Fiscal Year
2015
AGENCY FINANCIAL REPORT
U.S. ENVIRONMENTAL
PROTECTION AGENCY
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ABOUT THIS REPORT
The U.S. Environmental Protection Agency is pleased to present the Fiscal Year 2015 Agency Financial
Report (APR), produced in accordance with the Chief Financial Officers Act and Office of Management and
Budget (OMB) Circular A-13 6, Financial Reporting Requirements. Using the fiscal and high-level
performance results presented annually in the APR, the President, Congress, and the public can evaluate the
agency's accomplishments for each fiscal year beginning October 1 through September 30.
The FY 2015 APR contains EPA's FY2015 Financial Statements Audit Report; FY2015 Management Integrity
Act Report, including the Administrator's assurance statement on the soundness of the agency's internal
controls for financial and programmatic activities; and, in compliance with the Inspector General Act of
1978 as amended, EPA's report on FY 2015 progress in addressing Office of Inspector General (DIG) audit
recommendations.
EPA's APR is supplemented by its Annual Performance Report (APR) and Financial and Program
Performance Highlights. Together, these reports present a complete picture of the agency's activities,
accomplishments, progress, and finances for each fiscal year.
EPA's FY2015 APR, which will be incorporated in the Agency's FY2017 Annual Performance Plan and
Budget, presents the agency's FY 2015 performance results measured against the targets established in its
FY 2015 performance plan and budget and discuss progress toward achieving the goals established in its
FY2011-2015 Strategic Plan. The APR is prepared according to the requirements set forth in OMB Circular
A-11, Preparation, Submission and Execution of the Budget and the Government Performance and Results
Act Modernization Act of 2010 (GPRAMA). EPA will post the FY2015 APR on the agency's website at
http://www.epa.gov/planandbudget/annualplan/fy2015.html in February 2016.
EPA's Web-based Financial and Program Performance Highlights summarizes key financial and
performance information from both the APR and APR in a brief, nontechnical, user-friendly format The
Highlights will be posted on the agency's website at http://www.epa.gov/planandbudget/ in February
2016.
How the Report Is Organized
Administrator's Letter
The Administrator's letter transmits EPA's FY2015 APR from the Agency to the President and Congress.
The letter assures that financial and performance data presented in the APR are reliable and complete. It
also assures that the report communicates significant internal control weaknesses and actions EPA is
taking to resolve them.
Section I—Management's Discussion and Analysis
Section I contains information on EPA's mission and organizational structure; selected agency performance
results; an analysis of the financial statements and stewardship figures; information on systems, legal
compliance, and controls; and other management initiatives.
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Section II—Financial Section
Section II includes a message from the Chief Financial Officer (CFO) and the agency's independently audited
financial statements, which are in compliance with the CFO Act. This section also contains the related
Independent Auditor's Report and other information on the agency's financial management.
Section III—Other Accompanying Information
This section provides additional material as specified under OMB Circular A-136, Financial Reporting
Requirements, and the Reports Consolidation Act of 2000. The subsection titled "Management Challenges
and Integrity Weaknesses" discusses EPA's progress toward strengthening management practices to
achieve program results and presents OIG's list of top management challenges and the agency's response.
Appendices
The appendices include links to relevant agency websites and a glossary of acronyms and abbreviations.
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TABLE OF CONTENTS
ABOUT THIS REPORT 1
MESSAGE FROM THE ADMINISTRATOR 5
SECTION I MANAGEMENT'S DISCUSSION AND ANALYSIS 8
About EPA 9
History and Purpose 9
Mission 10
Organization 10
Regional Map 12
Collaborating with Partners and Stakeholders 12
A Framework for Performance Management 12
FY 2015 Advances in Performance Management 13
FY 2015 Program Performance 15
Strategic Goals 15
Financial Analysis and Stewardship Information 23
Sound Financial Management: Good for the Environment, Good for the Nation 23
Financial Condition and Results 24
Financial Management for the Future 28
Limitations of the Principal Financial Statements 29
Improving Management and Results 30
Office of Inspector General Audits, Evaluations, and Investigations 30
Grants Management 31
Accountability: Systems, Controls, and Legal Compliance 32
Federal Managers' Financial Integrity Act (FMFIA) 32
Management Assurances 34
Federal Financial Management Improvement Act (FFMIA) 34
Federal Information Security Modernization Act (FISMA) 35
Biennial User Fees 35
Miscellaneous Receipts Act 35
Inspector General Act Amendments of 1988—Audit Management 36
Defense Contract Audit Agency Audits 41
SECTION II - FINANCIAL SECTION 43
Message from the Deputy Chief Financial Officer 44
EPAS Fiscal 2015 and 2014 Consolidated Financial Statements 45
Audit of EPA's Fiscal Years 2015 and 2014 Consolidated Financial Statements 102
SECTION III- OTHER ACCOMPANYING INFORMATION 177
Management Integrity and Challenges 178
Overview of EPA's Efforts 178
2015 Key Management Challenges 179
Office of Inspector General-Identified Key Management Challenges 179
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Agency Response to Office of Inspector General-Identified Key Management Challenges 203
Progress in Addressing FY 2015 Weaknesses and Significant Deficiencies 210
Material Weakness 210
Agency Weaknesses 210
Significant Deficiencies 212
Summary of Financial Statement Audit 217
Summary of Management Assurance 217
Freeze the Footprint 218
Schedule of Spending 219
Improper Payments Compliance 221
I. Risk Assessments 222
II. Statistical Sampling 227
III. Improper Payment Reporting 230
IV. Improper Payment Root Cause Categories 231
V. Corrective Actions 231
VI. Internal Control over Payments 233
VII. Accountability 233
VIII. Agency Information Systems and Other Infrastructure 233
IX. Barriers 233
X. Recapture of Improper Payments Reporting 233
XI. Additional Comments 237
XII. Reduction of Improper Payments with the Do Not Pay Initiative 238
Conclusions 239
Civil Monetary Penalty Adjustment for Inflation 240
APPENDIX A PUBLIC ACCESS 245
APPENDIX B ACRONYMS AND ABBREVIATIONS 247
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MESSAGE FROM THE ADMINISTRATOR
The President
The White House
Washington, D.C. 20500
Dear Mr. President:
I am presenting to you the U.S. Environmental Protection Agency's FY 2015 Agency Financial
Report. Within this report, you will find that the EPA has made robust progress during the year in
our mission to protect human health and the environment. While doing so, we have ensured that
we are executing our mission in a financially responsible and transparent manner.
We continue our ongoing success in combating climate change. In FY 2015 the EPA announced
historic, first-ever national standards to limit carbon pollution from power plants, cutting U.S.
carbon pollution from the power sector by 870 million tons or 32 percent below 2005 levels in
2030. Power plants are the largest drivers of climate change in the U.S., accounting for roughly
one-third of all carbon-pollution emissions, but there were previously no national limits on carbon
pollution. This action will avert up to 90,000 asthma attacks among the American public, and
Americans will spend up to 300,000 more days in the office or the classroom instead of being sick
at home. Additionally, up to 3,600 families will be spared the grief of losing a loved one due to air
pollution. The plan reflected unprecedented public participation, including more than 4.3 million
public comments on the proposal and hundreds of meetings with stakeholders. The final rule
establishes guidelines for states to follow in developing and implementing their plans to cut
carbon pollution, including requirements that vulnerable communities have a seat at the table
with other stakeholders.
In a historic step for clean-water protection, the EPA and the U.S. Army finalized the Clean Water
Rule to clearly protect from pollution and degradation the streams and wetlands that form the
foundation of the nation's water resources. Before this rule the protection status for
approximately 60 percent of the nation's streams and millions of acres of wetlands was rendered
unclear by Supreme Court decisions, resulting in a jurisdictional determination process that was
confusing, complex and time-consuming for both the agencies and the affected public. Now, the
rule ensures that waters protected under the Clean Water Act are more precisely defined and
predictably determined, making the permitting process less costly, easier and faster for businesses
and industry. The rule is grounded in law and the latest science and is shaped by significant public
comment. The rule does not create any new permitting requirements for agriculture and
maintains all previous exemptions and exclusions. People need clean water for their health; about
117 million Americans - one in three people - rely on streams that lacked clear protection before
the Clean Water Rule for their drinking water. Further, America's cherished way of life depends
on clean water as healthy ecosystems provide wildlife habitat and places to fish, paddle, surf and
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swim. Clean and reliable water is also an economic driver, especially for manufacturing, farming,
tourism, recreation and energy production. The Clean Water Rule is critical because the health of
our rivers, lakes, bays and coastal waters are impacted by the streams and wetlands where they
begin.
The EPA also finalized in FY 2015 the Steam Electric Limitation Guidelines that will eliminate the
annual discharge of 1.4 billion pounds of pollutants into America's waterways from steam-electric
power plants, including a substantial volume of toxic metals and will reduce water withdrawal by
57 billion gallons per year. These guidelines are strong but reasonable, based on technologies that
are readily available and broadly used in the industry today, reinforcing the ongoing trend toward
cleaner, more modern plants. The standards also provide flexibility in implementation through a
phased-in approach, allowing plant owners to pursue integrated strategies to meet these
requirements. While being responsive to industry needs, the standards recognize that toxic
pollutants from these plants, including mercury, arsenic, lead and selenium, can cause
neurological damage in children; can result in cardiovascular, pulmonary and neurological
disorders in people exposed to these pollutants through eating contaminated fish; and can lead to
cancer and damage to the circulatory system, kidneys and liver. In reducing plant discharges,
Americans will reap an estimated benefit of $463 million per year in health benefits across the
nation.
As another key accomplishment, the EPA published the Definition of Solid Waste final rule, which
added safeguards for recycling hazardous materials to protect our communities while promoting
sustainable materials management. The rule improves accountability and state-federal oversight
of hazardous-materials recycling while reducing regulatory burden and encouraging recycling.
The rule included a groundbreaking environmental-justice analysis that addressed the rule's
potential impacts on low-income and minority communities. It also helps foster environmental,
economic and social benefits through sustainable materials management, which preserves
resources in a manner that creates jobs and supports a strong economy. And it demonstrates that
protecting communities and leveraging economic advantages for sustainable recycling and
materials manufacturing can go hand-in-hand.
Our environmental enforcement continues to be solid. In FY 2015 the EPA announced the largest
civil penalty in the history of the Clean Air Act, a historic settlement with the automakers Hyundai
and Kia. The settlement will resolve alleged Clean Air Act violations based on the automakers' sale
of close to 1.2 million vehicles that will emit approximately 4.75 million metric tons of greenhouse
gases in excess of what the automakers certified to the EPA. The automakers will pay a $100
million civil penalty to resolve violations concerning the testing and certification of vehicles sold
in America and spend approximately $50 million on measures to prevent any future violations.
Hyundai and Kia will also forfeit 4.75 million greenhouse-gas-emission credits that the companies
previously claimed, which are estimated to be worth more than $200 million. The settlement also
considers that Hyundai and Kia gave consumers inaccurate information about the real-world fuel
economy performance of many of their vehicles. Hyundai and Kia must audit their fleets for model
years 2015 and 2016 to ensure that vehicles sold to the public conform to the description and data
provided to the EPA.
Finally, advancing our work to protect vulnerable communities, the EPA revised the Agricultural
Worker Protection Standard in FY 2015 to increase protection from pesticide exposure for the
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nation's two million agricultural workers and their families. These changes afford farmworkers
similar protections that are already provided to workers in other industries while taking into
account the unique working environment of many agricultural jobs. Changes include annual
mandatory training to inform farmworkers on required protections, expanded training to reduce
take-home exposure from pesticides on work clothing, minimum age requirement for handling of
pesticides, mandatory signage for the most hazardous pesticides and new, no-entry application-
exclusion zones surrounding pesticide-application equipment to protect workers from exposure
to pesticide overspray. These updated standards help close opportunity gaps and protect workers
while preserving the strong traditions of family farms and ensuring the continued growth of the
agricultural economy.
Additional details on the EPA's accomplishments will be provided in the Annual Performance
Report for FY 2015, which will be released this winter. At this juncture, I can assure you that the
EPA's financial and performance data are reliable and complete and provide full transparency into
our program operations. My assurance statement, as required under the Federal Managers'
Financial Integrity Act, appears in Section I, "Management's Discussion and Analysis," of this
report and reflects that we did not identify any new material weaknesses for FY 2015. Section III
of this report provides details about corrective actions underway to address a previously
identified material weakness and a number of other less severe weaknesses and deficiencies. We
will continue monitoring progress toward correcting these issues.
I am proud to be part of an agency with the mission to protect our environment and the health of
the American people and future generations. The hard work and dedication of the EPA's men and
women make our accomplishments possible.
Respectfully,
Gina McCarthy
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SECTION I
MANAGEMENT'S DISCUSSION AND
ANALYSIS
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ABOUT EPA
History and Purpose
All Americans are entitled to a clean, healthy environment where they live, work, and play. Established in
1970 as the hazards of environmental pollution became increasingly evident, EPA has worked for over four
decades to identify, evaluate, and execute scientifically
sound, sustainable solutions to existing and emerging
environmental concerns.
Testing to measure chemical and biological
pollutants in media, such as wastewater, ambient
water, sediment, and biosolids (sewagesludge), per
methods promulgated under Clean Water Act
Section 304(h).
EPA unites environmental research, monitoring, standard-
setting, and enforcement functions under the banner of a
single agency. In doing so, the agency helps ensure that
environmental protection is an integral part of all U.S.
policies, whether they concern economic growth, natural
resource use, energy, transportation, agriculture, or human
health.
Since its inception, EPA has made great strides in protecting
the nation's air, water, and land. Focused cleanup efforts
have helped remediate the mistakes of the past, while EPA's
work to monitor and regulate pollutants, evaluate new
chemicals, and encourage reuse, recycling, and better
decision-making are helping to safeguard our
environmental future.
EPA does not work alone. Addressing the complex environmental issues facing the nation and the world
requires diligent, effective cooperation among a diverse and dynamic group of stakeholders, from state,
tribal, and local governments to foreign governments and international organizations.
Everyone has a role to play in creating a healthy, sustainable environment. By serving as the primary
federal source of rigorously researched, scientific information on the environment, EPA empowers
individuals and organizations to better understand and engage in environmental protection and create
lasting solutions in their own backyards and around the world.
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Mission
EPA's mission is to protect human health and the environment.
In executing this mission, EPA relies on the best available
scientific information to inform policy decisions and enforcement
actions that protect diverse, sustainable ecosystems and
safeguard the nation's human health and environment.
EPA remains committed to rigorous, peer-reviewed science as the
foundation for its decision-making and the basis for
understanding and addressing future environmental concerns. By
making scientifically sound environmental information easily
accessible to all stakeholders, EPA advances its mission and
furthers public trust and understanding of its work.
Organization
EPA's headquarters are in Washington, D.C. Together, EPA's headquarters offices, 10 regional offices, and
more than a dozen laboratories and field offices across the country employ a diverse, highly educated, and
technically trained workforce of roughly 15,000 people.
What EPA Does
Develops and enforces regulations
Responds to the release of
hazardous substances
Gives grants to states, local
communities, and tribes
Studies environmental issues
Sponsors partnerships
Teaches peopl" -*""•*
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Office of the
Administrator
Provides overall supervision of the Agency
and is responsible directry to the
Office of Administration
and Resources
Management
Office of Enforcement and
Compliance Assurance
r. and ch
hazards and advances environmental iusnce
Office of International
and Tribal Affairs
Works to protect humon hea/th a/id trie
US. ncDono/
interests through irrtemaoona/ envjronmenta/
co/farjoralion and strengthening
' ' nG
Region I
Boston, MA
Region 5
Chicago, IL
Office of Environmental
Information
Alonoges the life cycle of information
to support EPA's mission of protecting
Region 2
New York, NY
Region 6
Dallas, TX
T
Office of Chemical
Safety and
Pollution Prevention
Works to protect peopte and the
environment from potential risks from
pesticides and toxic chemicals through
innovative partnerships and collaboration.
and preventing pof/u&on before ft begins
Office of
General Counsel
Provides legal support for Agency rules
and policies, case-by-case decisions,
defensive Irtigat/on, operations.
Office of Solid Waste
and Emergency Response
Provides po/icy. guidance, and direction
for trie Agency's emergency response
and waste programs.
Region 3
Philadelphia, PA
Region 7
Kansas City. KS
ice of the
Chief Financial Officer
Manages agency's annual budget and
performance plan; coordinates EPA's
strategic planning efforts, provides
financial services for the Agency; and
mokes payments to EPA grant recipients.
Region 4
Atlanta, GA
Region 8
Denver, CO
Region 9
San Francisco, CA
Region 10
Seattle, WA
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Regional Map
EPA Offices and Facilites
1C EPA National Headquarters
EPA Regional Headquarters
EPA Regional and Program Laboratories and Facilities
Collaborating with Partners and Stakeholders
EPA's partnerships with states, tribes, local governments, and the global community are central to the
success of the national environmental protection enterprise. EPA places high value on strengthening these
partnerships and has established a cross-agency strategy, "Launching a New Era of State, Tribal, Local and
International Partnerships," to focus its work. EPA works in concert with its partners to improve
coordination, promote innovation, and leverage resources. Along with its co-regulators, EPA works with
the regulated community, private industry, nonprofit organizations, and the public to use new tools and
strategies to enhance coordination, manage resources effectively, and share information. For example,
through tools such as ECHO, "Enforcement and Compliance History Online," the agency has improved the
availability and transparency of environmental data. EPA will continue working with its partners and
stakeholders to improve implementation of national environmental programs, seeking the most efficient
use of resources, streamlining business processes, and developing innovative solutions to achieve results.
As we work together, our relationships will continue to be based on integrity, trust, and shared
accountability to leverage our expertise, authorities, resources, and capabilities.
A Framework for Performance Management
In compliance with GPRAMA, EPA develops a Strategic Plan, which establishes its long-term strategic goals,
objectives, and measures to carry out its mission of protecting human health and the environment. To
further its strategic goals and objectives, EPA commits to a suite of annual performance measures
established in its Annual Performance Plan and Budget. The agency reports its results against these annual
performance measures and discusses progress toward longer-term objectives and measures in its APR.
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EPA's Performance Management Framework
•FY 2014-2018 Strategic Plan
•FY 2014-2015 Agency
Priority Goals
Strategic
Planning
Annual
Planning
and
Budgeting
•FY 2017 EPA Annual Plan
and Budget
•FY 2014-2015 Agency
Priority Goal Action Plans
• Cross-Agency Strategy
and Action Plans
• FY 2015 Annual Performance
Report/Highlights
• FY 2015 Agency Report
• Agency Management Integrity
Report and Certifications
• Annual Audit Management
• Program Evaluation
• Deputy Administrator Performance I
:gic Reviews J
• L^epULy rvuiiiinoii amr rei i
V Progress Reviews/Strategic
FY 2015 National Program
Manager Guidance
Regional Performance
Commitments/Annual
Commitment System
(ACS)
Regional and State/Tribal
Grant Work Plans
FY 2015 Advances in Performance Management
During FY 2015, EPA implemented a number of key initiatives to further strengthen its performance
management
Agency Priority Goals (APGs) and Cross-Agency Priority (CAP) Goals: In FY 2015, EPA accomplished all
six of its FY 2014-2015 APGs. Some examples of key results include making more than 18,900 additional
sites ready for anticipated use, completing more than 250 assessments of pesticides and other
commercially available chemicals, and updating state nonpoint source management programs to comport
with new grant guidelines. EPA also established five FY 2016-2017 APGs and drafted 2-year action plans to
advance its priorities:
• Reducing greenhouse gas (GHG) emissions from cars and trucks.
• Advancing resilience in the nation's water infrastructure, while protecting public health and the
environment, particularly in high-risk and vulnerable communities.
• Cleaning up contaminated sites to enhance the livability and economic vitality of communities.
• Assessing and reducing risks posed by chemicals and promoting the use of safer chemicals in
commerce.
• Strengthening environmental protection through business improvements enabled by joint
governance and technology.
EPA reports progress on APG milestones and targets quarterly at http://www.performance.gov and will
report end-of-year progress for FY 2014-2015 APGs in its FY2015 Annual Performance Report.
EPA also contributes to CAP goals across the federal government, notably for cybersecurity, benchmarking,
infrastructure permitting, and people and culture. EPA's Acting Deputy Administrator discusses progress in
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these areas at monthly meetings of the President's Management Council. More information on CAP goals
and quarterly updates on government-wide progress are available at http://www.performance.gov.
Streamlined End-of-Year Performance Reporting and Analysis Process: In June, EPA's Office of the
Chief Financial Officer (OCFO) held an Agency-wide Lean event to streamline EPA's end-of-year reporting
and analysis process and increase the value of performance analyses and products to inform agency
decision-making. Key outcomes included streamlined reporting to meet GPRMA and OMB requirements,
more effective use of eight-year performance results data as a springboard for analysis and to support
senior leadership end-of-year discussions, a streamlined APR in EPA's Annual Performance Plan and Budget,
and enhancements to EPA's Web-based Financial and Program Performance Highlights.
Midyear and Strategic Reviews: In FY 2015, EPA convened strategic reviews and midyear performance
progress discussions with the Acting Deputy Administrator and Acting Chief Financial Officer earlier in the
year to better inform FY 2017 planning and budgeting, as well as to support the new FedStat meeting held
with EPA, OMB, and General Services Administration (GSA) officials. The reviews focused on each of EPA's
five strategic goals and five cross-agency strategies. EPA reported its strategic review summaries of
findings on http://www.performance.gov and will discuss end-of-year results in its FY2015 APR.
National Program Manager (NPM) Guidance: In FY 2015, EPA published its new two-year FY 2016-2017
NPM Guidances, based on the recommendations of an NPM Guidance/National Environment Performance
Partnership System (NEPPS) workgroup of state, regional, and national program representatives. The two-
year process is part of the agency's efforts to advance a new era of state, local, tribal, and international
Partnerships, a cross-agency strategy established under the FY2014-2018 EPA Strategic Plan. Key changes
in the FY 2016-2017 NPM Guidance process included earlier and more meaningful state and tribal
engagement in priority-setting, clear and transparent support for flexibility within the NPM Guidances,
better alignment of NPM Guidances and grant guidances, and earlier and more meaningful state and tribal
engagement in commitment-setting. EPA's OCFO and the NPM Guidance/NEPPS Workgroup are working
collaboratively to implement and assess these key changes.
Strategic Foresight Pilot Project: EPA's OCFO and Office of the Science Advisor launched this project to
set the stage for the agency's next round of strategic planning and development of the FY2018-2022 EPA
Strategic Plan. This effort responds to National Academy of Science, Science Advisory Board, and National
Advisory Council for Environmental Policy and Technology recommendations to anticipate future
environmental problems and build EPA's resiliency in light of rapid technological change by engaging in
futures analysis as a regular component of Agency operations. The pilot includes convening an Agency-
wide Strategic Foresight Lookout Panel within a broader community of practice to identify emerging
opportunities and challenges and develop actionable recommendations to inform annual and strategic
planning.
Stronger Stewardship: During FY 2015, EPA took a number of steps to increase attention to senior
leadership stewardship responsibilities and ensure that it responds to DIG audit findings and
recommendations and implements needed corrective actions timely to strengthen its programs and
operations. EPA's OCFO developed and offered new online Management Audit Tracking System training,
designated audit management as a focus area for its FY 2015 Management Integrity Program, reviewed
senior managers' responsibilities for overseeing audit follow-up, and continued to conduct onsite
Management Accountability Reviews in selected regional and national program offices to promote effective
and efficient management of programs and resources.
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FY 2015 PROGRAM PERFORMANCE
During FY 2015, EPA and its partners made progress
under the five strategic goals, 13 supporting
objectives, and four cross-agency strategies
established in the agency's FY2014-2018 Strategic
Plan.
Detailed FY 2015 performance results, including the
agency's progress in implementing its cross-agency
strategies, will be presented in EPA's FY2015 APR,
which the agency will issue with its FY2017 Annual
Performance Plan and Budget and post on its website
at http://www2.epa.gov/planandbudget in February
2016.
Strategic Goals
Goal 1: Addressing Climate Change and Improving
Air Quality
EPA's Strategic Goals
1. Addressing Climate Change and Improving Air
Quality
2. Protecting America's Waters
3. Cleaning Up Communities and Advancing
Sustainable Development
4. Ensuring the Safety of Chemicals and
Preventing Pollution
5. Protecting Human Health and the Environment
by Enforcing Laws and Assuring Compliance
EPA's Cross-Agency Strategies
• Working Toward a Sustainable Future
• Working to Make a Visible Difference in
Communities
• Launching a New Era of State, Tribal, Local, and
International Partnerships
• Embracing EPA as a High-Performing
Organization
EPA develops national programs, policies, and
regulations for controlling GHG emissions, air pollution, and radiation exposure to protect human health
and the environment On August 3, 2015, EPA announced the final Clean Power Plan (CPP) standards,
which are expected to cut U.S. carbon pollution from the power sector by 870 million tons in 2030, 32
percent below 2005 levels. The power sector accounts for roughly one-third of all carbon pollution
emissions, but there were no national limits on carbon pollution until CPP. The final rule establishes
guidelines for states to follow in developing and implementing their plans with a focus on emissions
trading mechanisms to make sure utilities have broad flexibility to reach their carbon pollution reduction
goals. As a result of the CPP, S02 emissions from power plants are projected to be 90 percent lower, and
nitrogen oxide emissions 72 percent lower, than in 2005. Americans would avoid up to 90,000 asthma
attacks and spend up to 300,000 more days in the office or the classroom, instead of sick at home. CPP also
reflects EPA's unprecedented public outreach, including more than 4.3 million public comments on the
proposal and hundreds of meetings with stakeholders.
As part of the President's Climate Action Plan, EPA proposed standards to cut methane emissions from the
oil and gas sector by 40 to 45 percent from 2012 levels by 2025. Methane is the second most prevalent GHG
emitted in the United States from human activities, and nearly 30 percent of those emissions come from oil
production and the production, transmission, and distribution of natural gas. These standards are
projected to yield net climate benefits of $120 to $150 million in 2025, and are also expected to reduce
170,000 to 180,000 tons of ozone-forming volatile organic compounds, along with 1,900 to 2,500 tons of
air toxics, in 2025. The standards complement voluntary efforts, including EPA's Methane Challenge
Program, and are based on current industry practices and technology.
To further support the Climate Action Plan, EPA also issued two proposals to reduce emissions of methane-
rich gas from municipal solid waste [MSW] landfills. Under these proposals new, modified, and existing
landfills would begin collecting and controlling landfill gas at emission levels nearly a third lower than
current requirements. MSW landfills receive non-hazardous waste from homes, businesses, and
institutions. As the landfill waste decomposes, it produces a number of air toxics, C02, and methane. MSW
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landfills are the third-largest source of human-related methane emissions in the U.S., accounting for 18
percent of methane emissions in 2013—the equivalent of approximately 100 million metric tons of C02
pollution. The proposed rules are expected to reduce methane emissions by an estimated 487,000 tons a
year beginning in 2025—equivalent to the carbon pollution emissions from more than 1.1 million homes.
EPA estimates the climate benefits of the combined proposals at nearly $750 million in 2025, or nearly $14
for every dollar spent to comply.
Working with the U.S. Department of Transportation, EPA proposed standards for medium- and heavy-duty
vehicles to improve fuel efficiency and cut carbon pollution to reduce the impacts of climate change, while
bolstering energy security and spurring manufacturing innovation. The standards build on current
standards that have delivered all-time-high fuel economy in 2013 for new vehicles. Medium- and heavy-
duty vehicles currently account for about 20 percent of GHG emissions and oil use in the U.S. transportation
sector. The proposed standards are expected to lower C02 emissions by approximately 1 billion metric
tons, cut fuel costs by about $170 billion, and reduce oil consumption by up to 1.8 billion barrels over the
lifetime of the vehicles sold. The total oil savings under the program would be greater than a year's worth
of U.S. imports.
EPA continued to promote expanded use of air quality monitoring through the use of portable, real-time
sensors to gain a more intricate picture of air pollution on both regional and local scales. In FY 2015, EPA
expanded its Village Green Project—adding four new U.S. locations and a school in Hong Kong. Housed in a
park bench, the solar- and wind-powered system provides real-time measurements of air pollutants and
weather conditions. Lower-cost air monitoring technologies, like the Village Green Project, provide the
public and communities with previously unavailable information about their local air quality and raise
their air pollution awareness. In July 2015, EPA hosted a community air monitoring training for community
groups and individuals interested in conducting citizen science projects involving next generation air
monitoring technology. Training covered the basics of air quality monitoring and sensors and best
practices for using citizen science methodology for data collection; promoting community engagement in
environmental protection; supporting the collection, interpretation, and communication of high-quality
data by community groups; and connecting EPA and community leaders.
EPA continues to face challenges in completing reviews of air toxics standards for stationary sources
required by the Clean Air Act (CAA), due to competing priorities in an environment of limited resources.
Within eight years, EPA must review and revise as necessary all of the air toxics standards that have been
promulgated under CAA Section 112 since 1990. These reviews involve collecting new information and
emissions data from industry; revSiewing emission control technologies; and completing associated
economic analyses for the affected industries. EPA must also review the risk that remains after the
implementation of the air toxics rule within eight years. EPA prioritizes its sector reviews based on legal
deadlines, resources, and the impact individual sectors have on disproportionately impacted communities.
Goal 2: Protecting America's Waters
The nation's water resources are the lifeblood of our communities, supporting our economy and way of life.
Today we enjoy reliable sources of clean and safe water, but this was not always the case. In the past,
drinking water was too often the cause of illnesses, and many of our surface waters were so polluted that
swimming and fishing were extremely unsafe. The country has made significant progress since the
enactment of landmark clean water legislation over 40 years ago. However, serious challenges remain, and
we continue to look for ways to make improvements as we deal with persistent water quality problems.
The Safe Drinking Water Act gives EPA the authority to publish health advisories for contaminants not
subject to any national primary drinking water regulation. In FY 2015, EPA issued critical Drinking Water
Health Advisories (HAs) and technical guidance for public water systems dealing with cyanotoxins
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generated by harmful algal blooms in drinking water sources. These HAs are non-regulatory values that
serve as informal technical guidance to help federal, state, and local officials and managers of public or
community water systems protect public health from the cyanobacterial toxins microcystins and
cylindrospermopsin. Human exposure to cyanotoxins can result in a host of adverse health effects,
including gastroenteritis, liver damage, and kidney damage. The HA values represent concentrations in
drinking water below which adverse noncarcinogenic effects are not expected to result from the ingestion
of drinking water.
EPA also published supporting technical guidance to accompany the health advisories and to provide
information that public water systems and others can use to inform their decisions on managing the risks
from cyanotoxins in drinking water. The document includes a stepwise approach that can inform public
water systems' decisions on whether and how to monitor for and treat cyanotoxins and communicate with
stakeholders. Many states and utilities are using the guidance as a technical resource as they consider how
best to confront cyanotoxin challenges in their waters. The agency also published analytical methods that
support monitoring for several cyanotoxins of interest: Method 544 (for six specific microcystin congeners
and nodularin) and Method 545 (for cylindrospermopsin and anatoxin-a).
On June 29, 2015, EPA and the U.S. Department of the Army published the final Clean Water Rule in the
Federal Register, which clarifies those waters that are protected under the Clean Water Act. The rule
ensures that waters protected from pollution and degradation under the Clean Water Act are more
precisely defined, more predictably determined, and easier for businesses and industry to understand.
Supporting the rule was an EPA state-of-the-science report, Connectivity of Streams and Wetlands to
Downstream Waters: A Review and Synthesis of the Scientific Evidence, a review of more than 1,200 peer-
reviewed publications and summary of the current scientific understanding about the connectivity and
mechanisms by which streams and wetlands, singly or in aggregate, affect the physical, chemical, and
biological integrity of downstream waters.
On June 4, 2015, EPA released its draft Assessment of the Potential Impacts of Hydraulic Fracturing for Oil
and Gas on Drinking Water Resources. This study advances scientific understanding of the potential impacts
of hydraulic fracturing on drinking water resources and the factors that may influence those impacts. The
assessment is an important resource for states, tribes, industry, and the public, as well as stakeholders
seeking to develop unconventional oil and gas resources while protecting human health and the
environment EPA expects to finalize the assessment in 2016.
On January 16, 2015, EPA Administrator Gina McCarthy joined Vice President Biden to announce EPA's
new Water Infrastructure and Resiliency Finance Center. The Center serves as a resource to communities
to improve their wastewater, drinking water, and stormwater systems, particularly through innovative
financing and increased resiliency to climate change. The Center will be holding a series of Regional
Finance Forums throughout the country to provide communities with the opportunity to meet key regional
federal and state agency contacts, technical assistance providers and an opportunity to discuss financing
challenges and solutions and learn about alternative financing and other innovative tools.
EPA, states, and eight automotive industry groups signed the Copper-Free Brake Initiative on January 21,
2015. This voluntary memorandum of understanding will decrease copper, mercury, lead, cadmium,
asbestiform fibers, and chromium-6 salts in motor vehicle brake pads, thereby reducing the amount of
these materials that enters our nation's streams, rivers, and lakes from road runoff.
While these accomplishments attest to our progress in protecting the nation's waters, challenges remain.
For example, nutrient pollution, largely from nonpoint sources, is one of America's most widespread,
costly, and challenging environmental problems. Nutrient pollution from excess nitrogen and phosphorus
in the air and water can cause major environmental damage as well as serious health problems in people
and animals. Nutrient pollution is a primary driver of harmful algal blooms, which in addition to the
impacts to drinking water discussed above, impair our nation's waters for recreation, fishing, and other
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uses. EPA is increasingly concerned about challenges posed by harmful algal blooms andhypoix "dead"
zones in the Great Lakes, Gulf of Mexico, and other areas impacted by nutrient pollution.
Current methods for measuring nutrient loads are costly and do not capture the full complexity of how
nutrients impact and move within ecosystems. More accurate and affordable sensors are needed to help
reduce the high cost and complexity of collecting data. The Nutrient Sensor Challenge, launched in
December 2014, continues to address nutrient pollution in America's waterways. Through a partnership of
federal agencies and stakeholders, this Challenge and supporting activities aim to identify next-generation
solutions and tools from across the world that can help monitor and inform decisions pertaining to nutrient
pollution and be commercially available by 2017. The Challenge extends beyond sensor technology and addresses
the market and economics of nutrient monitoring. The Challenge is collaborating with states and other
organizations to identify and encourage incentives that will promote the deployment of nutrient sensors and the
sharing of ensuing data.
Goal 3: Cleaning Up Communities and Advancing Sustainable Development
Uncontrolled releases of waste and hazardous substances can contaminate our rivers, streams, drinking
water and land and threaten healthy ecosystems. Local land use and infrastructure investments can also
generate unanticipated environmental consequences, such as increased stormwater runoff, loss of open
space, and increased GHG emissions. EPA continues working to prevent and reduce exposure to
contaminants, to accelerate the pace of cleanups, and to promote smart growth and the reuse of formerly
contaminated land sites.
During FY 2015 EPA continued its work to achieve milestones established under the August 2013
Executive Order, "Improving Chemical Facility Safety and Security," making significant progress in
implementing the action items the agency established in its May 2014 final report to the President. The
agency reviewed approximately 100,000 public comments submitted under the RMP Request for
Information; developed and implemented guidance and online training for local, state, and tribal
emergency planning commissions; updated the chemical advisory for the safe storage, handling, and
management of ammonium nitrate; and developed standard operating procedures for joint inspections,
data sharing, outreach, and emergency response training based on a New York-New Jersey state pilot
On January 13, 2015, EPA published the "Definition of Solid Waste" [DSW] final rule, which added
safeguards for recycling of hazardous materials to protect our communities while promoting sustainable
materials management (SMM). The DSW rule improves accountability and state-federal oversight of
hazardous materials recycling, while reducing regulatory burden and encouraging recycling. The rule
included a groundbreaking environmental justice analysis that addresses the rule's potential impacts on
low-income and minority communities. The DSW rule helps foster environmental, economic, and social
benefits through SMM, which preserves resources in a manner that creates jobs and supports a strong
economy in an environmentally protective manner. It demonstrates that protecting communities and
leveraging economic advantages for sustainable recycling and materials manufacturing can go hand-in-
hand. In 2015, EPA collaborated with the G7 to advance resource efficiency and SMM, culminating in the
inclusion of SMM language in a G7 Declaration.
EPA published revised underground storage tank [UST] regulations in Tuly 2015. strengthening the 1988
federal UST regulations by increasing the emphasis on properly operating and maintaining UST equipment
The revisions will help prevent and detect UST releases, a leading source of groundwater contamination,
and also help ensure that all USTs in the United States, including those in Indian country, meet the same
minimum standards. This is the first major revision to the federal UST regulations since 1988.
July also marked the release of EPA's Report on the Environment (ROE), for the first time made available to
the public completely online in an interactive format. The ROE is a comprehensive source of scientific
indicators which describe the status and trends in the nation's environment and human health condition. It
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contains 85 environmental indicators associated with five human health and environmental protection
themes—Air, Water, Land, Human Exposure and Health, and Ecological Condition—and uses a systems-
based sustainability framework to show how indicators relate to each other, to the themes, and to key
issues of concern to EPA. The scientific information presented in the ROE allows EPA to track its progress
in carrying out its mission and meetings its strategic goals and helps improve the agency's communications.
In 2015, EPA's EnviroAtlas made data available to the public on six additional communities (Fresno, CA,
Green Bay, WI, Woodbine, IA, New Bedford, MA, Paterson, NJ, and Portland OR). EnviroAtlas is a web-based
tool which allows users to explore nature's benefits (ecosystem services) and better understand how
decisions can affect an array of ecological and human health outcomes. EPA is developing the land cover
data from which metrics linking ecosystem services to human health and well-being outcomes will be
created. The additional EnviroAtlas communities will have access to more local-scale data to inform their
decisions related to the natural and built environment.
EPA's Integrated Risk Information System (IRIS) released a final assessment of Libby Amphibole Asbestos
in December 2014, a critical step in protecting the health of the people of Libby, Montana. Libby, Montana,
was placed on the Superfund National Priorities List in 2002, and in 2009, EPA and the U.S. Department of
Health and Human Services announced a public health emergency at the site. The IRIS assessment will be a
key piece of information in determining whether further cleanup will be required at the site.
As part of EPA's celebration of the 30th anniversary of the November 8,1984, foundational Policy for the
Administration of Environmental Programs on Indian Reservations, on December 1, 2014, Administrator
McCarthy issued a policy statement addressing the importance and role that Indian treaties play in EPA
decision-making and reiterating elements of President Obama's Executive Order establishing the White
House Council on Native American Affairs, which set national policy on important native issues. Consistent
with the Administrator's directive, in August 2015, EPA launched a national consultation with tribal leaders
on draft guidance describing how the agency should address resource-based treaty rights when consulting
with tribes on planned EPA actions.
Goal 4: Ensuring the Safety of Chemicals and Preventing Pollution
Chemicals are released into the environment as a result of manufacturing, industrial and commercial
processing, household use, and disposal. Chemical safety remains one of EPA's highest priorities, and the
agency uses a variety of approaches and tools to assess, prevent, and reduce chemical releases and
exposures.
In February 2015, EPA's "Design for the Environment" program was rebranded with a new "Safer Choice"
name and label. The new label is designed to increase consumers' ability to identify and select products
with safer chemical ingredients for use in homes, schools, hotels, offices, and elsewhere. For products
bearing the "Safer Choice" label, EPA scientists have reviewed every ingredient and determined that the
product meets the stringent "Safer Choice Standard" human health and environmental criteria. More than
2,000 products currently carry the "Safer Choice" logo. The program also helps manufacturers find safer
chemical alternatives that already meet the "Safer Choice" criteria through the Safer Chemical Ingredients
List, which currently includes more than 720 chemicals that are safer to use in product formulation.
EPA's Chemical Safety Program continued to make progress towards its goal to assess all of the originally
identified Toxic Substances Control Act (TSCA) Work Plan Chemicals by the end of FY 2018
(http://www2.epa.gov/assessing-and-managing-chemicals-under-tsca/assessments-tsca-work-plan-
chemicals). The program completed its fifth risk assessment—for NMP (n-methyl-2-pyrrolidone), a paint
remover—and issued problem formulation documents for public comment and review for 11 chemicals,
addressing 1,4-dioxane and three clusters of flame retardants. Additionally, the program released a data
needs assessment for another flame-retardant cluster of seven chemicals, identifying critical gaps in
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toxicity, exposure, and commercial mixtures data to guide the collection of additional data and information.
In FY 2015 EPA also initiated rulemaking actions under TSCA Sections 5 and 6 to reduce risks identified for
three chemicals from the TSCA Work Plan for which risks were identified in assessments completed in FY
2014: TCE (trichloroethylene), NMP, andDCM (methylene chloride).
EPA also finalized revisions to the Agricultural Worker Protection Standard (WPS). The changes made to
the 1992 WPS will afford farmworkers health protections similar to those already afforded workers in
other industries, taking into account the unique agricultural working environment
[www2.epa.gov/pesticide-worker-safety/revisions-worker-protection-standard). The WPS seeks to
protect and reduce the risks of injury or illness resulting from agricultural workers' (those who perform
hand-labor tasks in pesticide-treated areas such as harvesting, thinning, and pruning) and pesticide
handlers' (those who mix, load, and apply pesticides) use and contact with pesticides on farms. Major
changes made to the regulation include annual mandatory training and expanded training on topics such as
how reducing take-home exposure from pesticides and prohibiting children under 18 from handling
pesticides.
To advance risk-based decision-making, in FY 2015 EPA applied computational toxicology capacity to its
Endocrine Disrupter Screening Program, using ToxCast and Tox21 data (http://www2.epa.gov/chemical-
research/toxicity-forecaster-toxcasttm-data) to further 21st-century exposure research. EPA published its
intention to incorporate validated high-throughput assays and a computational model as alternatives for
three of the 11 EDSP Tier 1 assays. This approach provided an opportunity to collaborate with National
Institute of Environmental Health Sciences and to demonstrate how the emerging data and models can
undergo "validation" in the specific context of the decision (fit for purpose), and be applied to accelerate
the pace of decision-making. Using this approach, EPA published partial screening results for the estrogen
receptor pathway for more than 1,800 chemicals, and is developing additional HTS and CompTox methods
for screening chemicals for other endocrine pathways. These and other innovations will significantly
accelerate the pace of screening, decrease costs, and reduce animal testing.
EPA continues to face many challenges in its efforts to ensure the safety of chemicals. One example involves
a suit brought by concerned citizens from environmental, food safety, and beekeeping groups regarding
adequately protecting pollinators. Pollinators are a vital part of America's economy and environment,
enabling the growth of fruits and vegetables. EPA has joined other federal agencies, the National Wildlife
Federation, the Pollinator Partnership, and many more organizations in the Million Pollinator Garden
Challenge to promote pollinator health. During FY 2015, as a co-leader of the President's Pollinator Health
Task Force, EPA continued taking action to help protect pollinators, as outlined in the Strategy to Promote
the Health of Honey Bees and Other Pollinators, and accepted comments on its Proposal to Protect Bees
from Acutely Toxic Pesticides.
In early FY 2015, EPA's Pollution Prevention Program initiated a pilot testing draft guidelines intended to
help federal buyers select those private ecolabels and standards that are environmentally preferable and
appropriate for federal procurement The U.S. government, one of the largest purchasers in the world, buys
everything from lighting to cleaning products, and its footprint includes the environmental and public
health impact of its 360,000 buildings, 650,000 fleet vehicles, and $400 billion spent annually on products
and services. While undertaking the multi-stakeholder pilot, EPA also issued interim recommendations on
specifications, environmental performance standards, and ecolabels to help federal agencies purchase
environmentally preferable products and services in accordance with Executive Order 13693 (issued
March 2015) and reduce the impact on public health and environmental associated with the federal
government's extensive supply chain.
As part of its international efforts under Goal 4, EPA worked closely with the Office of the U.S. Trade
Representative, the U.S. State Department, and other federal agencies to complete the environment and
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investment chapters of the Transpacific Partnership [TPP], a multilateral trade and investment agreement
among 12 Pacific countries, including some of the largest U.S. trading partners. The TPP includes provisions
requiring countries to enforce their domestic environmental laws; prevents countries from relaxing
environmental regulations to attract additional trade or investment; and requires countries to effectively
implement Multilateral Environmental Agreements they have ratified, such as the Montreal Protocol and
MARPOL. EPA engagement was crucial in reaching consensus on language that allows EPA to carry out its
mission of protecting human health and the environment while also safeguarding American investors doing
business in TPP countries.
In addition, negotiations were completed in March 2015 on the first mandatory Polar Code for ship safety
and environment protection under the International Maritime Organization (IMO). While the IMO has long
sought to address ship safety in the polar regions, the inclusion of a mandatory environment chapter is
unprecedented. The environment chapter is designed to significantly reduce or eliminate oil, chemicals,
sewage, and garbage discharges from ships in Arctic waters. EPA led the development of a unified U.S.
government position supporting strong environmental protections in the sensitive and changing ecosystem
of the Arctic, and worked with the U.S. Coast Guard, Department of State, and National Oceanic and
Atmospheric Administration to prevent attempts to weaken these provisions during negotiations at the
IMO. The Polar Code will become effective on January 1, 2017.
Goal 5: Protecting Human Health and the Environment by Enforcing Laws and Assuring Compliance
Vigorous enforcement supports EPA's ambitious mission to protect human health and the environment
During FY 2015, EPA's enforcement of the nation's environmental laws remained focused primarily on
large cases that drive compliance across industries and have significant impacts on protecting public health
and the environment For example, in the largest CAA penalty to date, EPA concluded an action against
automakers Hyundai and Kia that required them to pay a $100 million civil penalty to resolve alleged CAA
violations and addressed their sale of more than 1 million vehicles that collectively will emit approximately
4.75 million metric tons of GHGs in excess of whatthe automakers certified to EPA. EPA also concluded a
landmark case against Kerr-McGee Corporation and related subsidiaries of Anadarko Petroleum
Corporation. The settlement provides $5.15 billion to a litigation trust, making it the largest recovery for
cleanup of environmental contamination in history and ensuring that over 2,700 sites in 47 states receive
funds to help pay for cleanup.
EPA's criminal enforcement program investigates and assists the DOJ in prosecuting deliberate or
egregious violations of environmental laws and regulations. In FY 2015, significant cases were often tied to
individual conduct, resulting in incarceration of over than 129 years, plus individuals and corporations being
fined $88 million, with an additional $4 billion in court-ordered environmental projects and $112 million in
restitution. On May 14, 2015, three subsidiaries of North Carolina-based Duke Energy Corporation, the
largest utility in the United States, pleaded guilty to nine criminal violations of the Clean Water Act at
several of its North Carolina facilities and agreed to pay a $68 million criminal fine and spend $34 million
on environmental projects and land conservation to benefit rivers and wetlands in North Carolina and
Virginia. Additionally, under the plea agreement, both Duke Energy Carolinas and Duke Energy Progress,
must certify that they have reserved sufficient assets to meet legal obligations with respect to its coal ash
impoundments within North Carolina, obligations estimated to be $3.4 billion.
Under its National Enforcement Initiatives. EPA also addressed pollution problems that make a difference
in communities. For example, the Energy Extraction Initiative concluded its first global oil and gas
settlement against Noble Energy Inc. for violating the Colorado State Implementation Plan, which sets
requirements for the installation, operation, maintenance, design, and sizing of vapor control systems at
condensate tanks. As part of the settlement, Noble Energy will spend approximately $60 million in
injunctive relief, $4.95 million on a civil penalty, $4.5 million on mitigation projects, and $4 million on
Supplemental Environmental Projects. Meanwhile, under the Mineral Processing Initiative, EPA also
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reached a settlement with three gold mining and mineral processing facilities in Nevada: Barrick Goldstrike
Mine Inc., Newmont USA Limited, and Veris USA Jerritt Canyon. As a result of this settlement, process
changes at these facilities will reduce or eliminate 120 million pounds per year of Resource Conservation
and Recovery Act (RCRA) hazardous waste with combined penalties exceeding $1.6 million.
Today's pollution challenges require a modern approach to compliance, and EPA continued to make
significant progress in advancing next generation transparency measures and new tools and approaches.
On September 24, 2015, EPA finalized the Clean Water Act National Pollutant Discharge Elimination System
(NPDES) Electronic Reporting Rule, which requires electronic reporting of NPDES information rather than
the paper-based reports that are currently required from permitted facilities that discharge to U.S. waters.
In alignment with the agency's larger EPA E-Enterprise business strategy, the NPDES E-rule moves EPA and
states into the 21st century by taking advantage of advances in information technology; expands EPA's
efforts to provide meaningful data to the public; and supports the EPA-wide effort to move from paper to
electronic reporting. It will provide EPA and states the strategic ability to address the most serious water
pollution problems by using limited resources efficiently. When fully implemented, the rule is estimated to
save authorized state NPDES programs, NPDES regulated entities, and EPA over $24 million annually.
In addition, EPA issued the Next Gen Enforcement 2015 Memorandum, a public memorandum setting forth
the agency's commitment to actively consider the use of Next Generation Compliance tools within all civil
enforcement settlements. EPA included requirements for advanced monitoring in several case settlements
(e.g., Marathon Petroleum Corp. and Total Petroleum Puerto Rico Corp.] and included advanced
monitoring, public transparency, and other tools in such rules as the Refinery National Emission Standards
for Hazardous Air Pollutants (NESHAP) under the Clean Air Act and the rule on combustion of coal
combustion residuals under the RCRA. EPA also enhanced partnerships with state and local agencies
through day-long visits to 12 states to build support for and obtain input on Next Generation work.
EPA continued its efforts to advance environmental justice through its programs, policies, and activities
and to support its cross-agency strategy on making a visible difference in environmentally overburdened,
underserved, and economically distressed communities. EPA released the draft framework for the EJ 2020
Action Agenda for public comment over the summer of 2015, receiving more than 500 comments during an
extended commenting period. EPA expects to finalize this Action Agenda by February 2016, following a
final round of public comment.
As an accompaniment to the EJ 2020 Action Agenda, the EJ Interagency Working Group (IWG) is also
developing a three-year strategic plan to guide the development and work of its subcommittees. The IWG
released the plan for public comment in summer 2015 and expects to finalize it by the end of 2015.
The agency also released ETSCREEN to strong public approval and interest. EJSCREEN is an online tool for
identifying environmentally overburdened communities. Since its release, the EJSCREEN site has received
over 200,000 unique visits and steady media attention from local, regional, and national media outlets.
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FINANCIAL ANALYSIS AND STEWARDSHIP
INFORMATION
Sound Financial Management: Good for the Environment, Good for the Nation
EPA carries out its mission to protect human health and the environment while adhering to the rigorous
financial management standards. Highlighted below are some of EPA's most significant financial
achievements in FY 2015:
• Clean opinion. For the 16th consecutive year, EPA's OIG issued a "clean" audit opinion, unqualified
and unmodified, in the agency's financial statements. This means EPA's financial statements are
presented fairly in all material aspects, and conform to generally accepted accounting principles
used by the federal government Simplistically, a clean opinion means EPA's financial data are
reliable and accurate.
• Process improvements in financial management. In FY 2015, the agency held three Lean events
as noted below:
o Software applications accountability process. Improved the process to inventory,
manage, and account for software applications and personal property across the agency.
o End-of-year performance reporting process. Improved process to identify opportunities
that eliminate redundancies, achieve efficiencies, and reduce workload while at the same
time maintaining accountability during the end-of-year performance reporting process.
• New leave management module. EPA launched a new leave management module with one single
point of entry within its time and attendance (T&A) system allowing for greater T&A tracking and
is easier to audit.
• Enhanced unliquidated obligation tool. EPA developed a new software tool that lets managers
review its unliquidated open actions (i.e., contracts, grants, travel orders, etc., that have been
obligated but not yet fully outlaid). The new tool dramatically improved managers' ability to
manage the nearly $10 billion worth of unliquidated obligations by combining financial and
administrative data for each action, updating data daily, capturing all previous certifications of
funds, targeting efforts at only actions with no activity, and providing summary report capabilities.
EPA was able to deobligate $1.2 billion of unliquidated obligations in part due to the visibility
provided by this tool.
• Capturing costs identified for user fees. EPA implemented a new agency-wide process to
improve the accuracy of user fees in its financial management system. This new process saves
taxpayer dollars by reducing the administrative burden in gathering user fee cost data, automating
the tracking of user fee costs, and increasing efficiency and accuracy of reporting financial data.
• New executive resource center. Also in FY 2015, EPA launched a new application that provides
executives with easy-to-use summary-level financial and administrative information to serve as a
tool to improve management oversight and internal controls. It contains near-real-time
information, in chart format, and is customizable to user needs to help executives identify
potential areas of concern in their particular organizations.
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Financial Condition and Results
Financial statements are formal financial
records that document EPA's activities at the
transaction level, where a "financial event"
occurs. A financial event is any occurrence
having financial consequences to the federal
government related to the receipt of
appropriations or other financial resources;
acquisition of goods or services; payments or
collections; recognition of guarantees,
benefits to be provided, and other potential
liabilities; or other reportable financial
activities.
EPA prepares four consolidated statements
(a balance sheet, a statement of net cost, a
statement of changes in net position, and a
statement of custodial activity) and one
combined statement, the Statement of
Budgetary Resources. Together, these
statements with their accompanying notes
provide the complete picture of EPA's
financial situation. The complete statements with accompanying notes, as well as the auditor's opinion, are
available in Section II of this report.
Key Terms
Assets: What EPA owns and
manages.
Liabilities: Amounts EPA
owes because of past
transactions or events.
Net position: The difference
between EPA's assets and
liabilities.
Net cost of operations: The
difference between the
costs incurred by EPA's
programs and EPA's
revenues.
The balance sheet displays
assets, liabilities, and net position
as of September 30, 2015, and
September 30, 2014. The
statement of net cost shows
EPA's gross cost to operate,
minus exchange revenue earned
from its activities. Together,
these two statements provide
information about key
components of EPA's financial
condition—assets, liabilities, net
position, and net cost of
operations. The balance sheet
trend chart depicts the agency's
financial activity levels since FY
2013.
Balance Sheet Trend
(dollars in billions)
$20
$15
$10
$5
$-
i Assets
I Liabilities
i Net Position
i Net Cost of Operations
2013
2014
2015
In FY 2015, Superfund cashout advances received from the Anadarko settlement and a change to the
agency's process for accounting for Superfund cashout advances, resulted in significant differences from FY
2014 balances in assets, liabilities, and revenue (See Section II of this report for additional information).
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EPA Resources and Spending
The figure below depicts EPA's aggregate budgetary resources (congressional appropriations and some
agency collections), obligations (authorized commitment of funds), and total outlays (cash payments) for
each of the last five fiscal years. The Statement of Budgetary Resources in Section III provides more
information on the makeup of the agency's resources.
EPA Financial Trends
(dollars in billions)
2011 2012
^^—Budgetary Resources
2013 2014 2015
^Obligations ^^—Total Outlays
The figure below presents EPA's FY 2015 costs (expenses for services rendered or activities performed) by
category.
FY 20 15 Cost Categories
4%
0%
Contracts
Grants
Payroll
Other
Travel
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Assets—What EPA Owns and
Manages
EPA's assets totaled $16.1
billion at the end of FY 2015,
an increase of $90 million
from the FY 2014 level. In FY
2015, almost 90 percent of
EPA's assets fall into two
categories: fund balance with
Treasury and investments. All
of EPA's investments are
backed by U.S. government
securities. The graph below
compares the agency's FY
2015 and FY 2014 assets by
major categories.
Composition of Assets, FY 2015 - FY 2014
(dollars in billions)
Other Assets
Accounts Receivable (Net)
Property, Plant, and Equipment (Net)
Investments
Fund Balance with Treasury
12015
12014
Composition of Liabilities, FY 2015 - FY2014
(dollars in billions)
Liabilities—What EPA Owes
EPA's liabilities were $4.73
billion at the end of FY 2015,
an increase of $2.54 billion
from the FY 2014 level. In FY
2015, EPA's largest liability
(70 percent) was Superfund
cashout advances that the
agency uses to pay for cleanup
of contaminated sites under
the Superfund program.
Additional categories include
payroll and benefits payable,
salaries, pensions and other
actuarial liabilities, EPA's debt
due to Treasury, custodial
liabilities that are necessary to
maintain assets for which EPA
serves as custodian,
environmental cleanup costs, and other miscellaneous liabilities. The graphs compare FY 2015 and FY 2014
liabilities by major categories.
Payroll and Benefits
Other
Cashout Advances, Superfund
Accounts Payable and Accrued Liabilities
$0.50 $1.00 $1.50 $2.00 $2.50
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Net Cost of Operations—How EPA Used Its Funds
The graph that follows show how EPA's funds are expended among its five program goal areas in FY 2015
and FY 2014.
Net Cost by Goal, FY2015 - FY2014
(dollars in billions)
Clean Air
Clean & Safe Water
Land Preservation & Restoration
Healthy Communities & Ecosystems
Compliance & EnvironmentalStewardship
$3
$5
$6
Stewardship Funds
EPA serves as a steward on behalf of the American people. The chart below presents four categories of
stewardship: land, research and development, infrastructure, and human capital. In FY 2015, EPA devoted
a total of $4.3 billion to its stewardship activities.
FY 2015 Stewardship
o%
I
Infrastructure
Human Capital
Research & Development
Land
Per the Federal Accounting Standards Advisory Board, stewardship investments consist of expenditures
made by the agency for the long-term benefit of the nation that do not result in the federal government
acquiring tangible assets.
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• The largest infrastructure programs are the Clean Water State Revolving Fund (CWSRF) and
Drinking Water State Revolving Fund (SRF) programs that provide grant funds to states for the
construction of wastewater and drinking water treatment facilities. States lend the majority of
these funds to localities or utilities to fund the construction and or upgrade of facilities (some may
also be forgiven or given as grants). Loan repayments then revolve at the State level to fund future
water infrastructure projects. EPA's budget included nearly $3 billion in FY 2015 appropriated
funds for states' use. In addition, states lent billions of dollars from funds they received as
repayments from previous SRF loans. These funds provide assistance to public drinking water
systems for the enhancement of wastewater infrastructures, allowing for crucial access to cleaner
and safer drinking water for millions of people.
• Research and development activities enable EPA to identify and assess important risks to human
health and the environment. This critical research investment provides the basis for EPA's
regulatory work, including regulations to protect children's health and at-risk communities,
drinking water, and the nation's ecosystems.
• Human capital includes EPA's educational outreach and research fellowships, both of which are
designed to enhance the nation's environmental capacity.
• Land includes contaminated sites to which EPA acquires title under the Superfund authority. This
land needs remediation and cleanup because its quality is well below any usable and manageable
standards. To gain access to contaminated sites, EPA acquires easements that are in good and
usable condition. These easements also serve to isolate the site and restrict usage while the cleanup
is taking place.
A detailed discussion of this information is available in Section III of this report, under the Required
Supplementary Stewardship Information.
Financial Management for the Future
During times of environmental challenges, sound stewardship of EPA's financial resources continues to be
critical to the agency's ability to protect the environment and human health locally, nationally, and
internationally. Reliable, accurate, and timely financial information is essential to ensure cost-effective
decisions for addressing land, water, air and ecosystem issues.
To strengthen EPA's financial stewardship capabilities, EPA focuses on the fundamental elements of
financial management: people and systems.
People: EPA leverages every available tool to recruit the best people with the necessary skills to meet
tomorrow's financial challenges. Staff members are trained in financial analysis and forecasting to
understand financial data and what those data mean. EPA is integrating financial information into everyday
decision-making so that it maximizes the use of its resources.
Systems: In FY 2015, EPA used a component-based approach to managing its financial systems. It was
designed to improve EPA's financial stewardship by strengthening accountability, data integrity, and
internal controls. The system, called Compass, is based on a commercial-off-the-shelf software solution that
addresses EPA's most critical business needs, including:
• General ledger
• Accounts payable
• Accounts receivable
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• Property
• Project cost
• Intra-governmental transactions
• Budget execution
Compass provides core budget execution and accounting functions and facilitates more efficient
transaction processing. The system posts updates to ledgers and tables as transactions are processed and
generates source data for the preparation of financial statements and budgetary reports. Compass is
integrated with 15 agency systems that support diverse functions, such as budget planning, execution, and
tracking; recovery of Superfund site-specific cleanup costs; property inventory; agency travel; payroll
T&A; document and payment tracking; and research planning. Compass is a Web-based, open architecture
application managed at the CGI Federal Phoenix Data Center, a certified shared service provider in
compliance with the Financial Management Line of Business.
EPA's financial systems modernization strategy builds on Compass and the previous migration to a Human
Resources shared service provider through the implementation of additional components, subject to future
review by OMB:
• Account code structure
• Budget formulation
• Superfund imaging and cost accounting
• Payment systems, such as for travel, purchase card, and grant payments
EPA is ready to begin operations and maintenance on the first phase of its new budget formulation system
in the fourth quarter of FY 2015 and is cross-walking data for the new account code structure.
Limitations of the Principal Financial Statements
EPA prepared the principal financial statements to report the financial position and results of its
operations, pursuantto the requirements of 31 U.S.C. 3515 (b). While EPAhas prepared the statements
from the books and records of the entity in accordance with U.S. generally accepted accounting principles
for federal entities and the formats prescribed by OMB, the statements are in addition to the financial
reports used to monitor and control budgetary resources that are prepared from the same books and
records. The statements should be read with the understanding that they are for a component of the U.S.
government, a sovereign entity.
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IMPROVING MANAGEMENT AND RESULTS
Office of Inspector General Audits, Evaluations, and Investigations
OIG contributes to EPA's mission to improve human health and environmental protection by assessing the
efficiency and effectiveness of the agency's program management and results. OIG ensures that agency
resources are used as intended, develops recommendations for improvements and cost savings, and
provides oversight and advisory assistance in helping EPA carry out its objectives. In FY 2015, OIG
identified key management challenges and internal control weaknesses. OIG audits, evaluations, and
investigations resulted in:
• 474 recommendations accounting for over $130 million in potential savings and recoveries;
• 296 actions taken by the agency for improvement from OIG recommendations; and
• 74 criminal, civil, or administrative enforcement actions.
As well, recommendations from prior years led to $594 million in costs saved or avoid in FY 2015.
OIG also contributes to the oversight integrity of and public confidence in the agency's programs and to the
security of its resources by preventing and detecting possible fraud, waste, and abuse and pursuing judicial
and administrative remedies. For example, in response to OIG recommendations, the agency:
• Agreed to develop and report outcome-based goals and measures for the combined sewer overflow
(CSOs) consent decrees, develop a national consent decree tracking system for regional and
headquarters use, and provide a public website for CSO consent decree information (OIG report 15-
P-0280: http://www.epa.gov/oig/reports/2015/20150916-15-P-0280.pdfj.
• Agreed to assemble a team of experienced asbestos experts to advise the agency in producing an
updated and consolidated guidance with practical application to the regulated community (OIG
Report 15-P-0168: http://www.epa.gov/oig/reports/2015/20150616-15-P-0168.pdf).
• Agreed to enforce grant requirements that states input all necessary data in the project-level
tracking database and review data completeness as part of the agency's annual review of state
performance. Additionally, the agency agreed to enhance coordination between the Drinking Water
State Revolving Fund and Public Water System Supervision programs and periodically evaluate
program results (OIG Report 15-P-0032: http://www.epa.gov/oig/reports/2014/20141205-15-P-
0032.pdf).
Additionally:
• OIG recommended that EPA deobligate $4.6 million in unneeded funds identified during its annual
unliquidated obligation reviews (OIG Report 15-1-0021:
http://www.epa.gov/oig/reports/2014/20141117-15-l-0021.pdfl
• OIG recommended that EPA recover $910,000 in overbilled costs for helpdesk services (OIG Report
15-P-0042: http://www.epa.gov/oig/reports/2014/20141205-15-P-0032.pdfl
• OIG recommended that EPA make better use of $8.9 million through improved warehouse
management of personal property (15-P-0033: http://www.epa.gov/oig/reports/2014/20141208-
15-P-0033.pdf!
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Grants Management
EPA has two major grants management metrics, one for grant competition, the other for grants closeout
For FY 2015, the agency exceeded the grant competition metric by 6%, and was just 0.5% shy of the 99%
grant closeout target
Grants Management Performance Measures for EPA
Performance Measure
Percentage of eligible grants
closed out
Percentage of new grants
subject to the competition
policy that are competed
Target
90%*
99%**
90%
Progress in FY 2015
93.2% of grants that expired in
2014
98.5% of grants that expired in
2013 and earlier
96%
Progress in FY 2014
92% of grants that expired in
2013
98% of grants that expired in
2012 and earlier
96%
*Percentage of open grants that expired in 2014 that were closed in performance year
**Percentage of open grants that expired in 2013 and earlier that were closed in performance year
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ACCOUNTABILITY: SYSTEMS, CONTROLS, AND
LEGAL COMPLIANCE
Federal Managers' Financial Integrity Act (FMFIA)
FMFIA requires agencies to conduct annual evaluations of their internal controls over programs and
financial systems and report the results to the President and Congress. In addition, agencies are required to
report on the effectiveness of internal controls over financial reporting, which includes safeguarding of
assets and compliance with applicable laws and regulations in accordance with the requirements of OMB
Circular A-123, Appendix A.
Each year, EPA's national program and regional offices conduct assessments and submit annual assurance
letters attesting to the soundness of the internal controls within their organizations. These assurance
letters provide the basis for the Administrator's annual statement of assurance on the adequacy of EPA's
internal controls over programmatic operations and financial systems. During FY 2015, the agency
continued to conduct Management Accountability Reviews in selected national program and regional
offices to assess its implementation of the FMFIA and new audit management procedures. These reviews
combined previously separate Management Integrity Compliance Reviews and Audit Management Reviews
into one single review and yielded results that will be used to improve the agency's technical guidance to
senior managers.
To evaluate its internal controls over financial reporting (as required by OMB Circular A-123, Appendix A),
the agency reviewed 10 key financial processes and 71 key controls. Based on this evaluation, no new
material weaknesses were identified. Subsequent to the agency's review, EPA's OIG identified no new
material weakness and 12 new significant deficiencies during the FY 2015 financial statement audit Based
on the results of the agency's and OIG's FY 2015 evaluations, the Administrator can provide reasonable
assurance on the adequacy and effectiveness of EPA's internal controls over programs and financial
systems, and the agency's internal controls over financial operations were found to be operating effectively
and efficiently.
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Fiscal Year 2015 Annual Assurance Statement
The U.S. Environmental Protection Agency conducted its FY 2015 assessment of the effectiveness of
internal controls over programmatic operations and financial activities as well as conformance of financial
systems to government-wide standards. The assessment was conducted in compliance with the Federal
Managers' Financial Integrity Act, Office of Management and Budget Circular A-12 3, Management's
Responsibility for Internal Control and other applicable laws and regulations.
Based on the results of the EPA's assessment and no findings of material weaknesses, I am providing
reasonable assurance that the agency's internal controls over programmatic operations were operating
effectively and financial systems conform to government-wide standards as of September 30, 2015.
In addition, EPA conducted its assessment of the effectiveness of internal controls over financial activities.
As of June 30, 2015, no new material weaknesses were identified. However, the agency continues to
address a material weakness identified in FY 2014 related to the recording of transactions and
capitalization of software costs. The agency expects to complete corrective actions by FY 2018.
As a result, I can provide reasonable assurance that, except for the material weakness over the agency's
recording of transactions and capitalization of software costs, the EPA's internal controls over financial
activities were operating effectively as of September 30, 2015.
NOV 1 6 2015
Gina McCarthy Date
Administrator
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Management Assurances
EPA did not identify any new material weaknesses for FY 2015. However, the agency continues to address a
material weakness identified in FY 2014. The agency expects to complete corrective actions for this
weakness by FY 201. Section III of this report provides details about EPA's corrective actions underway to
address a previously identified material weakness, and a number of other less severe weaknesses and
deficiencies. EPA will continue monitoring progress toward correcting these issues. The graph below
shows EPA's progress toward correcting its material and agency-level weaknesses since 2011. EPA
continues to emphasize the importance of maintaining effective internal controls.
Five Year Trend of Material and Agency
Weaknesses Remaining at Fiscal Year End
(Fiscal Years 201 1-20 5)
Material • Agency
2012 2013 2014 2015
Federal Financial Management Improvement Act (FFMIA)
FFMIA requires that agencies implement and maintain financial management systems that comply with 1)
federal financial management system requirements, 2) applicable federal accounting standards, and 3) the
U.S. Standard General Ledger (USSGL). Annually, agency heads are required to assess and report on
whether these systems comply with FFMIA.
EPA's FY 2015 assessment included the following:
• A-12 3 review found no significant deficiencies.
• OIG's FY 2015 financial statement audit identified no new material weakness.
• The agency's annual Federal Information Security Modernization Act Report did not disclose any
material weaknesses.
• The agency conducted other systems-related activities, including:
o Third-party control assessments
o Network scanning for vulnerabilities
o Annual certification for access to the agency's accounting system
Based on the assessment described above, the agency is in compliance with the FFMIA for FY 2015.
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Federal Information Security Modernization Act (FISMA)
FISMA directs federal agencies to annually evaluate the effectiveness of their information security
programs and practices and submit a report—including an independent evaluation by the OIG—to the
Department of Homeland Security (DHS), OMB, and Congress. Agencies also report quarterly and monthly
to DHS and OMB on the status of particular aspects of the information security program.
EPA's Chief Information Officer's FY 2015 FISMA Report and the OIG's FY 2015 FISMA audit status meeting
cites no material weaknesses in information security. The FY 2015 OIG report, however, noted where EPA
needs to make significant improvements in overseeing systems operated on its behalf by contractors or other
entities. EPA will continue improving oversight of systems operations through 2016. The agency plans to
focus on the other Administration Priorities (APs) for information security as well in FY 2016 to progress
on meeting the AP standards.
Biennial User Fees
In accordance with OMB Circular A-25 Revised ("User Charges") and the CFO Act of 1990, agencies conduct
the biennial review of their user fee programs. The objective was to determine whether additional fees
should be assessed for services provided and/or recommend adjustments to re fleet unanticipated changes
in costs or market values.
In FY 2015, EPA implemented a new agency-wide process to improve the accuracy of user fees in its
financial management system, and to reduce the costs to taxpayers for the management of the user fee
programs. EPA will conduct a user fee review in FY 2016 to capture a full fiscal years' worth of costs by
using the new business process. This will ensure that the agency is charging the most up-to-date fees for
user fees programs in an efficient and effective manner. Below is a table listing the user fee programs EPA
collected funds from in FY 2015, and the account number the funds are deposited in.
User Fee
Clean Air Part 71 Operating Permit Program
Lead-based Paint Fees Program
Motor Vehicle & Engine Compliance Program
Pesticide Maintenance Fee
Pesticides Registration Service Program
Pre-Manufacture Notice Program
Deposit Account
685295
685295L
685295A
68X4310
68X5374.1
680895
Miscellaneous Receipts Act
The EPA experienced seven Miscellaneous Receipts Act violations that occurred between FY 1983 through
2012. EPAis also evaluating three related potential Antideficiency Act violations. EPA discovered the
violations when it reviewed business processes associated with Superfund removal and remediation
projects that were partially financed by state funds. In FY 2015, the EPA determined that the agency
accepted state funds in excess of its statutory authority. In addition, the agency may have used some of
those state funds to accomplish work outside the scope of its statutory authority. See Section II, "Notes to
the Financial Statements," for additional details.
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Inspector General Act Amendments of 1988—Audit Management
EPA uses the results of OIG audits and evaluations to assess its progress toward its strategic goals and
make corrections and adjustments to improve program effectiveness and efficiency. The agency is
continuing to strengthen its audit management, addressing audit follow-up issues and working to complete
corrective actions expeditiously and effectively to improve environmental results. By the end of FY 2015,
for 73 percent of OIG program/performance audits, the OIG and agency reached agreement on
recommendations and corrective action upon issuance of the final audit Examples of FY 2015 efforts to
strengthen audit management include:
• EPA's OCFO developed and implemented a strategy for increasing the agency's attention to its audit
follow-up responsibilities, including timely completion of corrective actions in response to OIG
audit recommendations. At the end of FY 2015, EPA had reduced the number of late corrective
actions by 28 percent from FY 2014.
• In December 2014, OCFO launched new online training for using EPA's Management Audit Tracking
System (MATS) to ensure timely and effective audit follow-up in compliance with agency policy
(EPA Manual 2750: Audit Management Procedures) and accurate, complete, and up-to-date audit
data.
• EPA made oversight of audit follow-up a focus area for its FY 2015 Management Integrity Program.
All national program and regional offices reviewed a sample of their OIG audits using a
standardized checklist and reported findings in their FY 2015 assurance letters to the
Administrator. Results indicated no agency-level internal control weaknesses in audit management
• The agency began updating its Manual 2750: Audit Management Procedures, which was last revised
in FY 2012. Manual 2750 is a comprehensive audit management guide which addresses OIG,
Government Accountability Office, and Defense Contract Audit Agency audits. The agency expects to
complete the update by December 2015.
In addition, OCFO continued to conduct onsite reviews of national and program offices, initiated in FY 2009
and scheduled on a rotating basis. These QA/QC reviews focus on offices' audit follow-up procedures, data
entered in MATS, and availability of supporting documentation. The CFO continued to issue first and third
quarter audit management progress reports to senior agency managers, highlighting the status of
management decisions and corrective actions.
In FY 2015, EPA was responsible for addressing OIG recommendations and tracking follow-up activities for
309 OIG reports. The agency achieved final action (completing all corrective actions associated with the
audit) on 108 audits, including program evaluation/program performance, assistance agreement, and
single audits. This total excludes Defense Contract Audit Agency audits issued after January 1, 2009; these
audits are discussed separately below.
EPA's FY 2015 management activities for audits with associated dollars are represented in the following
table.*
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Category
A. Audits with management decisions but without
final action at the beginning of the period
B. Audits for which management decisions were
made during the period
(i) Management decisions with disallowed costs
(1) and with better use funds (2)
(ii) Management decisions with no disallowed
costs (60) and with no better use funds (34)
C. Total audits with management decision pending
final action during the period (A+B)
D. Final action taken during the period:
(i) Recoveries
a) Offsets
b) Collection
c) Value of Property
d) Other
(ii) Write-offs
(iii) Reinstated through grantee appeal
(iv) Value of recommendations completed
(v) Value of recommendations management
decided should/could not be completed
E. Audits with management decision but without
final action at end of period (C-D)
Disallowed Costs
(Financial Audits)
Number Value
56 $ 8,259,708
61 $ 0
117 $ 8,259,708
67 $ 94,109
$ 0
$ 94,109
$ 0
$
$ 0
$ 0
50 $ 8,165,599
Funds Put To Better Use
(Performance Audits)
Number Value
88 $ 322,578,854
36 $ 16,975,192
124 $ 339,554,046
41 $ 5,954,049
$ 5,771,870
$ 182,179
83 $ 333,599,997
*Any differences in numbers of reports and amounts of disallowed costs or funds put to better use between
this report and EPA's previous APR result from corrections made to data in the agency's audit tracking
system.
EPA's FY 2015 management activities for audits without final corrective action are summarized as follows:
Final Corrective Action Not Taken. Of the 309 audits that EPA tracked, a total of 143 audits with
management decision were without final action and not yet fully resolved at the end of FY 2015. (The
12 audits with management decisions under administrative appeal by the grantee are not included in
the 143 total; see discussion below.)
Final Corrective Action Not Taken Beyond One Year. Of the 143 audits without final action, EPA officials
had not completed final action on 78 audits (four of which involve multiple offices) within one year
after the management decision (the point at which the DIG and the action official reach agreement on
the corrective action plan). Because the issues to be addressed may be complex, agency managers often
require more than one year after management decisions are reached with the DIG to complete the
agreed-on corrective actions. These audits are listed below by category—audits of program
performance (54), single audits (12), assistance agreements (8), and financial statements (4)—and
identified by title and responsible office.
Audits of Program Performance. Final action for program performance audits occurs when all corrective
actions have been implemented, which may require more than one year when corrections are complex and
lengthy. Some audits include recommendations requiring action by more than one office. As of September
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30, 2015, EPA is tracking 54 audits without final action in the program performance category (4 of which
involve multiple offices).
Office of the Administrator
14-P00017 EPA Does Not Sufficiently Follow National Security Information Classification Standards
Office of Administration and Resources Management
10-P00002 Review of Hotline Complaint on Employee Granted Full-Time Work-at-Home Privilege
11-P00136 EPA Needs Better Agency-Wide Controls Over Staff Resources
12-P00836 EPA Should Improve Management Practices and Security Controls for Its Network Directory Service
System
13-P00028 Improvements Needed in Estimating and Leveraging Cost Savings Across EPA
13-P00200 Improvements Needed in EPA's Smartcard Program to Ensure Consistent Physical Access Procedures
and Cost Reasonableness
13-P00208+ EPA Should Increase Fixed Price Contracting for Remedial Actions
13-P00209 Opportunities for EPA-Wide Improvements Identified During Review of a Regional Time and
Materials Contract
14-P00338 Increased Emphasis on Strategic Sourcing Can Result in Substantial Savings for EPA
Office of Air and Radiation
11-P00701 EPA Should Update Its Fee Rule to Recover More Motor Vehicle and Engine Compliance Program
Costs
13-100434 Effectiveness of Strategies to Reduce Ozone Precursors
13-P00161 EPA Needs to Improve Air Emissions Data for the Oil and Natural Gas Production Sector
13-P00373 The EPA Should Improve Monitoring of Controls in the Renewable Fuel Standard
Program
Office of Chemical Safety and Pollution Prevention
10-P00066 EPA Needs a Coordinated Plan to Oversee Its Toxic Substances Control Act Responsibilities
12-P00600 Review of Hotline 2011-0027 (Lead- Renovation Painting and Repair Program) - Review of Hotline
Complaint Concerning Cost and Benefit Estimates for EPA's Lead-Based Paint Rule
13-P00163 EPA Is Not Recovering All Its Costs of the Lead-Based Paint Fees Program
14-P00322 Impact of EPA's Conventional Reduced Risk Pesticide Program Is Declining
14-P00349 EPA Can Help Consumers Identify Household and Other Products with Safer Chemicals by
Strengthening
14-P00350 EPA's Risk Assessment Division Has Not Fully Adhered to Its Quality Management Plan
Office of the Chief Financial Officer
2006-P00013 SF Mandate: Program Efficiencies
11-P00031 EPA Needs to Strengthen Internal Controls for Determining Workforce Levels
11-P00630 EPA Needs Workload Data to Better Justify Future Workforce Levels
13-P00366 The EPA Needs to Improve Timeliness and Documentation of Workforce and Workload Management
Corrective Actions
Office of Enforcement & Compliance Assurance
2001-P00013 State Enforcement Effectiveness- National Audit
10-P00007 EPA Oversight and Policy for High Priority Violations of Clean Air Act Need Improvement
10-P00224+ EPA Should Revise Outdated or Inconsistent EPA-State Clean Water Act Memoranda of Agreement
10-P00230 Data Quality Audit of ECHO System Phase II
11-P00315 Agency-Wide Application of Region 7 NPDES Program Process Improvements Could Increase EPA
Efficiency
13-P00431 EPA Needs to Update Its Pesticide and Chemical Enforcement Penalty Policies and Practices
14-P00270+ EPA Has Not Implemented Adequate Management Procedures to Address Potential Fraudulent
Environmental Data
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Office of Environmental Information
14-P00122 EPA Needs to Improve Safeguards for Personally Identifiable Information
14-P00142 EPA's Information Systems and Data Are at Risk Due to Insufficient Training of Personnel With
Significant Information Security Responsibilities
14-P00143 EPA Needs to Improve Management of the Cross-Media Electronic Reporting Regulation Program in
Order to Strengthen Protection of Human Health and the Environment
14-P00270+ EPA Has Not Implemented Adequate Management Procedures to Address Potential Fraudulent
Environmental Data
Office of Grants and Debar ment
14-P00317+ EPA Should Improve Oversight and Assure the Environmental Results of Puget Sound Cooperative
Agreements
Office of Research and Development
11-P00333 Office of Research and Development Needs to Improve Its Method of Measuring Administrative
Savings
14-P00247 EPA Employees Did Not Act Consistent With Agency Policy in Assisting an EPA Grantee
Office of Solid Waste and Emergency Response
2007-P00002 Asbestos Cleanup in Libby Montana
10-P00042 Lack of Final Guidance on Vapor Intrusion Impedes Efforts to Address Indoor Air Risks
11-P00173 EPA Promoted the Use of Coal Ash Products with Incomplete Risk Information
12-P00253 EPA Needs to Further Improve How It Manages Its Oil Pollution Prevention
12-P00289 Controls Over State Underground Storage Tank Inspection Programs in EPA Regions Generally
Effective
12-P00508 EPA Inaction in Identifying Hazardous Waste Pharmaceuticals May Result in Unsafe Disposal
13-P00152 EPA Could Improve Contingency Planning for Oil and Hazardous Substance Response
13-P00176 Results and Benefits Information Is Needed to Support Impacts of EPA's Superfund Removal Program
13-P00178 Improvements Needed in EPA Training and Oversight for Risk Management Program Inspections
13-P00208+ EPA Should Increase Fixed Price Contracting for Remedial Actions
13-P00298 Improved Information Could Better Enable EPA to Manage Electronic Waste and Enforce Regulations
14-P00270+ EPA Has Not Implemented Adequate Management Procedures to Address Potential Fraudulent
Environmental Data
14-P00302 EPA Has Made Progress in Assessing Historical Lead Smelter Sites But Needs to Strengthen
Procedures
Office of Water
10-P00224+
14-P00129
14-P00318
14-P00348
14-P00363
EPA Should Revise Outdated or Inconsistent EPA-State Clean Water Act Memoranda of Agreement
EPA Did Not Conduct Thorough Biennial User Fee Reviews
Unliquidated Obligations Resulted in Missed Opportunities to Improve Drinking Water Infrastructure
EPA Needs to Work With States to Develop Strategies for Monitoring the Impact of State Activities on
the Gulf of Mexico Hypoxic Zone
More Action Is Needed to Protect Water Resources From Unmonitored Hazardous Chemicals
Region 6
14-P00109 Internal Controls Needed to Control Costs of Emergency and Rapid Response Services Contracts, as
Exemplified in Region 6
Region 8
11-P00430 An Overall Strategy Can Improve Communication Efforts at Asbestos Superfund Site in Libby,
Montana
Region 9
2008-P00196 Making Better Use of Stringfellow SF Special Accounts
11-P00725 Region 9 Technical and Computer Room Security Vulnerabilities Increase Risk to EPA's Network
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Region 10
14-P00317+
EPA Should Improve Oversight and Assure the Environmental Results of Puget Sound Cooperative
Agreements
+ Indicates audits involving more than one office
Single audits. Final action for single audits occurs when non-monetary and/or monetary compliance actions
are completed. Achieving final action may require more than a year if the findings are complex or the
grantee does not have the resources to take corrective action. Single audits are conducted of nonprofit
organizations, universities, and state and local governments. As of September 30, 2015, EPA is tracking
completion of corrective action on the following 12 single audits.
Region 2
2007-300139
11-300022
11-300038
12-300444
13-300119
Region 9:
10-300208
13-300164
13-300346
13-300355
Region 10
2003-300047
2003-300117
2003-300145
State of New York, FY 2006
United States Virgin Islands Government FY 2007
United States Virgin Islands Government FY 2008
New Jersey State FY 2011
United States Virgin Islands FY 2010
CityofNogalesFY2008
City of Nogales Arizona FY 2011
City of Nogales Arizona FY 2012
Guam Waterworks Authority GU FY 2012
Stevens Village Council
Stevens Village Council
Circle Village CouncilA
AIndicates collection of funds has been turned over to the U.S. Department of the Treasury
Audits of Assistance Agreements. Reaching final action for assistance agreement audits may require more
than one year, as the grantee may appeal, refuse to repay or be placed on a repayment plan that spans
several years. EPA is tracking the following 8 audits in this category as of September 30, 2015.
Office of Grants and Debar ment
2001-100073 Napoleon City Schools-ASHAA (Hotline)
10-400067 Incurred Cost Audit of Three EPA Cooperative Agreements Awarded to National Tribal Environment
12-R00749 Examination of Costs Claimed Under EPA Cooperative Agreement 2A-83440701 Awarded
Under the Recovery Act to Cascade Sierra Solutions, Eugene, Oregon
Region 3
2001-100101
2008-400156
Center for Chesapeake Communities (CCC) Assist. Agreements'
Canaan Valley Institute
Region 5
2008-200039 Village of Laurelville, Ohio'
Region 6
13-R00297
Air Quality Objectives for the Baton Rouge Ozone Nonattainment Area Not Met Under EPA
Agreement 2A-96694301
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Region 9
12-200072 Agreed-Upon Procedures Applied to EPA Grants Awarded to Summit Lake Paiute Tribe, Sparks,
Nevada
AIndicates collection of funds has been turned over to the U.S. Department of the Treasury
Financial Statement Audits. Reaching final action on financial statement audits may require more than one
year due to complexities involved in financial reporting and compliance with laws, applicable statutes, and
contract regulations.
EPA is tracking progress toward completion of corrective actions on the following 4 financial statement
audits as of September 30, 2015.
Office of Administration and Resource Management
11-100015 Audit of EPA's Fiscal 2010 and 2009 Consolidated Financial Statements
Office of the Chief Financial Officer
10-100029 Audit of 2009 and 2008 (Restated) Consolidated Financial Statements
13-100054 Audit of EPA's Fiscal 2012 and 2013 Financial Statements
Office of Environmental Information
14-100039 FY 2013 EPA Financial Statements
Audits Awaiting Decision on Appeal. EPA regulations allow grantees to appeal management decisions on
financial assistance audits that seek monetary reimbursement from the recipient. In the case of an appeal,
EPA must not take action to collect the account receivable until the agency issues a decision on the appeal.
At the end of FY 2015,12 audits were in administrative appeal. When these audits are out of appeal and all
issues have been resolved, they will be captured in audit follow-up data reported in the EPA's APR.
Defense Contract Audit Agency Audits
Prior to January 1, 2009, DCAA audits of EPA contracts requested by EPA's OIG were included in OIG's
Semiannual Report to Congress. EPA will continue to track and report on these DCAA audits along with
other OIG audits until they are resolved and final actions are taken; these audits are included in the
preceding summary. Beginning January 1, 2009, however, EPA's Office of Acquisition Management
assumed responsibility for requesting DCAA audits. Accordingly, these audits are now reported separately
from OIG audits. The following provides an overview of DCAA audit activity for the period October 1, 2014
through September 30, 2015.
Summary of Audit Activities for the Period Ending September 30, 2015
Category
A. Audits for which no management decision was made by 10/1/2014
B. Audits which were issued during the period
C. Subtotal (A+B)
D. Audits for which a management decision was made during the reporting period
E Audits for which no management decision was made by 9/30/15
F. Reports for which no management decision was made within six months of issuance
Number
32
28
60
33
23
24
Questioned Costs
$ 1,774,479
$ 199,537
$ 836,446
$ 836,446
$ 0
$ 0
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During this reporting period, EPA management was accountable for monitoring 60 DCAA audits. The
agency achieved final action on 33 audits. EPA's FY 2015 management activities for DCAA audits with
associated dollars are represented in the following table:
Category
A. Audits with management decisions but without final action at the
beginning of the period
B. Audits for which management decisions were made during the
period
(i) Management decisions with disallowed costs (20)
(ii) Management decisions with no disallowed costs (13)
C. Total audits pending final action during the period (A+B)
D. Final action taken during the period:
(i) Recoveries
a) Offsets
b) Collection
c) Value of property
d) Other
(ii) Write-offs
(iii)Reinstated through appeal
(iv) Value of recommendations completed
(v) Value of recommendations management decided should/could
not be completed
E. Audits without final action at end of period (C-D)
Disallowed Costs
(Financial Audits)
Number Value
4 $ 278,942
33 $ 836,446
37 $1,176,231
33 $ 836,446
$ 0
$ 0
$ 0
$ 836,446
$ 0
$
4 $ 278,942
Funds Put to Better Use
(Performance Audits)
Number Value
0 $ 0
0 $ 0
0 $ 0
0 $ 0
$ 0
$ 0
0 $ 0
Final Corrective Action Not Taken on DCAA Audit Reports: Of the 60 DCAA audits EPA tracked, 27 were
without final action and not yet fully resolved at the end of FY 2015.
DCAA Audits Awaiting Decision on Appeal: As of September 30, 2015, there were no management
decisions in administrative appeal status.
DCAA Audits Without Management Decision in 180 Days: As of September 30, 2015, EPA is tracking no
DCAA reports, for which EPA is the cognizant agency, that have not reached management decision in over
180 days from the date of the report.
Final Corrective Action Not Taken Beyond One Year: Final action for contract audits performed by DCAA
or other organizations occurs when non-monetary and/or monetary compliance actions are completed.
Achieving final action may require more than a year if the findings are complex or the contractor does not
have the resources to take corrective action. EPA is tracking completion of corrective action on the
following contract audits for the period beginning October 1, 2015.
2012-114475
2012-114800
2012-114841
Avanti Corporation FY 2006,2007 and 2008 Incurred Costs
Alpha Gamma FY 2005 Incurred Costs
TechLaw Inc. FY 2006, 2007, 2008 Incurred Costs
42
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SECTION II - FINANCIAL SECTION
43
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MESSAGE FROM THE DEPUTY CHIEF FINANCIAL
OFFICER
I am pleased to join the Administrator in presenting the EPA's FY 2015 Agency
Financial Report, which provides financial and high-level programmatic performance
information to facilitate the understanding of the EPA's mission and achievements.
This report highlights to the President, Congress and the public our accomplishments
and challenges in protecting human health and the environment, effectively managing
the financial resources entrusted to us, and progress toward addressing key
management initiatives.
As required by Office of Management and Budget Circular A-123 and the Federal
Managers' Financial Integrity Act, the EPA conducted an annual assessment of the
effectiveness of internal controls over financial activities and reporting and programmatic operations. Based
on the results of the agency's FY 2015 evaluations and reviews, the agency can provide reasonable
assurance on the adequacy and effectiveness of the agency's internal controls over programs, financial
activities, and financial systems. Additionally, the EPA did not identify any new material weaknesses for FY
2015. Section III of this report provides details about corrective actions underway to address a previously
identified material weakness, and a number of other less severe weaknesses and deficiencies. We will
continue monitoring progress toward correcting these issues.
For FY 2015, the agency achieved an unmodified audit opinion for the 16th consecutive year on
the EPA's financial statements. This unmodified opinion means the EPA's financial data is reliable
and accurate. The agency's leadership continues its commitment of practicing sound financial
management and good stewardship over taxpayer resources.
During this fiscal year, we strengthened operational processes to reduce risks and enhance internal
controls. The agency developed more robust management oversight practices to facilitate better utilization
of resources-dramatically improving our ability to advance the mission of the agency. The agency also
launched an executive dashboard providing managers with summary financial and administrative data to
identify potential areas of concern within their respective organization.
As we enter into a new fiscal year, we are committed to expanding our management integrity
process to provide an integrated approach to evaluating strategic decisions, internal controls, and
risk management. We continue to uphold our commitment to financial excellence and strive to
ensure we are using taxpayer dollars effectively in fulfilling our mission. I look forward to the
agency's continued success through collaboration with our partners and stakeholders to help
deliver the best results to the American people.
David A. Bloom
Deputy Chief Financial Officer
November 16, 2015
44
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ERA'S FISCAL 2015 AND 2014
CONSOLIDATED FINANCIAL STATEMENTS
45
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Principal Financial Statements
Financial Statements
1. Consolidated Balance Sheet
2. Consolidated Statement of Net Cost
3. Consolidated Statement of Net Cost by Goal
4. Consolidating Statement of Changes in Net Position
5. Combined Statement of Budgetary Resources
6. Statement of Custodial Activity
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balance with Treasury (FBWT)
Note 3. Cash and Other Monetary Assets
Note 4. Investments
Note 5. Accounts Receivable, Net
Note 6. Other Assets
Note 7. Loans Receivable, Net
Note 8. Accounts Payable and Accrued Liabilities
Note 9. General Property, Plant and Equipment, Net
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. Commitments and Contingencies
Note 18. Funds from Dedicated Collections
Note 19. Intragovernmental Costs and Exchange Revenue
Note 20. Cost of Stewardship Land
Note 21. Environmental Cleanup Costs
Note 22. State Credits
Note 23. Preauthorized Mixed Funding Agreements
Note 24. Custodial Revenues and Accounts Receivable
Note 25. Reconciliation of President's Budget to Statement of Budgetary Resources
Note 2 6. Recoveries and Resources Not Available, Statement of Budgetary Resources
Note 27. Unobligated Balances Available
Note 28. Undelivered Orders at the End of the Period
Note 29. Offsetting Receipts
Note 30. Transfers-In and Out, Statement of Changes in Net Position
Note 31. Imputed Financing
Note 32. Payroll and Benefits Payable
Note 33. Other Adjustments, Statement of Changes in Net Position
Note 34. Non-exchange Revenue, Statement of Changes in Net Position
Note 35. Reconciliation of Net Cost of Operations to Budget
Note 36. Amounts Held By Treasury (Unaudited)
Note 3 7. Miscellaneous Receipts Act Violations and Potential Antideficiency Act Violations
46
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Required Supplementary Information (Unaudited)
1. Deferred Maintenance
2. Stewardship Land
3. Supplemental Combined Statement of Budgetary Resources
Required Supplementary Stewardship Information (Unaudited)
1. Investment in the Nation's Research and Development
2. Investment in the Nation's Infrastructure
3. Human Capital
47
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FY2015
United States Environmental Protection Agency
Consolidated Balance Sheet
As of September 30, 2015 and 2014
(Dollars in Thousands)
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2) $
Investments (Note 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 (Notes 13 and 17)
Total Intragovernmental
Accounts Payable & Accrued Liabilities (Note 8)
Pensions & Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 21)
Cashout Advances, Superfund (Notes 1 and 16)
Commitments & Contingencies (Note 17)
Payroll & Benefits Payable (Note 32)
Other (Note 13)
Total Liabilities
NET POSITION
Unexpended Appropriations - Funds from Dedicated Collections (Note 18)
Unexpended Appropriations - Other Funds
Cumulative Results of Operations - Funds from Dedicated Collections (Notes 1 and 18)
Cumulative Results of Operations - Other Funds
Total Net Position
Total Liabilities and Net Position $
The accompanying notes are an integral part of these financial statements.
48
FY2014
8,646,354 $
5,738,556
10,688
216,802
14,612,400
10
415,757
337
1,054,915
6,842
16,090,261 $
67,037 $
38
35,067
86,998
189,140
529,977
46,166
36,165
3,322,735
901
195,615
409,793
4,730,492
16,579
7,783,251
2,776,111
783,828
11,359,769
16,090,261 $
9,370,002
3,900,385
10,573
229,018
13,509,978
10
526,859
398
1,185,888
3,288
15,226,421
68,609
62
96,495
92,435
257,601
535,250
49,060
21,610
971,666
901
198,265
114,183
2,148,536
(2,497)
8,508,269
3,642,573
929,540
13,077,885
15,226,421
-------
United States Environmental Protection Agency
Consolidated Statement of Net Cost
For the Fiscal Years Ending September 30, 2015 and 2014
(Dollars in Thousands)
FY2015 FY2014
COSTS
Gross Costs (Note 19) $ 9,512,628 $ 9,054,107
Less:
Earned Revenue (Note 19) 775,606 548,690
NET COST OF OPERATIONS (Notes 25 and 35) S 8,737,022 S 8,505,417
The accompanying notes are an integral part of these financial statements.
49
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United States Environmental Protection Agency
Statement of Net Cost by Goal
For the Fiscal Year Ending September 30,2015
(Dollars in Thousands)
Costs:
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Note 19)
NET COST OF OPERATIONS
Clean Air
; 169,915
871,335
1,041,250
23,110
726
23,836
S 1,017,414
Clean & Safe
Water
382,821
4,419,378
4,802,199
(17,866)
27,579
9,713
4,792,486
Land
Preservation &
Restoration
328,868
1,882,664
2,211,532
39,688
537,143
576,831
1,634,701
Healthy
Communities
& Ecosystems
168,421
566,612
735,033
28,375
42,744
71,119
663,914
Compliance &
Environmental
Stewardship
231,381
491,233
722,614
3,559
90,548
94,107
628,507
Consolidated
Costs: Totals
Intragovernmental $ 1,281,406
With the Public 8,231,222
Total Costs 9,512,628
Less:
Earned Revenue, Federal 76,866
Earned Revenue, non Federal 698,740
Total Earned Revenue (Note 19) 775,606
NET COST OF OPERATIONS S 8,737,022~
The accompanying notes are an integral part of these financial statements.
50
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United States Environmental Protect!on Agency
Statement of Net Cost by Goal
For the Fiscal Year Ending September 30,2014
(Dollars in Thousands)
Clean Air
Costs:
Intragovernmental $ 162,818
With the Public 836,368
Total Costs 999,186
Less:
Earned Revenue, Federal 16,972
Earned Revenue, non Federal 865
Total Earned Revenue (Note 19) 17,837
NET COST OF OPERATIONS $ 981,349
Clean & Safe
Water
412,244
4,160,915
4,573,159
5,570
24,837
30,407
4,542,752
Land
Preservation &
Restoration
338,293
1,774,828
2,113,121
41,185
350,118
391,303
1,721,818
Healthy
Communities
& Ecosystems
149,398
518,293
667,691
12,361
44,643
57,004
610,687
Compliance &
Environmental
Stewardship
248,160
452,790
700,950
5,701
46,438
52,139
648,811
Consolidated
Costs: Totals
Intragovernmental $ 1,310,913
With the Public 7,743,194
Total Costs 9,054,107
Less:
Earned Revenue, Federal 81,789
Earned Revenue, non Federal 466,901
Total Earned Revenue (Note 19) 548,690
NET COST OF OPERATIONS $ 8,505,417~
The accompanying notes are an integral part of these financial statements.
51
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United States Environmental Protection Agency
Consolidating Statement of Changes in Net Position
For the Fiscal Year Ending September 30,2015
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period $
Adjustment:
(a) Changes in Accounting (Note 1)
(b) Correction (Note 1)
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 34)
Nonexchange Revenue - Other (Note 34)
Transfers In/Out (Note 30)
Trust Fund Appropriations
Other
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 30)
Imputed Financing Sources (Note 31)
Other Financing Sources
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumul ative Resul ts of Operati ons $
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 31)
Other Adjustments (Note 33)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
FY2015
Funds from
Dedicated
Collections
3,642,573
(1,261,097)
(9,420)
2,372,056
(2,109)
26,707
203,384
(10,208)
981,089
(1,044)
1,197,819
29
23,596
23,625
(817,388)
404,056
2,776,111
FY2015
Funds from
Dedicated
Collections
(2,497)
(2,497)
3,674
13,293
2,109
19,076
16,579
2,792,690
FY2015
All Other
Funds
929,540
929,540
8,616,081
3
28,253
(981,089)
12
7,663,260
(29)
110,691
110,662
(7,919,634)
(145,712)
783,828
FY2015
All Other
Funds
8,508,269
8,508,269
7,958,419
(13,293)
(54,063)
(8,616,081)
(725,018)
7,783,251
8,567,079
FY2015
Consolidated
Total
4,572,113
(1,261,097)
(9,420)
3,301,596
8,613,972
26,707
203,387
18,045
(1,032)
8,861,079
134,287
134,287
(8,737,022)
258,344
3,559,940
FY2015
Consolidated
Total
8,505,772
8,505,772
7,962,093
(54,063)
(8,613,972)
(705,942)
7,799,830
11,359,769
The accompanying notes are an integral part of these financial statements.
52
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United States Environmental Protection Agency
Consolidating Statement of Changes in Net Position
For the Fiscal Year Ending September 30, 2014
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 34)
Nonexchange Revenue - Other (Note 34)
Transfers In/Out (Note 30)
Trust Fund Appropriations
Other
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 30)
Imputed Financing Sources (Note 31)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Budgetary Financing Sources:
Appropriations Received
Other Adjustments (Note 33)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
$
•)
$
$
$
FY2014
Funds from
Dedicated
Collections
4,576,942
4,576,942
1,984
29,919
192,559
(1,012,576)
940,508
(2,122)
150,272
(53)
23,124
23,071
(1,107,713)
(934,370)
3,642,573
FY2014
Funds from
Dedicated
Collections
3,674
(4,187)
(1,984)
(2,497)
(2,497)
3,640,076
FY2014
All Other
Funds
731,208
731,208
8,385,104
2
28,825
(938,387)
7;475=544
(298)
120,790
120,492
(7,397,704)
198,332
929,540
FY2014
All Other
Funds
8,980,012
7,933,169
(19,808)
(8,385,104)
(471,743)
8,508,269
9,437,809
FY2014
Consolidated
Total
5,308,150
5,308,150
8,387,088
29,919
192,561
(983,751)
2,121
(2,122)
7,625,816
(350)
143,914
143,564
(8,505,417)
(736,037)
4,572,113
FY2014
Consolidated
Total
8,980,012
7,936,843
(23,995)
(8,387,088)
(474,240)
8,505,772
13,077,885
The accompanying notes are an integral part of these financial statements.
53
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United States Environmental Protection Agency
Combining Statement of Budgetary Resources
For the Fiscal Years Ending September 30, 2015 and 2014
(Dollars in Thousands)
FY2015
FY2014
BUDGETARY RESOURCES
Unobligated balance, brought forward, October 1:
Recoveries of prior year unpaid obligations (Note 26)
Other changes in unobligated balance
Unobligated balance from prior year budget authority, net
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority from offsetting collection (discretionary and mandatory)
Total Budgetary Resources
2,963,076
227,283
(15,107)
3,175,252
10,560,343
290
738,244
14,474,129
3,242,602
397,697
(62,229)
3,578,070
10,172,972
887,854
14,638,896
STATUS OF BUDGETARY RESOURCES
Obligations Incurred
Unobligated Balance, end of year:
Apportioned
Unapportioned
Total Unobligated balance, end of period (Note 27)
Total Status of Budgetary Resources
10,123,499
4,242,190
108,440
4,350,630
14,474,129
11,676,560
2,742,774
219,562
2,962,336
14,638,896
CHANGE IN OBLIGATED BALANCE
Unpaid Obligations:
Unpaid obligations, brought forward, October 1 (gross)
Obligations incurred, net
Outlays (gross)
Recoveries of prior year unpaid obligations
Unpaid obligations, end of year (gross)
Uncollected Payments
Uncollected customer payments from Federal Sources, brought forward, October 1)
Change in Uncollected customer payments from federal sources
Uncollected customer payments from Federal Sources, end of year
Memorandum entries:
Obligated balance, start of year
Obligated balance, end of year (net)
BUDGET AUTHORITY AND OUTLAYS, NET:
Budget authority, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Change in Uncollected customer payments from Federal sources (discretionary and mandatory)
Budget Authority, net (discretionary and mandatory)
Outlays, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Outlays, net (discretionary and mandatory)
Distributed offsetting receipts (Note 29)
Agency outlays, net (discretionary and mandatory
9,692,881
10,123,499
(10,484,265)
(227,283)
9,104,832
(259,642)
24,113
(235,529)
9,433,183
8,869,303
11,298,877
(762,357)
24,113
10,560,633
10,484,265
(762,357)
9,721,908
(2,716,279)
7,005,629 $"
9,784,031
11,676,560
(11,370,070)
(397,697)
9,692,826
(296,176)
36,534
(259,642)
9,487,855
9,433,183
11,060,827
(924,388)
36,534
10,172,973
11,370,070
(924,388)
10,445,682
(1,045,029)
9,400,653
The accompanying notes are an integral part of these financial statements.
54
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United States Environmental Protection Agency
Statement of Custodial Activity
For the Fiscal Years Ending September 30,2015 and 2014
(Dollars in Thousands)
FY2015
FY2014
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
Other
Total Cash Collections
Accrual Adjustment
Total Custodial Revenue (Note 24)
Disposition of Collections:
Transferred to Others (General Fund)
Increases/Decreases in Amounts to be Transferred
Total Disposition of Collections
Net Custodial Revenue Activity
198,087
56,334
119,295
(2,040)
254,421
(60,173)
117,255
2,218
194,248
119,473
254,423
(60,174)
117,255
2,218
194,248
119,473
The accompanying notes are an integral part of these financial statements.
55
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Environmental Protection Agency
Notes to the Financial Statements
Fiscal Year Ended September 30, 2015 and September 30, 2014
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. 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, hazardous waste, pesticides, and toxic
substances.
The FY 2015 financial statements are presented on a consolidated basis for the Balance Sheet, 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.
B. 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. The Statement of Net Cost has been prepared with cost segregated by
the agency's strategic goals.
C. Budgets and Budgetary Accounting
1. General Funds
Congress adopts an annual appropriation for State and Tribal Assistance Grants (STAG), Buildings and
Facilities (B&F), and for Payments to the Hazardous Substance Superfund to be available until expended, as
well as annual appropriations for Science and Technology (S&T), Environmental Programs and
Management (EPM) and for the Office of Inspector General (DIG) to be available for two 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 EPA's Fiscal Year 2014 Appropriation Act established a new three-year appropriation account to
provide funds to carry out section 3024 of the Solid Waste Disposal Act, including the development,
operation, maintenance, and upgrading of the hazardous waste electronic manifest system. The agency is
authorized to establish and collect user fees for this account that will be used for the electronic manifest
system.
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 one year appropriation, available for obligation in the fiscal year for which it was
56
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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 reestimates that occur in subsequent years after the loans were disbursed.
Funds transferred from other federal agencies are processed as non-expenditure transfers. 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 Re registration and Expedited Processing Fund (FIFRA) and Pesticide Registration Funds
(PRIA) 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 Working Capital Fund (WCF) is provided by fees collected from other agency appropriations
and other federal agencies to offset costs incurred for providing the agency administrative support for
computer and telecommunication services, financial system services, employee relocation services,
background investigations, conference planning and postage.
3. Special Funds
The Environmental Services Receipt Account obtains fees associated with environmental programs.
Exxon Valdez Settlement Fund uses funding collected from reimbursement from the Exxon Valdez
settlement
The National Resource Damages Trust Fund was established for funds received for critical damage
assessments and restoration of natural resources injured as a result of the Deepwater Horizon oil spill.
4. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit accounts pending
further disposition. Until determination is made, these are not EPA's funds. The amounts are reported to
the US Treasury through the Government-wide Treasury Account Symbol Adjusted Trial Balance System
(GTAS).
5. Trust Funds
Congress adopts an annual appropriation amount for the Superfund, Leaking Underground Storage Tank
(LUST) and the Inland Oil Spill Programs Accounts 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 Inland Oil Spill Programs appropriation amount to the EPA's Inland Oil
57
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Spill Programs Account In 2015, EPA established a new receipt account for superfund special account
collections. This allows the agency to invest the funds until draw down is needed for special accounts
disbursements.
D. Basis of Accounting
Generally Accepted Accounting Principles (GAAP) for Federal entities is the standard prescribed by the
Federal Accounting Standards Advisory Board (FASAB), which is the official standard-setting body for the
Federal government and the American Institute of Certified Public Accountants (AICPA). The financial
statements are prepared in accordance with GAAP for Federal entities.
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 posted in accordance with
Office of Management and Budget (OMB) directives and the US Treasury regulations.
EPA uses a modified matching principle since Federal entities recognize unfunded (without budgetary
resources) liabilities in accordance with FASAB Statement of Federal Financial Accounting Standards
(SFFAS) No. 5 "Accounting for Liabilities of the Federal Government"
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 SFFAS No. 7, "Accounting for Revenues and Other Financing Sources."
Superfund
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 Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA) Section 122(b)(3) placed in special accounts. Special Accounts and corresponding interest
are classified as mandatory appropriations due to the retain and use authority under CERCLA 122(b)(3).
Cost recovery settlements that are not placed in special accounts continue to be deposited in the Trust
Fund.
Special Accounts Funds Accounting Process Change
Below is a summary of the accounting process changes the agency made in FY 2015 and their impact
• In FY 2015, the agency developed a new business process for managing its special accounts funds.
The agency moved the Anadarko settlement collections to the Superfund Trust Fund to invest in
U.S. Government Securities. A summary of the Anadarko settlement is provided below in paragraph
X of this Note 1. This change impacted the budgetary accounts (US Standard General Ledger
Accounts- Authority Resources from Invested Balances and Unfilled Customer Order Collected). The
impact is shown on Statement of Budgetary Resources lines "Appropriations" and "Spending
Authority from Offsetting Collections" as follows:
o Appropriations (Mandatory) increased by $1.4 Billion
o Spending Authority from Offsetting Collections was not used to record the Anadarko
collection.
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• In FY 2016, all new agency cash outs will go into the receipt account 68X8145.006 which allows the
agency to have the funds invested immediately in U.S. Government Securities.
• For collections in FY 2015 and prior years, except for the Anadarko settlement, which is
approximately $1.4 Billion, the funds are treated as Reimbursable Authority and are shown on
Statement of Budgetary Resources line "Spending Authority from Offsetting Collections."
• The summary of investments in U.S. Government Securities is provided below in paragraph G of this
Note 1.
• Prior to FY 2015, the agency recorded special accounts funds proceeds as earned and/or unearned
revenue to account for past and prospective cleanup activities based on the consent decree.
Effective FY 2015, the agency changed its accounting treatmentto record special accounts funds
settlement proceeds as unearned revenue after determining that collections previously recorded as
past costs were being used for future site cleanup. EPA reclassified $1.1 Billion from equity to
unearned in fiscal year 2015 to reflect this change in accounting. In FY 2015, EPA collected an
additional $290 million in past costs that was classified as unearned revenue, intended for future
site cleanups.
Other Funds
Most of the other funds, including those under the Credit Reform Act of 1990, receive program guidance
and funding needed to support loan programs through appropriations which may be used within statutory
limits for operating and capital expenditures. The Asbestos Direct Loan Financing fund 4322 receives
additional funding to support the outstanding loans through collections from the Program fund 0118 for
the subsidized portion of the loan.
The FIFRA and PRIA 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 the 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 US Government Securities
Investments in US Government securities are maintained by Treasury and are reported at amortized cost
net of unamortized discounts. Discounts are amortized over the term of the investments and reported as
interest income. No provision is made for unrealized gains or losses on these securities because, in the
majority of cases, they are held to maturity (see Note 4).
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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 Superfund Amendments and Reauthorization Act of 1986 (SARA). Since there is no assurance
that these funds will be recovered, cost recovery expenditures are expensed when incurred (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 at least some, but not necessarily all, of the 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 percenter 50 percent of site remedial action costs, depending on who has the primary responsibility 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 paid to other entities both internal and external to the agency
for which a budgetary expenditure has not yet occurred.
L. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans receivable resulting from
obligations on or before September 30,1991, are reduced by the allowance for uncollectible loans. Loans
receivable resulting from loans obligated on or after October 1,1991, are reduced by an allowance equal to
the present value of the subsidy costs associated with these loans. The subsidy cost is calculated based on
the interest rate differential between the loans and Treasury borrowing, the estimated delinquencies and
defaults net of recoveries offset by fees collected and other estimated cash flows associated with these
loans.
M. Appropriated Amounts Held by Treasury
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Cash available to the agency that is not needed immediately for current disbursements of the Superfund
and LUST Trust Funds and amounts appropriated from the Superfund Trust Fund to the OIG, 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" as amended. For EPA-held property, the Fixed Assets
Subsystem (FAS) maintains the official records and automatically generates depreciation entries monthly
based on in-service 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 two years. For contractor held property, depreciation is taken on
a modified straight-line basis over a period of six years depreciating 10 percent the first and sixth year, and
20 percent in years two through five. Detailed records are maintained and accounted for in contractor
systems, not in FAS for contractor held property. Acquisitions of EPA-held personal property are
depreciated using the straight-line method over the specific asset's useful life, ranging from two 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 projected
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
at the end of the lease to the EPA; contains a bargain purchase option; the lease term is equal to 75 percent
or more of the estimated economic service life; or the present value of the projected cash flows of the lease
and other minimum lease payments is equal to or exceeds 90 percent of the fair value.
Superfund contract property used as part of the remedy for site-specific response actions is capitalized in
accordance with the agency's capitalization threshold. This property is part of the remedy at the site and
eventually becomes part of the site itself. Once the response action has been completed and the remedy
implemented, the 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 the 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 WCF. This
property is retained in FAS, depreciated utilizing the straight-line method based upon the asset's in-service
date and useful life and is reflected on the WCF statements.
Real property consists of land, buildings, capital and leasehold improvements and capital leases. Real
property, other than land, is capitalized when the value is $85 thousand or more. Land is capitalized
regardless of cost Buildings are valued at an estimated original cost basis, and land is valued at fair market
value if purchased prior to FY 1997. Real property purchased after FY 1996 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 when incurred.
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Software for the WCF, a revenue generating activity, is capitalized if the purchase price is $100 thousand or
more with an estimated useful life of two 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 two to five years.
0. Liabilities
Liabilities represent the amount of monies or other resources that are more likely than not to be paid by
the agency as the result of an agency transaction or event that has already occurred and can be reasonably
estimated. However, no liability can be paid by the agency without an appropriation or other collections
authorized for retention. Liabilities for which an appropriation has not been enacted are classified as
unfunded liabilities and there is no certainty that the appropriations will be enacted. Liabilities of the
agency arising from other than contracts can be abrogated by the Government acting in its sovereign
capacity.
P. Borrowing Payable to the Treasury
Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos direct loans.
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 32 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 1,1987, the Federal
Employees Retirement System (FERS) went into effect pursuant to Public Law 99-335. Most employees
hired after December 31,1986, are automatically covered by FERS and Social Security. Employees hired
prior to January 1,1987, 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 (0PM), as administrator of the CSRS
and FERS, the Federal Employees Health Benefits Program, and the Federal Employees Group Life
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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 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.
EPA received updated information in early FY 2015 from the Bureau of Fiscal Service related to excise
taxes collected in FY 2014 on behalf of the Leaking Underground Storage Tank Trust Fund. This
necessitated an adjustment to beginning Net Position.
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 projects aimed at creating advances in science, health, and
environmental protection that will provide long-term economic benefits.
The EPA managed almost $7.22 billion in Recovery Act funded projects and programs to achieve these
goals, offered resources to help other "green" agencies, and administered environmental laws that
governed Recovery activities.
As of September 30, 2015, EPA expended over $7.1 billion, with $2.1 million deobligated and returned to
Treasury. The EPA, in collaboration with states, tribes, local governments, territories and other partners,
administered the funds it received under the Recovery Act through four appropriations. The funds include:
• $4.4 billion for State and Tribal Assistance Grants (STAG) that in turn include:
• $4 billion for assistance to help communities with water quality and wastewater infrastructure
needs and $2 billion for drinking water infrastructure needs (Clean Water and Drinking Water
State Revolving Fund programs and Water Quality Planning program);
• $100 million for competitive grants to evaluate and clean up former industrial and commercial
sites (Brownfields program);
• $300 million for grants and loans to help regional, state and local governments, tribal agencies,
and non-profit organizations with projects that reduce diesel emissions (Clean Diesel
programs);
• $600 million for the cleanup of hazardous sites (Superfund program);
• $200 million for cleanup of petroleum leaks from underground storage tanks (Leaking
Underground Storage Tank program); and
• $20 million for audits and investigations conducted by the Inspector General (IG).
The vast majority of the contracts awarded under the Recovery Act used competitive contracts. The EPA
remains committed to ensuring transparency and accountability in spending Recovery Act funds in
accordance with OMB guidance.
An EPA Stimulus Steering Committee directed EPA's Recovery Act management and guided transparency
efforts. EPA's Stewardship Plan laid out the agency's risk mitigation plan, including risk assessment,
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internal controls and monitoring activities. The Stewardship Plan was divided into seven functional areas:
grants, interagency agreements, contracts, human capital/payroll, budget execution, performance
reporting and financial reporting. The Plan was developed based on Government Accountability Office
(GAO) standards for internal control. Under each functional area, risks were assessed and related control,
communication and monitoring activities identified for each program. The Plan was updated based on OMB
guidance.
EPA has the three-year EPM treasury account symbol 6809/110108 that was established to track the
appropriate operation and maintenance of the funds. EPA's other Recovery Act programs are the following:
Office of Inspector General (IG), treasury symbol 6809/120113; State and Tribal Assistance Grants,
treasury symbol 6809/100102; Paymentto the Superfund, treasury symbol 6809/100249; Superfund,
treasury account symbol 6809/108195; and Leaking Underground Storage Tank, treasury account symbol
6809/108196. Please note almost all of these programs are now closed with only a few remaining projects
remaining open - primarily for long term rate adjustments and trailing costs.
V. Deepwater Horizon Oil Spill
On April 20, 2010, the Deepwater Horizon drilling rig exploded, releasing large volumes of oil into the Gulf
of Mexico. As a responsible party, BP is required by the 1990 Oil Pollution Act to fund the cost of the
response and cleanup operations. On September 10, 2012, the President designated EPA and USD A as
additional trustees for the National Resource Damage and Assessment Council for restoration solely
conjunction with injury to, destruction of, loss of, or loss of the use of natural resources, including their
supporting ecosystems, resulting from the Deepwater Horizon Oil Spill. In FY 2015, EPA received an
advance of $184,000 from BP and $2.056 million from the U.S. Coast Guard, to participate in addressing
injured natural resources and service resulting from the Deepwater Horizon Oil Spill.
On October 5, 2015, the United States and the five Gulf states announced a settlement with BP to resolve
civil claims against BP arising from the April 20, 2010 well blowout and oil spill. The proposed settlement
resolves the governments' civil claims under the CWA and natural resources damage claims under the Oil
Pollution Act, as well as economic damage claims of the five Gulf States and local governments. All together
this settlement is worth $20.8 billion. The settlement includes $5.5 billion for federal CWA penalties; 80%
of which will go to restoration efforts in the Gulf region pursuant to the RESTORE Act. The settlement also
includes $8.1 billion in natural resource damages, including $1 billion that BP already committed to pay for
early restoration, for joint use by the federal and state trustees to restore injured resources. The natural
resource damages money will fund Gulf restoration projects that will be selected by the federal and state
trustees to meet five restoration goals and 13 restoration project categories, e.g., restoring water quality,
reducing nutrients, restoring and conserving habitat, etc. For more information:
http://www.justice.gov/enrd/deepwater-horizon.
W. Hurricane Sandy
On January 29, 2013, President Obama signed into law the Disaster Relief Appropriations Act (Disaster
Relief Act) which provided aid for Hurricane Sandy disaster victims and their communities. Because relief
funding of this magnitude often carries additional risk, the Disaster Relief Act required Federal agencies
supporting Sandy recovery and other disaster-related activities to write and implement and Internal
Control Plan to prevent waste, fraud and abuse of these funds. The EPA Hurricane Sandy Internal Control
Plan was reviewed and approved by OMB, GAO and the IG in FY 2013.
EPA received a post sequestration appropriation of $577 million in Hurricane Sandy funds for the following
programs (all amounts are post sequestration):
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• The Clean Water State Revolving Fund received $475 million for work on clean water infrastructure
projects in New York and New Jersey.
• The Drinking Water State Revolving Fund received $95 million for work on drinking water
infrastructure projects in New York and New Jersey.
• The Leaking Underground Storage Tanks program received $4.75 million for work on projects
impacted by Hurricane Sandy.
• The Superfund program received $1.9 million for work on Superfund sites impacted by Hurricane
Sandy.
• EPA also received $689,000 to make repairs to EPA facilities impacted by Hurricane Sandy and
conduct additional water quality monitoring.
As of September 30, 2015, EPA obligated $576.7 million of these funds and expended $2.7 million.
X. Anadarko Settlement
On November 10, 2014, the U.S. District Court for the Southern District of New York (SONY) approved the
historic $5.15 billion settlement agreement that was announced by EPA and the Department of Justice
(DOJ) on April 3, 2014, resolving fraudulent conveyance claims against Kerr-McGee Corporation and
related subsidiaries of Anadarko Petroleum Corporation. The deadline for any appeals from the district
court's decision passed on January 20, 2015, without any appeal being filed. The settlement agreement
went into effect on January 21, 2015.
Of the environmental recovery in this settlement, nearly $1.6 billion will help pay for cleanup work
associated with 16 EPA-lead sites, resulting in the largest bankruptcy-related award that EPA has ever
received for environmental claims and liabilities. The settlement addresses Kerr-McGee's enormous legacy
environmental and tort liabilities, including its liability at Federal Superfund sites. EPA has received the
collections from DOJ regarding the Anadarko settlement
Y. Use of Estimates
The preparation of financial statements requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
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Note 2. Fund Balance with Treasury (FBWT)
Fund Balance with Treasury as of September 30, 2015 and September 30, 2014, consists of the following:
Trust Funds:
Superfund
LUST
Oil Spill
Revolving Funds:
FIFRA/Tolerance
Working Capital
Cr. Reform Finan.
e-Manifest
NRDA
Appropriated
Other Fund Types
Total
Entity
Assets
$ 39,078
24,358
7,694
22,400
72,238
36
3,411
3,196
8,044,387
419,081
$ 8,635,879
FY2015
Non-Entity
Assets
10,475
Total
10,475
39,078
24,358
7,694
22,400
72,238
36
3,411
3,196
8,044,387
429,556
8,646,354
Entity
Assets
18,817
32,390
4,020
16,480
83,214
398
549
8,821,029
389,306
9,366,203
FY2014
Non-Entity
Assets
3,799
Total
3,799
18,817
32,390
4,020
16,480
83,214
398
549
8,821,029
393,105
9,370,002
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.
Status of Fund Balances:
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund (Note 36)
Obligated Balance not yet Disbursed
Non-Budgetary FBWT
Totals
FY2015
4,226,754 $
108,424
(4,991,953)
3,867
8,851,913
447,349
8,646,354 $
FY2014
894,141
2,068,195
(3,416,491)
12,140
9,433,183
378,834
9,370,002
The funds available for obligation may be apportioned by OMB for new obligations at the beginning of the
following fiscal year. Funds unavailable for obligation are mostly balances in expired funds, which are
available only for adjustments of existing obligations. For FY 2015 and FY 2014 no differences existed
between Treasury's accounts and EPA's statements for fund balances with Treasury.
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Note 3. Cash and Other Monetary Assets
As of September 30, 2015 and September 30, 2014, the balance in the imprest fund was $10 thousand.
Note 4. Investments
As of September 30, 2015 and September 30, 2014 investments related to Superfund and LUST consist of
the following:
Amortized
. Interest Investments,
Cost (Premium) . ^T Market Value
_.. Receivable Net
Discount
Intragovernmental Securities:
Non-Marketable FY2015 $ 5,731,240 (4,278) 3,038 5,738,556 5,738,556
Non-Marketable FY2014 $ 3,886,652 (8,836) 4,897 3,900,385 3,900,385
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. All investments in Treasury securities are funds
from dedicated collections (see Note 18).
The Federal Government does not set aside assets to pay future benefits or other expenditures associated
with funds from dedicated collections. The cash receipts collected from the public for dedicated collection
funds 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.
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Note 5. Accounts Receivable, Net
The Accounts Receivable as of September 30, 2015 and September 30, 2014 consistof the following:
FY2015 FY2014
Intragovernmental:
Accounts & Interest Receivable
Less: Allowance for Uncollectibles
Total
Non-Federal:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance for Uncollectibles
Total
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, 2015 and September 30, 2014 consistof the following:
Intragovernmental: FY2015 FY2014
11,372
(684)
10,688
124,494
2,416,585
(2,125,322)
415,757
11,266
(693)
10,573
126,170
2,303,339
(1,902,650)
526,859
Advances to Federal Agencies
Advances for Postage
Total
Non-Federal:
Travel Advances
Other Advances
Inventory for Sale
Total
216,692
110
216,802
339
6,121
382
228,982
36
229,018
4
2,914
370
6,842
3,288
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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, 2015 and September 30, 2014 are as follows:
FY2015
FY2014
Loans Value of Assets Loans Value of Assets
Receivable, Allowance* Related to Receivable, Allowance* Related to
Gross Direct Loans Gross Direct Loans
Direct Loans
Obligated After FY
1991
Total
337
337
337
337
32
32
366
366
398
398
* 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).
Subsidy Expenses for Credit Reform Loans (reported on a cash basis):
Interest Rate
Re-estimate
Technical
Re-estimate
Total
Upward Subsidy Reestimate - FY 2015 $
Downward Subsidy Reestimate - FY2015
FY 2015 Totals $
Upward Subsidy Reestimate-FY2014 $
Downward Subsidy Reestimate - FY2014
FY 2014 Totals $
302
96
398
302
96
398
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Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
FY2015 FY2014
Beginning balance of the subsidy cost allowance $ 366 27
Add: subsidy expense for direct loans disbursed during the
reporting years by component:
Interest rate differential costs
Default costs (net of recoveries)
Fees and other collections
Other subsidy costs - 96
Total of the above subsidy expense components 366 123
Adjustments:
Subsidy allowance amortization - 304
Other (31) -
End balance of the subsidy cost allowance before reestimates (31) 304
Add or subtract subsidy reestimates by component:
(a) Interest rate reestimate 2 (47)
(b) Technical/default reestimate - (14)
Total of the above reestimate components 2 (61)
Ending Balance of the subsidy cost allowance $ 337 366
EPA has not disbursed Direct Loans since 1993.
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Note 8. Accounts Payable and Accrued Liabilities
The Accounts Payable and Accrued Liabilities are current liabilities and consist of the following amounts as
of September 30, 2015 and September 30, 2014:
Intragovernmental:
Accounts Payable
Subsidy Payable
Accrued Liabilities
Total
FY2015
824
(339)
66,552
67,037
FY2014
533
68,076
68,609
Non-Federal:
Accounts Payable
Advances Payable
Interest Payable
Grant Liabilities
Other Accrued Liabilities
Total
FY2015
FY2014
69,361
5
5
304,929
155,677
529,977
75,387
11
7
308,521
151,324
535,250
Other Accrued Liabilities primarily relate to contractor accruals.
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, 2015 and September 30, 2014, General PP&E consisted of the following:
EPA-Held Equipment
Software
Contractor Held Equip.
Land and Buildings
Capital Leases
Total
Acquisition
Value
291,669
964,670
37,261
707,564
30,613
2,031,777
FY2015
Accumulated
Depreciation
(188,779)
(503,328)
(21,746)
(239,925)
(23,084)
(976,862)
Net Book
Value
102,890
461,342
15,515
467,639
7,529
1,054,915
Acquisition
Value
291,021
993,293
36,085
702,658
35,285
2,058,342
FY2014
Accumulated
Depreciation
(182,473)
(420,968)
(18,345)
(223,647)
(27,021)
(872,454)
Net Book
Value
108,548
572,325
17,740
479,011
8,264
1,185,888
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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, 2015 and September 30, 2014 is as follows:
All Other Funds
Intragovernmental:
Debt to Treasury
Beginning
Balance
FY2015
Net
Borrowing
FY2014
Ending Beginning Net Ending
Balance Balance Borrowing Balance
62
(24)
38
28
34
62
Note 11. Stewardship Land
The agency acquires title to certain property and property rights under the authorities provided in Section
104(j) CERCLA related to remedial cleanup sites. The property rights are in the form of fee interests
(ownership) and easements to allow access to cleanup sites or to restrict usage of remediated sites. The
agency takes title to the land during remediation and transfers it to state or local governments upon the
completion of cleanup. 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 under the terms of 104(j).
As of September 30, 2015 and 2014, the agency possesses the following land and land rights:
FY2015 FY2014
Superftmd Sites with
Easements
Beginning Balance
Additions
Withdrawals
Ending Balance
35
1
0
36
36
0
1
35
Superftmd Sites with
Land Acquired
Beginning Balance
Additions
Withdrawals
Ending Balance
34
1
0
35
33
1
0
34
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, 2015 and September 30, 2014, custodial liability is approximately $35.067 million and $96.495 million,
respectively.
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Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2015:
Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgment Fund
Total Intragovernmental
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal
Liability for Deposit Funds, Non-Federal
Non-Current
Capital Lease Liability
Total Non-Federal
Covered by
Budgetary
Resources
10,132
1,155
4,881
38,310
730
55,208
378,033
12,170
Not Covered by
Budgetary
Resources
9,737
53
22,000
31,790
19,590
Total
390,203
19,590
10,132
1,155
4,881
38,310
730
9,737
53
22,000
86,998
378,033
12,170
19,590
409,793
Other Liabilities consist of the following as of September 30, 2014:
73
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Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Advances, HRSTF Cashout
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgment Fund
Total Intragovernmental
Other Liabilities - Non-Federal
Current
Unearned Advances
Liability for Deposit Funds
Non-Current
Capital Lease Liability
Total Non-Federal
Covered by
Budgetary
Resources
11,200
1,208
6,568
30,693
49,669
89,682
4,123
Not Covered by
Budgetary
Resources
20,566
200
22,000
42,766
20,378
Total
11,200
1,208
6,568
30,693
20,566
200
22,000
92,435
89,682
4,123
20,378
93,805
20,378
114,183
Note 14. Leases
Capital Leases:
The value of assets held under Capital Leases as of September 30, 2015 and 2014 are as follows:
Summary of Assets Under Capital Lease:
Real Property
Personal Property
Total
Accumulated Amortization
FY2015
30,613
30,613
23,084
FY2014
35,285
35,285
27,201
EPA had two capital leases for land and buildings housing scientific laboratories and computer facilities.
Both 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. EPA's leases
terminate in FY 2025.
The total future minimum capital lease payments are listed below.
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Future Payments Due
Fiscal Year Capital Leases
2016 $ 4,215
2017 4,215
2018 4,215
2019 4,215
After 5 years 22,480
Total Future Minimum Lease Payments 39,340
Less: Imputed Interest (19,750)
Net Capital Lease Liability 19,590
Liabilities not Covered by Budgetary Resource $ 19,590
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 had two 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 two leases expire in FY 2017
and FY 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
2016 $ 89
2017 83
2018 53
2019 53
Beyond 2019 8
Total Future Minimum Lease Payments $ 286
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, 2015 and 2014 was $46.17 million and $49.06 million,
respectively. The estimated future costs are recorded as an unfunded liability. The FY 2015 present value
of these estimated outflows is calculated using a discount rate of 3.143 percent in the firstyear, and 3.143
percent in the years thereafter. The estimated future costs are recorded as an unfunded liability.
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Note 16. CashoutAdvances, 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, 2015 and September
30, 2014, cashouts are approximately $3,323 million and $972 million respectively.
Note 17. Commitments and Contingencies
EPA may be a party in various administrative proceedings, 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, 2015 and 2014 total accrued liabilities for commitments and potential loss
contingencies is $901 thousand for both years, respectively. The recorded amount is comprised of two
cases and discussed below.
Gold King Mine
On August 5, 2015, EPA was conducting an investigation of the Gold King Mine near Silverton,
Colorado. While excavating part of the mine, pressurized water began leaking above the mine tunnel,
spilling about three million gallons of contaminated water stored behind the collapsed material in Cement
Creek, a tributary of the Animas River. In fiscal year 2015 and subsequent fiscal years, the agency has
received and anticipates receiving administrative tort legal claims for compensation from individuals and
entities who may have suffered personal injury or property damage from the U.S. government
actions. Subject to the materiality threshold, the agency will begin to report on such matters when claims
are filed and contingent legal liabilities are known.
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 thatthe agency's selection of the response
action was arbitrary and capricious or otherwise not in accordance with law.
As of September 30, 2015, there are two cases pending against EPA that are reported under Environmental
Liabilities below: Bob's Home Service Landfill ($900 thousand) and the Seaboard Chemical/Riverdale
Landfill Site matter ($1 thousand) are reported as a probable liability. The $901 thousand will be recorded
as an accrual.
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There are two matters concerning CERCLA involving the Appvion Lower Fox River and Green Bay Site and
the Hudson Oil Refinery site (associated with Land O'Lakes). The amounts are estimated at $174 million
and $17.6 million respectively but they are only possible and the final outcomes are not probable.
Judgment Fund
In cases that are paid by the U.S. Treasury Judgment Fund, EPA must recognize the full cost of a claim
regardless of which entity is actually paying the claim. Until these claims are settled or a court judgment is
assessed and the Judgment Fund is determined to be the appropriate source for the payment, claims that
are probable and estimable must be recognized as an expense and liability of the agency. For these cases,
at the time of settlement or judgment, the liability will be reduced and an imputed financing source
recognized. See Interpretation of Federal Financial Accounting Standards No. 2, "Accounting for Treasury
Judgment Fund Transactions." EPA has a $22 million liability to the Treasury Judgment Fund for a payment
made by the Fund to settle a contract dispute claim.
As of September 30, 2015, there are two cases pending: Trinity Marine Products. Inc. v. United States and
Frederick McKenzie et al v. United States. The Trinity Marine Products case has been denied twice, but
Trinity appealed to US Court of Appeals for the Fifth Circuit. The possibility of loss is only reasonably
possible so no liability has been accrued. An estimate of possible damages is $1 million to $4.4 million. For
the McKenzie case, the Government has filed a motion to dismiss the complaint and the Court has decided
to issue its decisions on the briefs without oral arguments. The Court has also determined that it will not
rule on this case until the Trinity Marine Products case has been decided. An estimate of the possible
damages is $1 million to $2.8 million.
Other Commitments
Since 1991, the United States has had a non-cancellable agreement, subject to the availability of funds, with
the United Nations Environment Programme (UNEP) to provide funds to the Multilateral Fund for the
Implementation of the Montreal Protocol. In keeping with this agreement, the U.S. Department of State
continues to negotiate successive three-year agreements for the level of funds that the United States will
provide to the Multilateral Fund for this purpose. Since 1991, the Department of State which has primary
responsibility for international commitments of the U.S., has provided the bulk of funds to the Multilateral
Fund, with EPA providing a lesser amount. Since commitments to the Multilateral Fund are ongoing, future
EPA payments totaling $27 million have been deemed reasonably possible and are anticipated to be paid in
years 2015-2017.
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Note 18. Funds from Dedicated Collections (Unaudited)
Balance sheet as of September 30, 2015
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities
Total Liabilities
Unexpended Appropriation
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Net Cost for the
Period Ended September 30, 2015
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Statement of Changes in Net Position for the
Period ended September 30, 2015
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
Environmental TTT^™
LUST
Services
$ 397,838 24,358
525,253
78,881
599
397,838 629,091
7 85,610
7 85,610
.
397,831 543,481
397,838 629,091
98,271
-
98,271
370,045 462,786
587
27,786 178,379
-
-
(98,271)
27,786 80,695
$ 397,831 $ 543,481 $
Superfund
39,078
5,213,303
275,550
98,252
5,626,183
3,781,184
3,781,184
13,297
1,831,702
5,626,183
1,338,018
634,182
703,836
1,532,727
26,118
1,285
965,088
23,617
(703,836)
312,272
1,844,999
Other Funds from
Dedicated Collections
57,944
-
2,935
2,590
63,469
57,090
57,090
3,281
3,098
63,469
75,535
60,254
15,281
4,001
3
(4,067)
21,718
5
(15,281)
2,378
$ 6,379 $
Total Funds from
Dedicated Collections
519,218
5,738,556
357,366
101,441
6,716,581
3,923,891
3,923,891
16,578
2,776,112
6,716,581
1,511,824
694,436
817,388
2,369,559
26,708
203,383
986,806
23,622
(817,388
423,131
2,792,690
78
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Balance sheet as of September 30,2014
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities
Total Liabilities
Unexpended Appropriations
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Net Cost for the
Period Ended September 30, 2014
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Statement of Changes in Net Position for the
Period ended September 30,2014
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
Environmental
Services
370,053
370,053
LUST
370,045
370,053
358,632
11,413
11,413
$ 370,045
32,760
446,455
85,924
686
565,825
93,619
(4,187)
476,393
565,825
103,665
2,829
100,836
1,390,286
4,350
182,340
(1,004,187)
253
(100,836)
(918,080)
472,206
Superfund
27,393
3,453,929
319,640
119,991
3,920,953
1,127,129
1,127,129
2,793,824
3,920,953
1,395,175
405,391
989,784
2,827,897
25,565
732
909,562
19,852
(990,741)
2,792,867
Other Funds from
Dedicated Collections
42,168
5,407
3,145
50,720
46,719
46,719
1,690
2,311
50,720
83,808
66,715
17,093
127
3
(1,926)
22,045
845
(17,093)
3,874
4,001
Total Funds from
Dedicated Collections
472,374
3,900,384
410,971
123,822
4,907,551
1,267,475
1,267,475
(2,497)
3,642,573
4,907,551
1,582,648
474,935
1,107,713
4,576,942
29,918
192,559
(72,580)
20,950
(1,108,670)
(937,823)'
Funds from Dedicated Collections 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)," 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 if authorized by Congress in the agency's appropriations bill.
Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust Fund, was authorized by the
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.
Superfund Trust Fund: In 1980, the Superfund Trust Fund, 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
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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 Funds from Dedicated Collections:
Inland Oil Spill Programs Account: The Inland Oil Spill Programs Account was authorized by the Oil
Pollution Act of 1990 (OPA). Monies are appropriated from the Oil Spill Liability Trust Fund to EPA's Inland
Oil Spill Programs Account each year. 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 specific oil spill cleanup actions is
provided through the U.S. Coast Guard from the Oil Spill Liability Trust Fund through reimbursable
Pollution Removal Funding Agreements (PRFAs) and other inter-agency agreements.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by a 2004 Act, "Consolidated
Appropriations Act (P.L. 108-199)," and reauthorized until September 30, 2019, 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
Amendments of 1988, are to be paid by industry and deposited into this fund group.
Reregistration and Expedited Processing Fund: The Revolving Fund, was authorized by the FIFRA of
1972, as amended by the FIFRA Amendments of 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, 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 collection of these fees is prohibited by statute, enacted in the Consolidated Appropriations Act,
2004 (P.L. 108-199).
Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by P.L. 102-389, "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," 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 19. Intragovernmental Costs and Exchange Revenue
Exchange, or earned revenues on the Statement of Net Cost include income from services provided to
Federal agencies and the public, interest revenue (with the exception of interest earned on trust fund
investments), and miscellaneous earned revenue.
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Clean Air
Program Costs
Earned Revenue
NETCOST
Clean and Safe Water
Program Costs
Earned Revenue
NETCOSTS
Land Preservation &
Restoration
Program Costs
Earned Revenue
NETCOSTS
Healthy Communities &
Ecosystems
Program Costs
Earned Revenue
NETCOSTS
Compliance &
Environmental
Stewardship
Program Costs
Earned Revenue
NETCOSTS
Total
Program Costs
Earned Revenue
NETCOSTS
Intragovern-
mental
169,915
23,110
146,805
382,821
(17,866)
400,687
328,868
39,688
289,180
168,421
28,375
140,046
231,381
3,559
227,822
1,281,406
76,866
1,204,540
FY2015
With the
Public
871,335
726
870,609
4,419,378
27,579
4,391,799
1,882,664
537,143
1,345,521
566,612
42,744
523,868
491,233
90,548
400,685
8,231,222
698,740
7,532,482
Total
1,041,250
23,836
1,017,414
4,802,199
9,713
4,792,486
2,211,532
576,831
1,634,701
735,033
71,119
663,914
722,614
94,107
628,507
9,512,628
775,606
8,737,022
Intragovern-
mental
162,818
16,972
145,846
412,244
5,570
406,674
338,293
41,185
297,108
149,398
12,361
137,037
248,160
5,701
242,459
1,310,913
81,789
1,229,124
FY2014
With the
Public
836,368
865
835,503
4,160,915
24,837
4,136,078
1,774,828
350,118
1,424,710
518,293
44,643
473,650
452,790
46,438
406,352
7,743,194
466,901
7,276,293
Total
999,186
17,837
981,349
4,573,159
30,407
4,542,752
2,113,121
391,303
1,721,818
667,691
57,004
610,687
700,950
52,139
648,811
9,054,107
548,690
8,505,417
Intragovernmental costs relate to the source of goods or services notthe classification of the related revenue.
Note 20. Cost of Stewardship Land
EPA had one acquisition of stewardship land at a cost of $532,000 for the year ending September 30, 2015.
There were relocation services costs of $70,000 related to the acquisition of stewardship land for the year
ending September 30, 2015. These costs are included in the Statement of Net Cost
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Note 21. Environmental Cleanup Costs
Annually EPA is required to disclose its audited estimated future costs associated with:
1) Cleanup of hazardous waste and restoration of the facility when a facility is closed, and
2) Costs to remediate known environmental contamination resulting from the agency's operations.
EPA has 16 sites responsible for cleanup cost incurred under federal, state, and/or local regulations to
remove from, contain, or dispose of hazardous material fund located at these facilities.
EPA is required to report the estimated costs related to:
• Cleanup from federal operations resulting in hazardous waste
• Accidental damage to nonfederal property caused by federal operations, and
• Other damage to federal property caused by federal operations or natural forces.
The key to distinguishing between future cleanup cost versus an environmental liability is to determine
whether the event (accident, damage, etc.) has already occurred and whether we can reasonably estimate
the cost to remediate the site.
EPA has elected to recognize the estimated total cleanup cost as a liability and record changes to the
estimate in subsequent years.
As of September 30, 2015, EPA has 2 sites that require cleanup stemming from its activities. Two claimants'
chances of success are characterized as probable with costs amounting to $901 thousand that may be paid
out of the Treasury Judgment Fund. 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 FY 2015 or in FY 2014.
Accrued Cleanup Cost
EPA has 16 sites that will require permanent closure, and EPA is responsible to fund the environmental
cleanup of those sites. As of September 30, 2015 the estimated costs for site cleanup were $36.2 million
unfunded and $3.8 million funded respectively. In 2014 the estimated costs for site cleanup were $21.6
million unfunded, $2 million funded, respectively. Since the cleanup costs associated with permanent
closure were 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.
In FY 2015, the estimate for unfunded cleanup cost increased by $14.6 million from the FY 2014 estimate.
This increase is primarily due to the closure of several EPA buildings at the University of Nevada, Las Vegas
(UNLV). Also, in FY 2015 an increase of funds of $1.8 million were incurred compared to FY 2014 as the
result of the consolidating of EPA sites at UNLV.
Note 22. State Credits
Authorizing statutory language for Superfund and related Federal regulations requires states to enter into
Superfund State Contracts (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
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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. The 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, 2015 and September 30, 2014, the total remaining state credits have been
estimated at $22.4 million and $24.5 million, respectively.
Note 23. 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 lll(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, 2015, EPA had 4
outstanding preauthorized mixed funding agreements with obligations totaling $6.2 million. As of
September 30, 2014, EPA had 3 outstanding preauthorized mixed funding agreements with obligations
totaling $4.7 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 24. Custodial Revenues and Accounts Receivable
FY2015 FY2014
Fines, Penalties and Other Miscellaneous Receipts $ 194,248 119,474
Accounts Receivable for Fines, Penalties and Other
Miscellaneous Receipts:
Accounts Receivable $ 170,246 229,581
Less: Allowance for Uncollectible Accounts (133,444) (132,606)
Total $ 36,802 96,975
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 PRPs' willingness and ability to pay.
Note 25. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited FY 2015 Statement of
Budgetary Resources will be reconciled to the amounts included in the FY 2015 Budget of the United States
Government when they become available. The Budget of the United States Government with actual
numbers for FY 2015 has not yet been published. We expect it will be published by early 2016, and it will
be available on the OMB website at http://www.whitehouse.gov/.
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The actual amounts published for the year ended September 30, 2014 are listed immediately below
(dollars in millions):
FY2014
Statement of Budgetary Resources
$
Reported in Budget of the U. S. Governmenl $
Budgetary
Resources
14,472
14,472
Obligations
11,618
11,618
Offsetting
Receipts
1,045
1,045
Net Outlays
10,444
10,444
Note 26. 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, 2015 and September
30,2014:
FY2015 FY2014
Recoveries of Prior Year Obligations - Downward
adjustments of prior years'obligations $ 227,283 397,697
Temporarily Not Available - Rescinded Authority (7,466) (2,002)
Permanently Not Available:
Payments to Treasury (28)
Rescinded authority (40,000)
Canceled authority (74,171) (60,107)
Total Permanently Not Available $ (114,199) (60,107)
Note 27. 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, 2015 and September 30,
2014:
Unexpired Unobligated Balance $
Expired Unobligated Balance
Total $
FY2015
4,242,295
108,335
4,350,630
FY2014
2,852,876
109,460
2,962,336
Note 28. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at September 30, 2015 and September 30, 2014
were $8.65 billion and $9.25 billion, respectively.
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Note 29. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt accounts
offset gross outlays. For September 30, 2015 and September 30, 2014, the following receipts were
generated from these activities:
Trust Fund Recoveries $
Special Fund Environmental Service
Trust Fund Appropriation
Miscellaneous Receipt and Clearing Accounts
Total $
FY2015
274,173
27,784
2,389,251
25,071
2,716,279
FY2014
79,755
11,421
938,387
15,466
1,045,029
Note 30. Transfers-In and Out, Statement of Changes in Net Position
Appropriation Transfers, In/Out:
For September 30, 2015 and September 30, 2014, the Appropriation Transfers under Budgetary Financing
Sources on 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, and Net Transfers lines on the Statement of
Budgetary Resources. Details of the Appropriation Transfers on the Statement of Changes in Net Position
and reconciliation with the Statement of Budgetary Resources follow for September 30, 2015 and
September 30, 2014:
Fund/Type of Account FY2015 FY2014
Army Corps of Engineers $ -_ -_
Total Appropriation Transfers
(Other Funds) '_ '_
Net Transfers from Invested Funds $ 2,576,013 2,172,898
Transfers to Another Agency
Allocations Rescinded -_ -_
Total of Net Transfers on Statement
of Budgetary Resources $ 2,576,013 2,172,898
Transfers In/Out Without Reimbursement, Budgetary:
For September 30, 2015 and September 30, 2014, Transfers In/Outunder Budgetary Financing Sources on
the Statement of Changes in Net Position consist of transfers between EPA funds. These transfers affect
Cumulative Results of Operations. Details of the transfers-in and transfers-out, expenditure and non-
expenditure, follow for September 30, 2015 and September 30, 2014:
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FY2015
FY2014
Type of Transfer/Funds
Transfers-in (out) nonexpenditure,
Earmark to S&T and OIG funds
Capital Transfer
Transfers-in nonexpenditure, Oil Spill
Transfers-in (out) nonexpenditure,
Superfund
Transfer-out LUST
Total Transfer in (out) without
Reimbursement, Budgetary
Fund from
Dedicated
Collections
(28,089)
(18,209)
29,296
(17,002)
Other Funds
28,089
Fund from
Dedicated
Collections Other Funds
(28,987) 28,987
(18,209)
30,947
1,000,000 -
28,089
983,751
28,987
Note 31. 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 0PM
trust funds. These amounts are recorded as imputed costs and imputed financing for each agency. Each
year the 0PM 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 0PM trust funds will
provide for each agency. The estimates for FY 2015 were $120.1 million. For FY 2014, the estimates were
$143.9 million.
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 2015 total imputed costs were
$9.1 million.
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 2015 entries for Judgment Fund payments totaled $5.1
million. For FY 2014, entries for Judgment Fund payments totaled $16.6 million.
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Note 32. Payroll and Benefits Payable
Payroll and benefits payable to EPA employees for the years ending September 30, 2015 and September 30,
2014 consist of the following:
FY2015 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
Covered by
Budgetary
Resources
20,677
30,347
510
51,534
Not Covered
by Budgetary
Resources
144,081
144,081
Total
20,677
30,347
510
144,081
195,615
FY2014 Payroll & Benefits Payable
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
15,674
30,412
1,403
47,489
150,776
150,776
15,674
30,412
1,403
150,776
198,265
Note 33. 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 7 years earlier. These
amounts affect Unexpended Appropriations.
Other Funds Other Funds
FY2015 FY2014
Rescissions to General
Appropriations $ -
Canceled General Authority 54,063 23,995
Total Other Adjustments $
54,063
23,995
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Note 34. Non-exchange Revenue, Statement of Changes in Net Position
Non-exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net Position as of
September 30, 2015 and September 30, 2014 consists of the following Funds from Dedicated Collections
items:
Interest on Trust Fund $
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue $
Note 35. Reconciliation of Net Cost of Operations to
Funds from
Dedicated
Collections
FY2015
26,707
178,382
1,286
23,719
230,094
Budget
Funds from
Dedicated
Collections
FY2014
29,919
182,355
718
9,488
222,480
FY2015 FY2014
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 10,123,499 11,676,561
Less: Spending Authority from Offsetting Collections and Recoveries (965,527) (1,285,551)
Obligations, Net of Offsetting Collections 9,157,972 10,391,009
Less: Offsetting Receipts (2,716,279) (2,029,100)
Net Obligations 6,441,693 8,361,909
Other Resources
Transfers In/Out Without Reimbursement, Property - (351)
Imputed Financing Sources 134,286 143,914
Income from Other Appropriations -_ -_
Net Other Resources Used to Finance Activities 134,286 143,563
Total Resources Used To Finance Activities $ 6,575,979 8,505,473
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NET COST OF OPERATIONS:
Change in Budgetary Resources Obligated $ (316,397) 185,191
Budgetary Offsetting Collections and Receipts that
Do Not Affect Net Cost of Operations:
Credit Program Collections Increasing Loan Liabilities for
Guarantees or Subsidy Allowances 5,916 9
Offsetting Receipts Not Affecting Net Cost 302,032 90,713
Resources that Finance Asset Acquistion (41,368) (353,695)
Adjustments to Expenditure Transfers
that Do Not Affect Net Cost -_ -_
Total Resources Used to Finance Items Not Part of the Net Cost of Operations (49,817) (77,782)
Total Resources Used to Finance the Net Cost of Operations $ 6,526,162 8,427,691
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FY2015 FY2014
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 $ (6,696) (7,048)
Increase in Environmental and Disposal Liability 14,556 60
Increase in Unfunded Contingencies - (24,299)
Upward/Downward Reestimates of Credit Subsidy Expense (1,940) 61
Increase in Public Exchange Revenue Receivables 2,022,910 (141,954)
Increase in Workers Compensation Costs 13,872 10,027
Other 98 (42,238)
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods 2,042,800 (205,391)
Components Not Requiring/Generating Resources:
Depreciation and Amortization 167,844 191,543
Revaluation of Assets and Liabilities
Expenses Not Requiring Budgetary Resources 216 91,574
Total Components of Net Cost that Will Not Require or Generate Resources 168,060 283,117
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period 2,210,860 77,726
Net Cost of Operations $ 8,737,022 8,505,417
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Note 36. 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, 2015 and
September 30, 2014. 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 2015
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
Total Liabilities and Equity
Receipts
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury
3,504,925
3,504,925
3,504,925
3,504,925
1,105,206
1,105,206
101
101
3,038
1,705,340
1,708,479
1,708,478
1,708,478
1,681,291
1,398
1,682,689
981,089
26,118
2,689,896
1,105,206
(1,105,206)
(1,105,206)
1,584,690
Combined
101
101
3,038
5,210,265
5,213,404
5,213,403
5,213,403
1,681,291
1,398
1,682,689
981,089
26,118
2,689,896
2,689,896
In FY 2015, the EPA received an appropriation of $1,088 million for Superfund. Treasury's Bureau of Fiscal
Service (BFS), the manager of the Superfund Trust Fund assets, records a liability to EPA for the amount of
the appropriation. BFS 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, 2015 and September 30, 2014, the
Treasury Trust Fund has a liability to EPA for previously appropriated funds and special accounts of $5.2
billion and $3.4 billion, respectively.
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SUPERFUNDFY2014 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance $ - 122 122
Total Undisbursed Balance - 122 122
Interest Receivable - 3,242 3,242
Investments, Net 3,331,307 119,381 3,450,688
Total Assets 3,331,307 122,745 3,454,052
Liabilities & Equity
Equity 3,331,307 122,745 3,454,052
Total Liabilities and Equity 3,331,307 122,745 3,454,052
Receipts
Corporate Environmental - 15 15
Cost Recoveries - 79,754 79,754
Fines & Penalties - 1,035 1,035
Total Revenue - 80,804 80,804
Appropriations Received - 940,509 940,509
Interest Income -_ 25,565 25,565
Total Receipts -_ 1,046,878 1,046,878
Outlays
Transfers to/from EPA, Net 1,109,279 (1,109,279)
Total Outlays 1,109,279 (1,109,279)
Net Income $ 1,109,279 (62,401) 1,046,878
LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FY 2015 and
2014, there were no fund receipts from cost recoveries. The amounts contained in these notes are
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.
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LUST FY 2015
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & 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
LUST FY 2014
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & 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
- $
78,865
78,865 $
78,865
- $
-
- $
91,941 $
91,941
91,941 $
EPA
1
1
1
85,924
85,924
85,924
-
-
-
,094,566
,094,566
,094,566
3,767 $
3,767
446,388
450,155 $
450,155
166,941 $
99
11,341
178,381
587
178,968 $
(91,941) $
(91,941)
87,027 $
Treasury
2,596
2,596
1,655
358,877
363,128
363,128
172,913
72
9,354
182,339
4,350
186,689
(1,094,566)
(1,094,566)
(907,877)
3,767
3,767
525,253
529,020
529,020
166,941
99
11,341
178,381
587
178,968
-
178,968
Combined
2,596
2,596
1,655
444,801
449,052
449,052
172,913
72
9,354
182,339
4,350
186,689
-
186,689
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Note 37. Miscellaneous Receipts Act Violations and Potential Antideflciency Act Violations
The EPA experienced seven Miscellaneous Receipts Act violations that occurred between FY 1983 through
2012. EPAis also evaluating three related potential Antideficiency Act violations. EPA discovered the
violations when it reviewed business processes associated with Superfund removal and remediation
projects that were partially financed by state funds. In FY 2015, the EPA determined that the agency
accepted state funds in excess of its statutory authority. In addition, the agency may have used some of
those state funds to accomplish work outside the scope of its statutory authority.
Budget year
Miscellaneous
Receipts Violations
Antideficiency Act Amounts returned to
Violations Treasury
1983
1984
1987
1989
1995
2009
2012
83
164
23
165
134
394
544
164
165
134
83
23
394
544
1,507
463
1,044
The Miscellaneous Receipts Act violations where the agency had not already spent the funds were rectified
when the EPA transferred funds to Treasury on September 9, 2015 and a surplus warrant was issued on
September 14, 2015 in the amount of $1,044. With respect to the Miscellaneous Receipts Act violations
where EPA may have spent the funds for impermissible purposes, as of the date of the audit report, OMB is
reviewing EPA's proposed transmission of, as required by OMB circular A-11, 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 for Antideficiency Act violations.
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Required Supplementary Information (Unaudited)
Environmental Protection Agency
As of September 30, 2015, and September 30, 2014
(Dollars in Thousands)
1. Deferred Maintenance
Deferred maintenance is maintenance that was not performed when it should have been, that was
scheduled and not performed, or that was delayed for a future period. Maintenance is the act of keeping
property, plant, and equipment (PP&E) in acceptable operating condition and includes preventive
maintenance, normal repairs, replacement of parts and structural components, and other activities needed
to preserve the asset so that it can deliver acceptable performance and achieve its expected life.
Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to
serve needs different from or significantly greater than those originally intended.
Deferred Maintenance is described as the act of keeping fixed assets in acceptable condition.
Such activities include: Preventive maintenance, replacement of parts, systems, or components, and other
activities needed to preserve or maintain the asset.
The deferred maintenance as of Fiscal Year 2015:
Asset Category 2015 2014
Buildings $ 123,833 $ 42,833
EPA Held Equipment 250 675
Vehicles 9 Not available
Total Deferred Maintenance $ 124,092 $ 43,508
In Fiscal Year 2015, in accordance with SFFAS No. 42, Deferred Maintenance and Repairs: Amending
Statements of Federal Financial Accounting Standards 6,14, 29 and 32, agencies are required to:
1. Describe their maintenance and repairs policies and how they are applied.
2. Discuss how they rank and prioritize maintenance and repair activities among other activities.
3. Identify factors considered in determining acceptable condition standards.
4. State whether deferred maintenance and repairs relate solely to capitalized or fully depreciated
general PP&E.
5. Identify PP&E for which management does not measure and/or report deferred maintenance and
repairs and the rational for the exclusion of other than non-capitalized or fully depreciated general
PP&E.
6. Provide beginning and ending deferred maintenance and repairs balances by
7. Explain significant changes from the prior year.
The EPA presents the above Deferred Maintenance and Repairs (DM&R) information by asset category as
follows:
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Required Supplementary Information (Unaudited)
BUILDINGS
POLICY
EXPLANATION
Maintenance and repairs policies and
how they are applied.
The maintenance and repair policy is to maintain
facilities and real property installed equipment to fully
meet mission needs at each site. Systems are
maintained to function efficiently at full capacity and to
meet or exceed life expectancy of buildings and
building systems.
How we rank and prioritize
maintenance and repair activities
among other activities.
Building and facility program projects are scored and
ranked individually based on seven weighted factors to
determine priority needs. High scoring projects are
prioritized above lower scoring projects. The seven
factors considered are: health and safety, energy
conservation, environmental compliance, program
requirements, repair and upkeep, space alteration, and
operational urgency. Local facility managers identify
and prioritize their local repair and improvement
[R&I] projects.
Factors considered in determining
acceptable condition standards.
The nine building systems must function at a level that
fully meet mission needs. The nine building systems
are: structure, roof, exterior components and finish,
interior finish, HVAC, electrical, plumbing, conveyance,
and specialized program support equipment Each
system is rated from 0 to 5 during facility assessments.
Ratings are used to determine facility condition index
and estimated deferred maintenance.
State whether DM&R relate solely to
capitalized general PP&E and
stewardship PP&E or also to non-
capitalized or fully depreciated general
PP&E.
Facilities assessments and the resulting DM&R
estimates are applied to capitalize PP&E only. In FY
2015, the agency adopted the NASA method to
estimate deferred maintenance and moved away from
an anecdotal and subjective facilities management
approach used in FY 2014 .
PP&E for which management does not
measure and/or report DM&R and the
rationale for the exclusion of other than
non-capitalized or fully depreciated
general PP&E.
Buildings are not excluded from DM&R estimates.
Explain significant changes from the
prior year.
This is the first year detailed assessments were
performed.
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Required Supplementary Information (Unaudited)
EPA HELD EQUIPMENT
POLICY
Maintenance and repairs policies and how they are
applied.
How we rank and prioritize maintenance and repair
activities among other activities.
Factors considered in determining acceptable
condition standards.
State whether DM&R relate solely to capitalized
general PP&E and stewardship PP&E or also to non-
capitalized or fully depreciated general PP&E.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
Explain significant changes from the prior year.
EXPLANATION
Managers of the equipment consider
manufacturers recommendations in
determining maintenance requirements.
Equipment is maintained based on
manufacture's recommendations.
Manufacturer recommendations.
DM&R relates to all EPA Held Equipment
as determined by individual site
managers.
Individual site managers determine the
need to measure and/or report DM&R
based on mission needs.
Individual site equipment managers
decide on a case-by-case basis the need to
maintain equipment
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Required Supplementary Information (Unaudited)
VEHICLES
POLICY
EXPLANATION
Maintenance and repairs policies and
how they are applied.
Vehicle managers maintain vehicles owned by the EPA
in accordance with the recommendations of the
manufacturer.
How we rank and prioritize
maintenance and repair activities
among other activities.
The goal is to maintain the vehicle as built and as
recommended by the manufacturer. Repairs and
maintenance are also described as system critical or
minor. System critical repairs and maintenance are
high priority and are immediately taken care of. Minor
repairs are lower priority and may be taken care of at
a later date (time/scheduling permitting). These are
not critical to in-field functionality, but the repairs are
needed to maintain the vehicle as built.
Factors considered in determining
acceptable condition standards.
The vehicle is inspected to insure that it (the vehicle)
and related specialized equipment are in good
working order. The criteria being that the vehicle is
being maintained as built and as recommended by the
manufacturer.
State whether DM&R relate solely to
capitalized general PP&E and
stewardship PP&E or also to non-
capitalized or fully depreciated general
PP&E.
All vehicles are capitalized.
PP&E for which management does not
measure and/or report DM&R and the
rationale for the exclusion of other than
non-capitalized or fully depreciated
general PP&E.
None.
Explain significant changes from the
prior year.
This is the first year vehicles have been reported.
2. Stewardship Land
Stewardship land is acquired as contaminated sites in need of remediation and cleanup; 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.
97
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Required Supplementary Information (Unaudited)
3. Supplemental Combined Statement of Budgetary Resources
For the Period Ending September 30, 2015
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1:
Recoveries of Prior Year Unpaid Obligations
Other changes in unobligated balance
Unobligated balance from prior year budget authority, net
Appropriations (discretionary and mandatory)
Borrowing authority (discretionary and mandatory)
Spending authority from offsetting collections
Total Budgetary Resources
STATUS OF BUDGETARY RESOURCES
Obligations incurred
Unobligated balance, end of year:
Apportioned
Unapportioned
Total unobligated balance, end of period
Total Status of Budgetary Resources
CHANGE IN OBLIGATED BALANCE
Unpaid Obligations
Unpaid Obligations, Brought Forward, October 1 (gross)
Obligations incurred
Outlays (gross)
Recoveries of prior year unpaid obligations
Unpaid obligations, end of year (gross)
Uncollected Payments
Uncollected customer payments from Federal Sources, brought
forward, Oct. 1
Change in Uncollected customer payments from Federal sources
Uncollected customer payments from Federal sources, end of year
BUDGET AUTHORITY AND OUTLAYS, NET:
Budget authority, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Change in Uncollected customer payments from Federal sources
Budget authority, net (discretionary and mandatory)
Outlays, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Outlays, net (discretionary and mandatory)
Distributed offsetting receipts
Agency outlays, net (discretionary and mandatory)
Leaking
Env. Prog. Underground
& Mgmt. Storage Tank
373,542
34,649
(41,822)
366,369
2,613,679
41,523
3,021,571
2,704,063
267,251
50,256
317,507
3,021,570
1,129,609
2,704,063
(2,617,114)
(34,649)
1,181,909
(61,884)
(1,317)
(63,201)
2,655,202
(40,205)
(1,317)
2,613,680
2,617,114
(40,205)
2,576,909
2,576,909
7,561
1,895
(4,188)
5,268
91,941
24
97,233
93,090
3,674
470
4,144
97,234
103,292
93,090
(99,174)
(1,895)
95,313
-
-
91,965
(23)
91,942
99,174
(23)
99,151
99,151
Superfund
2,035,534
94,323
(1,044)
2,128,813
2,508,170
431,161
5,068,144
1,576,865
3,541,913
9,473
3,551,386
5,128,251
1,272,408
1,576,865
(1,352,698)
(94,323)
1,402,252
(10,325)
2,066
(8,259)
2,939,331
(433,227)
2,066
2,508,170
1,352,698
(433,227)
919,471
919,471
Science &
Tech.
167,060
22,559
(24,592)
165,027
734,648
24,839
924,514
776,782
126,610
21,121
147,731
924,513
355,890
776,782
(773,095)
(22,559)
337,018
(19,911)
2,090
(17,821)
759,487
(26,929)
2,090
734,648
773,095
(26,929)
746,166
746,166
State &
Tribal Ass.
Grants
216,629
53,239
269,868
3,505,161
455
3,775,484
3,593,221
159,707
22,557
182,264
3,775,485
6,639,253
3,593,221
(4,291,803)
(53,239)
5,887,432
-
-
3,505,616
(455)
3,505,161
4,291,803
(455)
4,291,348
4,291,348
Other
162,750
20,618
56,539
239,907
1,106,744
290
240,242
1,587,183
1,379,478
143,035
4,563
147,598
1,527,076
192,429
1,379,478
(1,350,381)
(20,618)
200,908
(167,522)
21,274
(146,248)
1,347,276
(261,518)
21,274
1,107,032
1,350,381
(261,518)
1,088,863
(2,716,279)
(1,627,416)
Total
2,963,076
227,283
(15,107)
3,175,252
10,560,343
290
738,244
14,474,129
10,123,499
4,242,190
108,440
4,350,630
14,474,129
9,692,881
10,123,499
(10,484,265)
(227,283)
9,104,832
(259,642)
24,113
(235,529)
11,298,877
(762,357)
24,113
10,560,633
10,484,265
(762,357)
9,721,908
(2,716,279)
7,005,629
98
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Environmental Protection Agency
Required Supplemental Stewardship Information (Unaudited)
For the Year Ended September 30, 2015
(Dollars in Thousands)
INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT:
EPA's Office of Research and Development provides the crucial underpinnings for EPA decision-making.
Through conducting cutting-edge science and technical analysis, ORD develops sustainable solutions to our
environmental problems and employ more innovative and effective approaches to reducing environmental
risks. ORD is the scientific research arm of the EPA, whose leading-edge research helps provide the solid
underpinning of science and technology to the agency. Public and private sector institutions have long been
significant contributors to our nation's environment and human health research agenda. EPA, 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.
Among the agency's highest priorities are research programs that address: the development and
application of alternative techniques for prioritizing chemicals for further testing through computational
toxicology; the environmental effects of pollutants 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 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 2015, the full cost of the agency's Research and Development activities totaled over $613 million.
Below is a breakout of the expenses (dollars in thousands):x
FY2011 FY2012 FY2013 FY2014 FY2015
Programmatic Expenses $ 597,558 580,278 531,901 510,911 535,352
Allocated Expenses $ 80,730 133,637 78,189 73,622 78,028
See Section II of the APR for more detailed information on the results of the agency's investment in
research and development.
1 Allocated Expenses are calculated specifically for the Required Supplemental Stewardship Information report
and do not represent the overall agency indirect cost rates.
99
-------
Required Supplemental Stewardship Information (Unaudited)
INVESTMENT IN THE NA TION'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. The agency also is appropriated funds to finance the
construction of infrastructure outside the Revolving Funds programs. These are reported below as Other
Infrastructure Grants.
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, however, EPA
continues to provide direct grant funding for the District of Columbia and territories.
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's investments in the nation's Water Infrastructure are outlined below (dollars in thousands):
FY2011 FY2012 FY2013 FY2014 FY2015
Construction Grants $ 35,339 14,306 6,944 1,447 17,462
Clean Water SRF $2,299,721 1,925,057 1,976,537 1,534,453 1,715,630
Drinking Water SRF $ 1,454,274 1,240,042 1,027,613 1,187,212 1,268,360
Other Infrastructure Grants $ 269,699 196,085 166,050 118,706 96,439
Allocated Expenses $ 548,375 777,375 524,326 516,102 590,595
See the Goal 2 - Clean and Safe Water portion in Section II of the APR for more detailed information on the
results of the agency's investment in infrastructure.
100
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Required Supplemental Stewardship Information (Unaudited)
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):
FY2011 FY2012 FY2013 FY2014 FY2015
Training and Awareness Grants $ 23,386 21,233 20,769 23,255 27,047
Fellowships $ 9,538 10,514 11,157 8,082 6,579
Allocated Expenses $ 4,448 7,311 4,118 4,226 5,146
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AUDIT OF ERA'S FISCAL YEARS 2015 AND 2014
CONSOLIDATED FINANCIAL STATEMENTS
102
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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Audit of EPA's
Fiscal Years 2015 and 2014
Consolidated Financial
Statements
Report No. 16-F-0040
November 16, 2015
103
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Abbreviations
AC Access Control
CERCLA Comprehensive Environmental Response, Compensation, and Liability Act
CFC Cincinnati Finance Center
EPA U.S. Environmental Protection Agency
FFMIA Federal Financial Management Improvement Act of 1996
FMFIA Federal Managers' Financial Integrity Act of 1982
FY Fiscal Year
GSA General Services Administration
LVFC Las Vegas Finance Center
NIST National Institute of Standards and Technology
OCFO Office of the Chief Financial Officer
OIG Office of Inspector General
OMB Office of Management and Budget
PCI DSS Payment Card Industry Data Security Standards
RAS Reporting and Analysis Staff
RMDS Resources Management Directive System
SCORPIOS Superfund Cost Recovery Package Imaging and On-Line System
SFFAS Statement of Federal Financial Accounting Standards
SP Special Publication
SSC Superfund State Contracts
Are you aware of fraud, waste or abuse in an
EPA program?
EPA Inspector General Hotline
1200 Pennsylvania Avenue, NW (2431T)
Washington, DC 20460
(888) 546-8740
(202) 566-2599 (fax)
OIG Hotlinegjepa.gov
Learn more about our OIG Hotline.
EPA Office of Inspector General
1200 Pennsylvania Avenue, NW (241OT)
Washington, DC 20460
(202) 566-2391
www.epa.gov/oig
Subscribe to our Email Updates
Follow us on Twitter (gjEPAoig
Send us your Project Suggestions
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fcfiz)
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
16-F-0040
November 16, 2015
Why We Did This Review
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.
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.
This report addresses the
following EPA goal or
cross-agency strategy:
Embracing EPA as a high-
performing organization.
Send all inquiries to our public
affairs office at (202) 566-2391 or
www.epa.gov/oiq.
Audit of EPA's Fiscal Years 2015 and 2014
Consolidated Financial Statements
We found the EPA's
financial statements to be
fairly presented and free
of material misstatement.
Listing of OIG reports.
EPA Receives an Unmodified Opinion
We rendered an unmodified opinion on the
EPA's consolidated financial statements for
fiscal years 2015 and 2014, meaning that they
were fairly presented and free of material
misstatement.
Internal Control Material Weakness and
Significant Deficiencies Noted
We noted the following material weakness:
• Software costs of about $124 million and associated amortization totaling
$56 million from prior years were not properly classified.
We noted significant deficiencies involving:
Misstating earned and unearned revenue for Superfund Special Accounts.
Reconciling property and financial systems.
Resolving long-standing cash differences with the U.S. Treasury.
Clearing transactions from the suspense account.
Reviewing cancellation of accounts receivable and collection transactions.
Recording accounts receivable from a Superfund judgment.
Reconciling accounts receivable subsidiary ledgers and general ledgers.
Overtoiling a state for a Superfund State Contract.
Overseeing user access to the Payment Tracking System.
Complying with controls for financial and mixed-financial applications.
Managing HelpDesk procedures for distributing passwords.
Improving a travel system's credit card data protection.
Noncomphance With Laws and Regulations Noted
We noted an instance of noncompliance with laws and regulations related to
complying with federal accounting standards for recording interest.
Recommendations and Planned Agency Corrective Actions
The EPA generally agreed with our findings and recommendations. We
clarified Recommendation 23 to have the EPA develop reports to reconcile
accounts receivable principal and non-principal charges to the general ledger.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 16, 2015
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal Years 2015 and 2014 Consolidated Financial Statements
Report No. 16-F-0040
FROM: Paul C. Curtis, Director
Financial Statement Audits
TO: David Bloom, Deputy Chief Financial Officer
Office of the Chief Financial Officer
Karl Brooks, Acting Assistant Administrator
Office of Administration and Resources Management
Attached is our report on the U.S. Environmental Protection Agency's (EPA's) fiscal years 2015 and
2014 consolidated financial statements. We are reporting one internal control material weakness and
12 significant deficiencies. Attachment 1 contains details on the material weakness and significant
deficiencies. We also noted one instance of noncompliance, which is discussed in Attachment 2.
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 the EPA in any enforcement
proceeding brought by the EPA or the Department of Justice.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this report
within 60 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 to close this
report in our audit tracking system. Your response will be posted on the Office of Inspector General's
public website, along with our memorandum commenting on your response. Your response should be
provided as an Adobe PDF file that complies with the accessibility requirements of Section 508 of the
Rehabilitation Act of 1973, as amended. The final response should not contain data that you do not want
to be released to the public; if your response contains such data, you should identify the data for
redaction or removal along with corresponding justification.
This report will be available at www.epa.gov/oig.
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Attachments
cc: See Appendix III, Distribution
107
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Audit of EPA's Fiscal Year 2015 and 2014 16-F-0040
Consolidated Financial Statements
Table of Contents
Inspector General's Report on EPA's Fiscal Years
2015 and 2014 Consolidated Financial Statements 1
Report on the Financial Statements 1
Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis 3
Evaluation of Internal Controls 3
Tests of Compliance With Laws, Regulations, Contracts and Grant Agreements 8
Prior Audit Coverage 10
Agency Comments and OIG Evaluation 10
Attachments 12
1. Internal Control Material Weakness and Significant Deficiencies 12
Material Weakness
EPA Accounting for Software Continues to Be a
Material Weakness 13
Significant Deficiencies
SPECIAL ACCOUNTS
EPA Incorrectly Recorded Superfund Special Account
Collections and Receivables 15
PROPERTY
EPA Did Not Reconcile the Property Management System
to Compass 17
CASH
EPA Should Improve Its Efforts to Resolve EPA's
Long-Standing Cash Differences With Treasury 19
SUSPENSE ACCOUNT
Cincinnati Finance Center Should Clear
Suspense Transactions Timely 21
-continued-
108
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Audit of EPA's Fiscal Year 2015 and 2014 16-F-0040
Consolidated Financial Statements
RECEIVABLES AND COLLECTIONS
EPA Improperly Canceled Accounts Receivable and Collections 23
EPA Did Not Record More Than $8 Million in Accounts Receivable
fora $9 Million Superfund Judgment 25
Improvement Needed in Reconciling Accounts Receivable 27
EPA Overbilled Superfund State Contract Cost Share 30
INFORMATION TECHNOLOGY
OCFO Lacked Internal Controls When Assuming Responsibility
for Account Management Procedures of Financial Systems 32
Financial and Mixed-Financial Applications Did Not Comply
With Required Account Management Controls 34
OCFO Needs to Strengthen Password Change Procedures 37
EPA's Travel System Needs Improved Credit Card
Data Protection and Independent Compliance Reviews 38
2. Compliance With Laws and Regulations 40
EPA Did Not Comply With Federal Accounting Standards for
Recording Interest 41
3. Status of Prior Audit Report Recommendations 44
4. Statusof Current Recommendations and Potential Monetary Benefits 48
Appendices
I. EPA's FYs2015 and 2014 Consolidated Financial Statements
II. Agency Response to Draft Report
III. Distribution
109
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110
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Inspector General's Report on EPA's Fiscal Years
2015 and 2014 Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
Report on the Financial Statements
We have audited the accompanying financial statements of the U.S. Environmental Protection
Agency (EPA), which comprise the consolidated balance sheet, as of September 30, 2015, and
September 30, 2014, and the related consolidated statements of net cost, net cost by goal,
changes in net position, and custodial activity; the combined statement of budgetary resources
for the years then ended; and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States
of America; this includes the design, implementation and maintenance of internal controls
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based upon our
audit. We conducted our audit in accordance with generally accepted government 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 15-02, Audit Requirements for Federal Financial
Statements. These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
16-F-0040
111
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The financial statements include expenses of grantees, contractors and other federal agencies.
Our audit work pertaining to these expenses included testing only within the EPA. The
U.S. Treasury collects and accounts for excise taxes that are deposited into the Leaking
Underground Storage Tank Trust Fund. The U.S. Treasury is also responsible for investing
amounts not needed for current disbursements and transferring funds to the EPA as
authorized in legislation. Since the U.S. Treasury, and not the 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 the EPA's financial statements. The OIG is organizationally
independent with respect to all other aspects of the agency's activities.
Opinion
In our opinion, the consolidated financial statements, including the accompanying notes,
present fairly, 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 the EPA as of and for the years ended September 30, 2015 and 2014, in
conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matters - Changes in Accounting
As discussed in Note 1 to the financial statements, Section E, Revenues and Other Financing
Sources, in FY 2015 the agency developed a new business process for managing its special
account funds. The change increased appropriations (mandatory) by $1.4 billion. Other
cash-out collections have been treated as reimbursable authority and are accounted for as
"spending authority from offsetting collections." The new business process will put all future
cash outs into a receipt account to have the funds immediately invested in U.S. Government
securities. The effect of this change impacts the statement of budgetary resources only.
The EPA also changed its accounting treatment to record special account settlement proceeds
as unearned revenue after determining that collections previously recorded as past costs were
being used for future site cleanup. The EPA reclassified $1.1 billion from equity to unearned
in fiscal year (FY) 2015 to reflect this change in accounting. In FY 2015, the EPA collected
an additional $290 million in past costs that was classified as unearned, intended for future
site cleanups. Our report is not modified with respect to these matters.
Emphasis of Matter - Asbestos Loans
As discussed in Note 7, Loans Receivable, Net, presents information concerning the EPA's
Asbestos Loan Program loans disbursed from obligations made prior to FY 1992. The note
states it presents the net loan present value less the subsidy present value. The EPA has
no outstanding asbestos loans as of September 30, 2015, as shown in the footnote.
Accordingly, it should also no longer have a subsidy allowance for receivables that no longer
exist. The amounts contained in Note 7 are not material to EPA's financial statements and
our report is not modified with respect to this matter.
16-F-0040
112
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Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis
Our audit was conducted for the purpose of forming an opinion on the financial statements as a
whole. The Required Supplementary Stewardship Information, Required Supplementary
Information, Supplemental Information, and Management's Discussion and .Analysis are
presented for purposes of additional analysis and are not a required part of the basic financial
statements. Such information is the responsibility of management. We obtained information from
the EPA management about its methods for preparing Required Supplementary Stewardship
Information, Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis, and reviewed this information for consistency with the
financial statements.
We did not identify any material inconsistencies between the information presented in the EPA's
consolidated financial statements and the information presented in the EPA's Required
Supplementary Stewardship Information, Required Supplementary Information, Supplemental
Information, and Management's Discussion and Analysis.
Our audit was not designed to express an opinion and, accordingly, we do not express an opinion
on the EPA's Required Supplementary Stewardship Information, 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, that is designed to provide reasonable
assurance that the following objectives are met:
• Reliability of financial reporting—Transactions are properly recorded, processed and
summarized to permit the preparation of the financial statements in accordance with
generally accepted accounting principles, and assets are safeguarded against loss from
unauthorized acquisition, use or disposition.
• Compliance with laws, regulations, contracts and grant agreements—Transactions
are executed in accordance with provisions of applicable laws, including those governing
the use of budget authority, regulations, contracts and grant agreements, noncompliance
with which could have a material effect on the financial statements.
Opinion on Internal Controls. In planning and performing our audit, we considered the 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
16-F-0040
113
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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. 15-02, Audit Requirements for Federal Financial Statements. We did not test all internal
controls relevant to operating objectives as broadly defined by the Federal Managers' Financial
Integrity Act of 1982 (FMFIA), such as those controls relevant to ensuring efficient operations.
Material Weakness and Significant Deficiencies. 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 deficiency, or
combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance. A material weakness is a
deficiency, or combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be prevented,
or detected and corrected in a timely manner. 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, one of which we consider to be a material weaknesses. These
issues are summarized below and detailed in Attachment 1.
EPA's Accounting for Software Continues to Be a Material Weakness
The EPA's accounting for software, noted during our FY 2014 audit of financial
statements, continues to be a material weakness. In FY 2015, the agency found that it had
not properly classified software totaling approximately $124 million and associated
amortization totaling $56 million from the current and prior years. In FY 2014, the
agency found that it had undercapitalized software by expensing approximately
$255 million in software costs over a 7-year period. The undercapitalized software and
related equity accounts indicate the agency has a material weakness in internal controls
over identifying and capitalizing software because such controls failed to detect and
correct the errors. While the agency has made progress and taken steps to correct
weaknesses in this area, these problems continue to highlight the continued efforts the
agency needs to take to improve its internal controls over accounting for software. Failure
to properly record capital software transactions in the agency's property management
system and Compass, the agency's accounting system, compromises the accuracy of the
EPA's property accounts, depreciation and operating expenses, as well as the accuracy of
the agency's financial statements. Consequently, we continue to report the accounting for
software as a material weakness.
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Significant Deficiencies
SPECIAL ACCOUNTS
EPA Incorrectly Recorded Superfund Special Account Collections
and Receivables
For Superfund Special Accounts, the EPA misstated $226,336,107 of earned and
unearned revenue, and incorrectly recorded $5,310,918 of Superfund accounts receivable
as earned rather than unearned revenue. Statement of Federal Financial Accounting
Standards (SFFAS) No. 7 directs agencies to record cash advances received for long-term
projects as unearned revenue. The EPA incorrectly recorded the special account
collections for a site by recording the funds received as earned revenue for past costs. The
settlement indicated the funds for the site were to be used for prospective or future costs
and should have been recorded as unearned revenue. The EPA incorrectly recorded the
special accounts receivable because it did not follow the terms of the consent decrees,
which indicated the funds were for future work at the sites. As a result, liabilities, earned
revenue and unearned revenue are misstated on the financial statements.
PROPERTY
EPA Did Not Reconcile the Property Management System to Compass
The EPA did not reconcile $356.4 million of capital equipment within Maximo
(a property management system) to relevant financial data within Compass. EPA policy
requires reconciliations between the property module and general ledger be performed
monthly by the responsible security organization. Various factors contributed to the
EPA's failure to reconcile the property module and the general ledger, such as the
processing of journal vouchers to correct software costs and an integration error between
Maximo and Compass. The inability to reconcile the property subsystem with Compass
can compromise the effectiveness and reliability of financial reporting.
CASH
EPA Should Improve Its Efforts to Resolve EPA's Long-Standing Cash
Differences With Treasury
The EPA did not resolve long-standing cash differences of $2.6 million between EPA and
U.S. Treasury cash balances. Treasury's guidance requires the EPA to correct and resolve
any differences between the Treasury's and EPA's Fund Balance with Treasury. The
EPA's Office of the Chief Financial Officer (OCFO) did not have effective internal
controls to adequately monitor the internal cash differences to ensure the EPA resolved
all the differences with the Treasury. Unresolved differences may result in the misstating
of the EPA's Fund Balance with Treasury and financial statements and increase the risk
of fraud.
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SUSPENSE ACCOUNT
Cincinnati Finance Center Should Clear Suspense Transactions Timely
The Cincinnati Finance Center (CFC) is not clearing transactions from the federal budget
clearing (suspense) account within 60 business days after posting. As of March 31, 2015,
we identified 136 federal transactions, totaling $9,020,680, remaining in suspense beyond
60 business days. EPA guidance requires each servicing finance office to classify and
transfer transactions in the agency's federal budget clearing account to appropriate general
ledger accounts within 60 business days. CFC did not clear the suspense account timely
primarily because EPA project officers did not provide timely disbursement approvals
needed to clear the suspense account. Untimely clearing of suspense transactions was also
due to opening records in Compass to apply credits for interagency agreements, reconciling
cost reports prior to project officer approval, and managing Working Capital Fund funding
issues. Untimely clearing of suspense transactions influences the agency's ability to reflect
financial activity in the correct fund.
RECEIVABLES AND COLLECTIONS
EPA Improperly Canceled Accounts Receivable and Collections
The EPA canceled 72 accounts receivable and 113 collection transactions without proper
reviews of the justification and authorizing approval in Compass. OMB Circular A-123
cites separation of duties and supervision as one of its specific management control
standards. However, EPA management has not established internal control procedures for
review and approval of cancellation transactions. Without approval of cancellation
transactions, the EPA increases the risk of fraud, misuse and errors.
EPA Did Not Record More Than $8 Million in Accounts Receivable for a
$9 Million Superfund Judgment
The EPA did not record as a Superfund accounts receivable more than $8 million of a
$9 million judgment in a consent decree. Federal accounting standards require agencies
to record accounts receivable based on legal provisions. CFC recorded the receivable
based on discussions at the direction of EPA personnel instead of amounts due to the
EPA as stipulated in the provisions of the legal document. By not recording receivables at
the amount stated in the legal document, the EPA may understate accounts receivable on
the financial statements.
Improvement Needed in Reconciling Accounts Receivable
The EPA did not properly reconcile its accounts receivable subsidiary ledger to the
general ledger. The EPA did not correct reconciliation variances, separately reconcile
federal and non-federal receivables, or develop accurate detail reports. We previously
reported the EPA's reconciliation of accounts receivable as a significant deficiency in our
FY 2014 financial audit report. In following up on the agency's proposed corrective
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actions, we found that the EPA did not correct the significant deficiency or completely
implement its corrective actions. EPA guidance directs the agency to perform quarterly
accounts receivable reconciliations, investigate discrepancies and correct any differences.
When the agency cannot accurately reconcile the accounts receivable subsidiary ledger to
the general ledger and correct differences, the agency cannot ensure financial statements
are properly stated.
EPA Overbilled Superfund State Contract Cost Share
The EPA overbilled a state $1,139,306 for one Superfund State Contract. EPA guidance
directs regional finance and program offices to reconcile Superfund State Contract
financial data by site. Regions use Superfund project expenditures to calculate the
amount of a state's cost share billed under a Superfund State Contract. An error in the
EPA's cost recovery process caused duplicate charges in the site's cost recovery report
that the region did not identify. When costs are not properly reconciled, states and other
entities may overpay for expenditures never incurred.
INFORMATION TECHNOLOGY
OCFO Lacked Internal Controls When Assuming Responsibility for
Account Management Procedures of Financial Systems
OCFO assumed responsibility for managing oversight of users' access to the Payment
Tracking System without ensuring the system had documentation covering key account
management procedures. OMB Circular A-123 states that internal control needs to be in
place over information systems. Also, the circular reiterates that general control applies to
all information systems including end-user environments.
Financial and Mixed-Financial Applications Did Not Comply With Required
Account Management Controls
EPA financial and mixed-financial applications complied with 11 of the 28 required
account management controls selected for review, or 39 percent. For the majority of the
five key applications noted, the EPA implemented processes for establishing conditions
for groups and role membership. However, more management emphasis is needed to
ensure responsible individuals fully develop and implement required account
management controls. In particular, we found that the EPA's Payment Tracking System
and travel system (Concur) show the greatest need for improvement to comply with
federal requirements. The possibility exists that the unauthorized access could be used to
commit fraud that could go undetected for a significant amount of time.
OCFO Needs to Strengthen Password Change Procedures
OCFO needs better HelpDesk procedures for distributing passwords to users locked out
of OCFO's financial systems. In particular, the OCFO HelpDesk does not have a process
to verify the user's identity prior to providing new passwords over the phone. Criteria
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require the adequate protection of system passwords. A perpetrator could access
applications— such as PeoplePlus and the Payment Tracking System—and manipulate
leave records or process unauthorized financial transactions.
EPA's Travel System Needs Improved Credit Card Data Protection and
Independent Compliance Reviews
The EPA's Concur travel system (1) allows users more access to credit card information
than users need, and (2) lacks required independent reviews of the Concur service
provider's compliance with Payment Card Industry Data Security Standards. In
particular, there are currently 623 Concur users who could unnecessarily view
employees' full credit card numbers in clear text. Also, Concur currently has a Service
Provider Level II Validation that does not meet the standard for the number of credit card
transactions processed. Concur processed 955,804 transactions through June 2015, but
any service providing that processes over 300,000 transactions per year must obtain a
Service Provider Level I Validation.
Attachment 3 contains the status of issues reported in prior years' reports. The issues included in
the attachment should be considered among the EPA's significant deficiencies for FY 2015.
We reported less significant internal control matters to the agency 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. 15-02, Audit Requirements for Federal Financial Statements, requires the
OIG 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 deficiency or combination of deficiencies in internal control such that
there is a reasonable possibility that a material misstatement of the entity's financial statements
will not be prevented, or detected and corrected, on a timely basis.
The agency continues to report software as a material weakness in the design or operation of
internal controls over financial reporting as of June 30, 2015.
Tests of Compliance with Laws, Regulations, Contracts and Grant
Agreements
The EPA management is responsible for complying with laws, regulations, contracts and grant
agreements 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, including those governing the use of budgetary
authority, regulations, contracts and grant agreements that have a direct effect on the
determination of material amounts and disclosures in the financial statements; and perform
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certain other limited procedures as described in Codifications of Statements on Auditing
Standards AU-C 250.14-16, Consideration of Laws and Regulations in an Audit of Financial
Statements. OMB Bulletin No. 15-02, Audit Requirements for Federal Financial Statements,
requires that we evaluate compliance with federal financial statement 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 nottest
compliance with all laws and regulations applicable to the EPA.
Opinion on Compliance With Laws, Regulations, Contracts and Grant Agreements
Providing an opinion on compliance with certain provisions of laws, regulations, contracts
and grant agreements was not an objective of our audit and, accordingly, we do not express
such an opinion. A number of ongoing investigations involving the EPA's grantees and
contractors could disclose violations of laws and regulations, but a determination about these
cases has not been made.
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 and used the OMB guidance, Memorandum M-09-
06-23, Implementation Guidance for the Federal Financial Management Improvement Act,
dated January 9, 2009, for determining substantial noncompliance with FFMIA.
The results of our tests did not disclose any instances of noncompliance with FFMIA
requirements, including where the agency's financial management systems did not
substantially comply with the applicable federal accounting standard.
We identified one significant matter involving compliance with laws and regulations that
came to our attention during the course of the audit. We found that the EPA did not comply
with federal standards for recording interest. We also reported this issue in our 2014 audit.
We will not issue a separate management letter.
EPA Did Not Comply With Federal Accounting Standards for Recording
Interest
The EPA did not record all applicable interest for some Superfund and installment
interest as required by applicable laws, federal accounting standards and EPA policy that
require the EPA to assess interest on delinquent accounts receivable. In following up on
the agency's proposed corrective actions, we found that the EPA did not implement a
correction in the Compass system related to Superfund and installment interest. By not
recording all applicable interest, the EPA did not collect all the funds to which it was
entitled and did not comply with applicable laws, standards and policies. We had
previously reported in our audit of the FY 2014 financial statements that the EPA did not
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comply with accounting standards for recording interest. Further details on this
noncompliance issue are in Attachment 2.
Audit Work Required Under the Hazardous Substance Superfund Trust Fund
Our audit work was also performed to meet the requirements in 42 U.S. Code §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 significant deficiencies
reported above also relate to Superfund.
Prior Audit Coverage
During previous financial or financial-related audits, we reported weaknesses that impacted our
audit objectives in the following areas:
• The EPA failed to capitalize software costs.
• The EPA did not capitalize lab renovation costs.
• The EPA's internal controls over accountable personal property inventory process need
improvement.
• The EPA's property management system does not reconcile to its accounting system.
• Originating offices did not timely forward accounts receivable source documents to the
finance center.
• The EPA did not properly reconcile accounts receivable.
• Unneeded funds were not obligated timely.
• The EPA did not comply with federal accounting standards for recording interest.
• Compass reporting limitations impair accounting operations and internal controls.
• The EPA should improve compliance with internal controls for accounts receivable.
• CFC should clear suspense transactions timely.
• The EPA should improve controls over expense accrual reversals.
• Financial management system user account management needs improvement.
Attachment 3 summarizes the current status of corrective actions taken on prior audit report
recommendations related to these issues.
Agency Comments and OIG Evaluation
In a memorandum dated November 10, 2015, the Chief Financial Officer responded to our draft
report.
The EPA generally agreed with our findings and recommendations. We clarified
Recommendation 23 to have the EPA develop reports to reconcile accounts receivable principal
and non-principal charges to the general ledger. 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.
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This report is intended solely for the information and use of the management of the 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
Certified Public Accountant
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
November 16, 2015
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Attachment 1
Internal Control Material Weakness and
Significant Deficiencies
Table of Contents
Material Weakness
1 EPA's Accounting for Software Continues to Be a Material Weakness 13
Significant Deficiencies
SPECIAL ACCOUNTS
2 EPA Incorrectly Recorded Superfund Special Account
Collections and Receivables 15
PROPERTY
3 EPA Did Not Reconcile the Property Management System to Compass 17
CASH
4 EPA Should Improve Its Efforts to Resolve EPA's Long-Standing
Cash Differences With Treasury 19
SUSPENSE ACCOUNT
5 Cincinnati Finance Center Should Clear Suspense Transactions Timely 21
RECEIVABLES AND COLLECTIONS
6 EPA Improperly Canceled Accounts Receivable and Collections 23
7 EPA Did Not Record More Than $8 Million in Accounts Receivable
for a $9 Million Superfund Judgment 25
8 Improvement Needed in Reconciling Accounts Receivable 27
9 EPA Overbilled Superfund State Contract Cost Share 30
INFORMATION TECHNOLOGY
10 OCFO Lacked Internal Controls When Assuming Responsibility for
Account Management Procedures of Financial Systems 32
11 Financial and Mixed-Financial Applications Did Not Comply
With Required Account Management Controls 34
12 OCFO Needs to Strengthen Password Change Procedures 37
13 EPA's Travel System Needs Improved Credit Card Data Protection
and Independent Compliance Reviews 38
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1 - EPA's Accounting for Software Continues to Be a
Material Weakness
The EPA's accounting for software, noted during our FY 2014 audit of financial statements,
continues to be a material weakness. In FY 2015, the agency found that it had not properly
classified software totaling approximately $124 million and associated amortization totaling
$56 million from the current and prior years. In FY 2014, the agency found that it had
undercapitalized software by expensing approximately $255 million in software costs over a
7-year period. The undercapitalized software and related equity accounts indicate the agency has
a material weakness in internal controls over identifying and capitalizing software because such
controls failed to detect and correct the errors. While the agency has made progress and taken
steps to correct weaknesses in this area, these problems continue to highlight the continued
efforts the agency needs to take to improve its internal controls over accounting for software.
Failure to properly record capital software transactions in the agency's property management
system and Compass, the agency's accounting system, compromises the accuracy of the EPA's
property accounts, depreciation and operating expenses, as well as the accuracy of the agency's
financial statements. Consequently, we continue to report the accounting for software as a
material weakness.
After declaration of the material weakness in FY 2014 regarding the expensing of $255 million
in undercapitalized software costs over a 7-year period, the EPA took steps to improve its
internal accounting and controls over software costs. According to OCFO, the "Lean" process
was used to evaluate the agency's software accounting process. The agency conducted an OMB
Circular A-123 review of internal controls over its capitalization of software process. OCFO met
with program offices as part of its outreach efforts to validate software costs in development and
asset values in production. In addition, OCFO reviewed a sample of several software projects in
development and put into production over the last 7 years to validate costs and determine the
correct value.
The agency identified approximately $124 million in software costs recorded in Software
In-Development that should have been placed in production in the current and prior years and
$56 million that should have been amortized. SFFAS No. 10, Accounting for Internal Use
Software, requires entities to capitalize the cost of software that meets the criteria for general
property, plant and equipment. The statement also requires that entities amortize in a systematic
and rational manner over the estimated useful life of the software. Amortization should begin
when that module or component has been successfully tested. The agency's policy is to
capitalize software costs exceeding its annual capitalization threshold of $250,000 over 7 years.
However, the agency did not properly classify all appropriate software costs because:
• Software costs already incurred and recorded may not have been accurate and complete.
• Staff and officials responsible for ensuring software project costs are correctly captured
may not have followed existing policies in identifying and coding information technology
investments.
• Data entry errors for some transactions caused incorrect accounting.
Failure to properly record property transactions in the agency's property management system and
Compass compromises the accuracy of EPA's property accounts, depreciation and operating
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expenses, as well as the accuracy of the agency's financial statements. The agency indicated it
does not expect to complete corrective actions on this material weakness until 2018; thus, we
continue to report this material weakness.
Recommendations
We recommend that the Chief Financial Officer:
1. Continue planned corrective actions and its outreach to program offices to validate all
software costs in development and asset values in production.
2. Require staff to ensure all software costs, including adjustments, are accurately recorded
in the agency's property management system and Compass; and that an audit trail is
maintained for software projects analyzed.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations. The EPA responded that it
completed the corrective action for Recommendation 2 on October 21, 2015. However, we are
listing the corrective action as ongoing and unresolved pending an estimated completion date.
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2 - EPA Incorrectly Recorded Superfund Special Account
Collections and Receivables
For Superfund Special Accounts, the EPA misstated $226,336,107 of earned and unearned
revenue, and incorrectly recorded $5,310,918 of Superfund accounts receivable as earned rather
than unearned revenue. SFFAS No. 7 directs agencies to record cash advances received for long-
term projects as unearned revenue. The EPA incorrectly recorded the special account collections
for a site by recording the funds received as earned revenue for past costs. The settlement
indicated the funds for the site were to be used for prospective or future costs and should have
been recorded as unearned revenue. The EPA incorrectly recorded the special accounts
receivable because it did not follow the terms of the consent decrees, which indicated the funds
were for future work at the sites. As a result, liabilities, earned revenue and uneanied revenue are
misstated on the financial statements.
Section 122(b) (3) of the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), 42 U.S.C. 9622(b)(3), authorizes the EPA to retain and use funds received
through an agreement with potentially responsible parties to address past and/or future response
costs. The EPA retains these funds in site-specific accounts called "special accounts." The EPA
records special account settlement funds received for past costs at a site as earned revenue and
future costs as unearned revenue.
SFFAS applies to general purpose financial reports of U.S. Government reporting entities.
SFFAS No. 7 is the accounting standard for revenue and other financing sources, and directs
agencies to record a cash advance for long-term projects as unearned revenue. Revenue should
not be recognized until costs are incurred from providing the goods and services. The EPA's
Resources Management Directive System (RMDS) 2540-03, Cash Management Collections and
Deposits, directs servicing finance offices to analyze each collection it receives to determine the
reason for the remittance and collection type, which helps the EPA to classify the collection to
the proper fund. RMDS 2550D-15-P1, Financial Management of the Special Accounts, directs
agencies to record settlement amounts for costs to be incurred (work to be performed) in the
future as unearned revenue.
The EPA received special account collections of $226,336,107 as earned revenue for past costs.
However, the settlement agreement classified the funds for the site as "prospective work."
Agency personnel reported that future work is projected at the site until 2038, and stated that if
the settlement agreement designated the receipts as "prospective work," the receipts should be
recorded as future costs. EPA recorded two special accounts receivable listed within the consent
decrees as revenue for past costs spent instead of unearned revenue for future response actions at
the sites.
The consent decrees required each of the settling defendants to make cash payments (including
premiums) to resolve their alleged liability to the United States with respect to the sites. EPA
personnel did not properly interpret the language of the consent decrees due to the following
reasons:
• CFC did not receive a Superfund accounts receivable control form for an EPA Region 5
receivable. Regions provide CFC with Superfund control forms to help CFC accurately
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record and reclassify Superfund receivables. The U.S. Department of Justice provided the
consent decree to CFC for this receivable, and the EPA did not request a control form
from Region 5 until after we had identified the error.
• EPA Region 6's Superfund accounts receivable control form did not specify the type of
special accounts receivable, and CFC did not request additional information from
Region 6 to properly classify the receivable type.
• EPA personnel overlooked relevant portions of the consent decree that described the
receivable type.
Recommendations
We recommend that the Chief Financial Officer:
3. Reclassify the $226,336,107 in special account collections recorded as past costs to future
costs to ensure the current year financial statements are properly stated.
4. Develop and implement policies and procedures to require finance offices to review the
terms of settlement agreements, and communicate with regional counsel or program
offices when necessary to ensure special account funds are correctly recorded.
5. Reclassify special accounts receivable totaling $5,310,918 that were previously recorded
as past costs, classifying them instead as future costs to ensure current year financial
statements are properly stated.
6. Develop and implement policies and procedures to require CFC to review the terms of
Superfund agreements, and communicate with regional counsel or program offices to
ensure special account funds are correctly recorded.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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3 - EPA Did Not Reconcile the Property Management System to
Compass
The EPA did not reconcile $356.4 million of capital equipment within Maximo (a property
management system) to relevant financial data within Compass (the agency's accounting
system). RMDS 2540-11-T2, Reconciliation Requirements for Capital Property, requires
reconciliations between the property module and general ledger be performed monthly by the
responsible security organization. Various factors contributed to the EPA's failure to reconcile
the property module and the general ledger, such as the processing of journal vouchers to correct
software costs and an integration error between Maximo and Compass. The inability to reconcile
the property subsystem with Compass can compromise the effectiveness and reliability of
financial reporting.
RMDS 2540-11-T2, states, "Reconciliations between the property module and general ledger
within Compass shall be performed monthly by the responsible security organization. The results
of the reconciliation shall be verified quarterly by the cognizant regional finance management
officer (RFMO), Research Triangle Park Finance Center, Cincinnati Finance Center (CFC) and
Las Vegas Finance Center (LVFC)." The directive also states "Within 60 days of discovery of
discrepancies, corrections should be entered into Maximo and Compass as necessary."
During our analysis of the fourth quarter certifications of the property reconciliations, we found
several discrepancies with respect to what was reported and the amounts that should have been
reported. OCFO's Reporting and Analysis Staff (RAS), CFC, and LVFC did not submit accurate
quarterly certifications reflecting actual differences between Maximo and Compass, which
contributed to the reconciliation issues. Specifically, we found:
• CFC only reported property before beginning budget FY 2013, omitting property with
beginning budget FY 2013 through 2015. This resulted in an increased difference of
$589,170 between their original certification and revised certification.
• RAS did not report adjustments it made to software and overhead corrections. The
reconciliation difference increased by $327 million between their original certification
and revised certification.
• LVFC originally reported a difference of $94,500. After our analysis, the amount was
reduced to $5,500 due to an incorrect amount reported on their original certification.
RAS and the finance centers submitted revised certifications after we questioned OCFO staff
regarding these discrepancies. According to RAS officials, various factors contributed to the
EPA's failure to reconcile the property module and the general ledger, such as the processing of
journal vouchers to correct software costs and an integration error between Maximo and
Compass. In addition, capital equipment and software was not entered into Maximo timely.
RAS stated it will not correct those balances associated with the integration errors until the
Compass enhancement is completed in the third quarter of FY 2016.
Inaccurate personal property records compromise the EPA's property control system and can
lead to the loss or misappropriation of agency assets. The failure to reconcile the property
subsystem with Compass can compromise the effectiveness and reliability of financial reporting,
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including possible misstatements within the financial statements. This is a continuing issue, as
we have previously reported on this issue in prior financial audit reports.
Recommendations
We recommend that the Chief Financial Officer:
7. Complete the planned corrective actions and continue to research and resolve differences
between Compass and the property management system timely.
8. Advise all regional finance management officers and finance centers of the requirement
that quarterly certifications must reflect an accurate accounting of any differences
between Maximo and Compass.
9. Work with the Assistant Administrator for Administration and Resources Management to
ensure all capital software adjustments made by RAS are recorded in Maximo accurately
and timely.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations. The EPA responded that it
completed the corrective action for Recommendation 9 on October 21, 2015. However, we are
listing the corrective action as ongoing pending an estimated completion date.
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4 - EPA Should Improve Its Efforts to Resolve EPA's Long-Standing
Cash Differences With Treasury
The EPA did not resolve long-standing cash differences of $2.6 million between EPA and
U.S. Treasury cash balances. Treasury's guidance requires the EPA to correct and resolve any
differences between the Treasury's and EPA's Fund Balance with Treasury. OCFO did not have
effective internal controls to adequately monitor the internal cash differences to ensure the EPA
resolved all the differences with the Treasury. Unresolved differences may result in the
misstating of the EPA's Fund Balance with Treasury and financial statements and increase the
risk of fraud.
Treasury Financial Manual, Volume 1, Section 3335, Reconciling FMS 224, Section II, states
that agencies should reconcile regional finance center transactions separately from Intra-
governmental Payments and Collections transactions by comparing transactions reported in their
accounting systems with the transactions reported to Treasury by the regional finance centers and
through the Intra-governmental Payment and Collection system. In the month following the
reporting month, agencies should correct any disclosed differences.
The EPA's RMDS No. 2540-03-P1, Fund Balance with Treasury Management Standard
Form 224 Reconciliation, requires the EPA to monthly review and track differences between the
Treasury's and EPA's fund balance. The directive requires the OCFO's RAS to monthly review
the agency financial system of record and report issues to the respective finance center. The RAS
is responsible for tracking all budget clearing account items from posting to final disposition.
The EPA finance centers are required to provide comments, as needed, to the RAS on the
monthly cash differences report.
OCFO prepares a monthly cash difference report by accounting point and treasury symbol, using
internal statement of differences submitted by the EPA finance centers, to identify and resolve
any differences between Treasury and EPA records. We found that the accounting points for the
Payroll accounting point and Washington Finance Center had long-standing unresolved cash
differences. As of September 30, 2015, the RAS reported $4.9 million in cash differences,
including $1.2 million for Payroll and $1.4 million for Washington Finance Center unresolved
for 5 and 12 months, respectively.
The OCFO did not adequately monitor the internal cash differences at the transaction level to
ensure that the EPA resolved all the differences with Treasury. The RAS relied on the accounting
points to resolve individual cash differences. However, the accounting points for Payroll and
Washington Finance Center did not resolve their long-standing differences. Therefore, the RAS
did not have effective internal controls to resolve the individual cash differences.
By not adequately monitoring and resolving all cash differences, the EPA increases the risk of
unrecorded transactions and fraud. Unrecorded transactions misstate the EPA's Fund Balance
with Treasury and the financial statements.
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Recommendations
We recommend that the Chief Financial Officer:
10. Require RAS to monitor and work with the finance centers to resolve all internal cash
differences to ensure the EPA resolves all the differences with the Treasury.
11. Require the Payroll accounting point and Washington Finance Center to research and
resolve cash differences.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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5 - Cincinnati Finance Center Should Clear Suspense Transactions
Timely
CFC is not clearing transactions from the federal budget clearing (suspense) account within
60 business days after posting. As of March 31, 2015, we identified 136 federal transactions,
totaling $9,020,680, remaining in suspense beyond 60 business days. EPA guidance requires each
servicing finance office to classify and transfer transactions in the agency's federal budget clearing
account to appropriate general ledger accounts within 60 business days. CFC did not clear the
suspense account timely primarily because EPA project officers did not provide timely
disbursement approvals needed to clear the suspense account. Untimely clearing of suspense
transactions was also due to opening records in Compass to apply credits for interagency
agreements, reconciling cost reports prior to project officer approval, and managing Working
Capital Fund funding issues. Untimely clearing of suspense transactions influences the agency's
ability to reflect financial activity in the correct fund.
CFC records federal disbursements and collections in a suspense account. The accounting system
notifies the project officers by email of a transaction waiting for their approval. The system sends
follow-up emails at 20 days, 30 days, and then weekly if the project officer does not act on the
approval request. Disbursement transactions remain in suspense until an EPA project officer
approves or disapproves them. When the EPA project officer approves a disbursement, the
system removes the transaction from the suspense account and charges it to the appropriate
receipt or expenditure accounts. Collection transactions remain in suspense until CFC applies
them to the corresponding receivable.
The EPA's RMDS No. 2540-03-P1, Fund Balance with Treasury Management Standard Form
224 Reconciliation, dated June 24, 2015, requires each servicing finance office to review,
classify and transfer transactions posted to Treasury Account Symbol 68F3885 to the appropriate
general ledger account within 60 business days.
Treasury Financial Manual, Volume 1, Bulletin No. 2011-06, dated June 30, 2012, directs
federal agencies to certify annually that suspense accounts for the preceding yearend does not
include any items or transactions more than 60 days old. If there are transactions more than
60 days old, the federal agency must clearly explain the reason.
CFC did not clear the suspense account timely primarily because EPA project officers did not
provide timely disbursement approvals needed to clear the suspense account. CFC staff stated
that they were not required to follow up with the project officers to obtain their approval. CFC
relied on the system-generated reminder emails to the project officers and did not make many
follow-up attempts to get the project officers' approval. Untimely clearing of suspense
transactions was also due to:
• Time spent working with the EPA Office of Technology Solutions to open records in
Compass to apply credits received for U.S. Department of Health and Human Services
interagency agreements.
• Time spent reconciling cost reports to ensure they included appropriate costs and then
waiting on the project officer approval.
• Time spent obtaining funding for Working Capital Fund expenditures.
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We identified and communicated the issue of untimely clearing of suspense transactions to the
agency during our FY 2014 financial statement audit. We recommended that the Assistant
Administrator for Administration and Resources Management require project officers to approve
federal disbursements timely and that the Chief Financial Officer require CFC staff to follow up
with project officers and regions to obtain the necessary disbursement approvals and information
needed to clear transactions timely from the federal budget clearing (suspense) account. The
agency concurred with our recommendations. According to the agency's corrective action status
report as of May 6, 2015, the agency completed corrective action for the second recommendation
but not the first. Since we found in our FY 2015 review that, once again, CFC did not clear the
federal suspense account within 60 business days, we consider the corrective actions for both
recommendations to be incomplete.
Recommendations
We recommend that the Assistant Administrator for Administration and Resources Management:
12. Complete the planned corrective actions to require project officers to approve federal
disbursements timely.
We recommend that the Chief Financial Officer:
13. Require CFC staff to follow up with project officers and regions more often to obtain the
necessary disbursement approvals and information needed to clear transactions timely
from the federal budget clearing (suspense) account. When project officers do not
respond and approve disbursements timely, elevate the matter for resolution.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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6 - EPA Improperly Canceled Accounts Receivable and Collections
The EPA canceled 72 accounts receivable and 113 collection transactions without proper reviews
of the justification and authorizing approval in Compass. OMB Circular A-123 cites separation
of duties and supervision as one of its specific management control standards. However, EPA
management has not established internal control procedures for review and approval of
cancellation transactions. Without approval of cancellation transactions, the EPA increases the
risk of fraud, misuse and errors.
OMB Circular A-123 states: "Key duties and responsibilities in authorizing, processing,
recording, and reviewing official agency transactions should be separated among individuals.
Managers should exercise appropriate oversight to ensure individuals do not exceed or abuse
their assigned authorities."
The U.S. Government Accountability Office's Standards for Internal Control in theFederal
Government states management should divide or segregate key duties and responsibilities among
different people to reduce the risk of error, misuse or fraud. This includes separating the
responsibilities for authorizing transactions, processing and recording them, reviewing the
transactions, and handling any related assets so that no one individual controls all key aspects of
a transaction or event.
We identified 72 accounts receivable and 113 collection transactions that the EPA canceled
without approval in Compass. The EPA personnel who recorded the receivable and collection
transactions also canceled the transactions, contrary to Government Accountability Office and
OMB internal control standards and proper segregation of duties. Current EPA practice requires
approval for accounts receivable and collection amendments over $100.
Within Compass, no secondary approval is necessary to cancel accounts receivables and the EPA
has no procedure requiring secondary approval for cancellations. This is an internal control
weakness in Compass and EPA policy. Cancellation procedures would provide the system of
checks and balances necessary to ensure the integrity of accounts receivables and collections.
Without approval of transaction cancellations, the EPA increases the risk of fraud, misuse and
errors.
Recommendations
We recommend that the Chief Financial Officer:
14. Develop and implement a policy and/or procedure to require secondary approval for the
cancellation of accounts receivable and collection transactions in Compass to ensure that
canceled transactions are appropriate and approved according to internal control
standards.
15. Modify Compass to route accounts receivable and collection cancellations for secondary
approval.
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16. Review and analyze the accounts receivable and collections canceled without secondary
approval and correct inappropriate cancellations.
Agency Comments and OIG Evaluation
The agency generally concurred with our findings and recommendations, agreeing to review
existing separation of duties policy and update policies and procedures if applicable. The agency
responded to Recommendation 15 that the system has controls for secondary approval, but the
agency did not address the act of secondary approval for canceling receivables. Therefore, we
consider Recommendation 15 to be unresolved.
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7 - EPA Did Not Record More Than $8 Million in Accounts Receivable
for a $9 Million Superfund Judgment
The EPA did not record as a Superfund accounts receivable more than $8 million of a $9 million
judgment in a consent decree. Federal accounting standards require agencies to record accounts
receivable based on legal provisions. CFC recorded the receivable based on discussions at the
direction of EPA personnel instead of amounts due to the EPA as stipulated in the provisions of
the legal document. By not recording receivables at the amount stated in the legal document, the
EPA may understate accounts receivable on the financial statements.
SFFAS No. 1, Accounting for Selected Assets and Liabilities, requires agencies to recognize a
receivable when an entity establishes a claim based on legal provisions. Agencies should
recognize an allowance for estimated uncollectible amounts to reduce the gross amount of
receivables to its net realizable value.
A Settling Defendant agreed to a judgment of $9 million for unreimbursed past costs and future
costs to be incurred at a Superfund site. The consent decree directed the defendant to satisfy a
portion of its judgment through a cash payment and the remainder from the sale of property and
proceeds from insurance policy claims. Instead of recording the receivable at the judgment
amount of $9 million, the EPA recorded the receivable for $714,185, which represented the
amount the EPA anticipated from a cash payment and the sale of property.
The EPA recorded the receivable at the anticipated cash receipt amount of $714,185 based on its
discussions with EPA regions and headquarters, instead of abiding by the provisions in the legal
document. Email correspondence regarding the recording of the receivable referred to the
amount of cash the EPA expected to receive from settling defendant instead of the judgment
amount. According to the consent decree, the settling defendant is a responsible party pursuant to
Section 107(a) of CERCLA, 42 U.S.C Section 9607(a), and is jointly and severally liable for
response costs incurred and to be incurred at the site. Cash payment made by the settling
defendant is to be credited toward the judgment. The remainder of the judgment is to be satisfied
from sale and insurance proceeds.
The EPA looks to regions and the EPA Office of General Counsel to provide information to
support the recording of accounts receivable. Recording a receivable based on the amount
collected versus the amount owed violates accounting standards, which require receivables to be
recorded based on legal provisions or goods or services provided. By not recording receivables at
the amount stated in the legal document, the EPA could misstate accounts receivable on the
financial statements.
Recommendations
We recommend that the Chief Financial Officer:
17. Require CFC to record accounts receivable as provided in legal documents.
18. Perform a thorough review of existing receivables to ensure the amounts recorded are
consistent with amounts in legal documents.
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Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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8 - Improvement Needed in Reconciling Accounts Receivable
The EPA did not properly reconcile its accounts receivable subsidiary ledger to the general
ledger. The EPA did not correct reconciliation variances, separately reconcile federal and
non-federal receivables, or develop accurate detail reports. We previously reported the EPA's
reconciliation of accounts receivable as a significant deficiency in our FY 2014 financial audit
report. In following up on the agency's proposed corrective actions, we found that the EPA did
not correct the significant deficiency or completely implement its corrective actions. EPA
guidance directs the agency to perform quarterly accounts receivable reconciliations, investigate
discrepancies and correct any differences. When the agency cannot accurately reconcile the
accounts receivable subsidiary ledger to the general ledger and correct differences, the agency
cannot ensure financial statements are properly stated.
The EPA's RMDS 2540-9-T2, Receivables and Billings, directs EPA's Reporting and Analysis
Staff to perform quarterly accounts receivable reconciliations and Office of Financial Services to
research discrepancies, and correct any differences.
SFFAS No. 1, Accounting for Selected Assets and Liabilities, requires federal agencies to report
receivables from federal entities separately from receivables from non-federal entities.
The U.S. Government Accountability Office's Standards for Internal Control in the Federal
Government defines the five standards for the minimum level of quality acceptable for intemal
control in government. The standard for control activities requires accurate and timely recording
of transactions and events.
OMB Circular A-123, Appendix D, requires financial management systems to provide complete,
reliable, consistent and timely financial management information on federal government
operations.
We found that the EPA's accounts receivable reconciliation did not properly reconcile the
accounts receivable subsidiary ledger to the general ledger. The accounts receivable subsidiary
ledger maintains the activity and current balances for each account receivable. The general
ledger is a control account with the total of all accounts receivable. Several factors caused the
improper reconciliation:
• The EPA did not investigate variances between the accounts receivable detail and the
general ledger.
• The EPA addressed only prior year variances and not variances between the bill detail
and the general ledger identified during each reconciliation.
• The EPA's FY 2015 receivable reconciliations that we reviewed did not separate federal
and non-federal receivables.
• The EPA included journal vouchers in its accounts receivable bill detail.
• The EPA could not prepare a 6-month reconciliation due to a Compass report issue that
caused the report to not run.
We had previously found during our audit of the FY 2014 financial statements a significant
deficiency in that the agency did not reconcile the accounts receivable subsidiary ledger to the
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general ledger. This was reported in Report No. 15-1-0021. Audit of EPA 's Fiscal Years 2014
and 2013 (Restated) Consolidated Financial Statements, issued November 17, 2014. Table 1
below notes our FY 2014 recommendations, made to OCFO, and the status of EPA actions.
Table 1: FY 2014 recommendations, corrective actions and OIG evaluation
No.
23
24
25
OIG Recommendation
Investigate variances
between the general ledger
control accounts and the
accounts receivable
subsidiary ledger bill detail
and correct errors by
recording entries to the
control accounts and/or the
accounts receivable bill detail,
as needed.
Reconcile federal and non-
federal accounts receivable
separately.
Develop accurate reports for
accounts receivable principal
charges and non-principal
charges.
EPA Corrective Action
Concur. OCFO corrected many
of the variances from the prior
year in the 3rd and 4th quarters of
FY 201 4. The remaining
variances will be corrected in the
2nd quarter of FY 201 5.
Concur. OCFO will design a
framework for providing timely
and accurate reconciliations of
federal and non-federal accounts
receivable.
Concur. The agency
acknowledges that we made an
error for not reporting principal,
interest, handling charges, and
penalties correctly for March
201 4. The agency has corrected
the error in the subsequent
reconciliation and will continue
oversight for all reconciliations
going forward.
OIG Evaluation
As of September 30, 2015, the EPA
had not completed this corrective
action. For the quarterly reconciliations
we analyzed, the EPA did not
investigate variances between the
accounts receivable detail and the
general ledger. Also, the EPA's
corrective action did not completely
address the problem because it only
addressed prior-year variances and
not variances between the bill detail
and the general ledger identified
during each reconciliation
As of September 30, 2015, the EPA
had not completed this corrective
action. EPA FY 2015 receivable
reconciliations we reviewed did not
separate federal and non-federal
receivables.
The agency's corrective action was not
effective for the following reasons:
(1) the agency could not prepare a
6-month reconciliation due to a
Compass report issue, which caused
the report to not run; (2) the bill report
for 9-month and year-end erroneously
included bill charges (interest,
handling, penalty); and (3) the year-
end report included FY 2016 activity.
Source; OIG analysis of EPA data.
The agency's current accounts receivable reconciliation process does not identify and resolve
differences between the accounts receivable general ledger control accounts and their
corresponding accounts receivable detail accounts to ensure that both the control and detail
accounts are properly stated. The purpose of a reconciliation is to identify and resolve
differences between the accounts receivable subsidiary ledger bill detail and the accounts
receivable general ledger control accounts to ensure accuracy and completeness in the financial
statements. When the agency cannot accurately reconcile the accounts receivable subsidiary
ledger to the general ledger control accounts, the agency cannot ensure:
• Accounts receivable general ledger control account balances are accurate.
• Accounts receivable subsidiary ledger bill detail is accurate.
• Federal and non-federal receivables are properly classified in the financial statements.
• Financial statements are properly stated.
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Recommendations
We recommend the Chief Financial Officer:
19. Complete the corrective actions previously identified in Table 1.
20. Reconcile the balances in its accounts receivable general ledger accounts to its
subsidiary ledger quarterly.
21. Reconcile federal and non-federal accounts receivable separately.
22. Resolve variances between the general level and receivable detail report for receivable
principal, interest, handling and penalties; and correct errors at the transaction level.
23. Develop accurate reports for accounts receivable principal and non-principal charges
(such as interest, handling and penalties) to reconcile such charges to the general ledger
accounts.
24. Correct the Compass reporting issues that prevent the proper reports to be produced.
Agency Comments and OIG Evaluation
The agency concurred with our findings and Recommendations 19, 20, 21, 22 and 24.
The agency did not concur with our recommendation to develop accurate reports
(Recommendation 23). We revised our recommendation to clarify that the agency needs accurate
reports to properly reconcile receivable principal and non-principal charges to the general ledger.
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9 - EPA Overbilled Superfund State Contract Cost Share
The EPA overbilled a state $1,139,306 for one Superfund State Contract (SSC). EPA guidance
directs regional finance and program offices to reconcile SSC financial data by site. Regions use
Superfund project expenditures to calculate the amount of a state's cost share billed under an
SSC. An error in the EPA's cost recovery process caused duplicate charges in the site's cost
recovery report that the region did not identify. When costs are not properly reconciled, states
and other entities may overpay for expenditures never incurred.
CERCLA, as amended, authorizes the EPA to bill states for their cost share of expenditures under
the SSC program. The EPA uses the Superfund Cost Recovery Package Imaging and On-Line
System (SCORPIOS) to accumulate and report costs expended on cleanup of Superfund sites.
The EPA's RMDS 2550D-09-P1, State Cost Share Provisions for Superfund State Contracts and
Remedial Cooperative Agreements, describes the EPA's process for managing the financial
aspects of Superfund state cost share provisions in Superfund state contracts. The policy directs
regional finance and program offices to prepare, track, manage and reconcile SSC financial data
by site.
The EPA overbilled the state for duplicate costs charged under an SSC for site 0737. The
SCORPIOS cost report for site 0737 contained duplicate charges of $11,393,060.26 for two
interagency agreements. Because the state's share of EPA costs expended under the SSC is
10 percent, the EPA overbilled the state $1,139,306.
Table 2: Duplicate charges included in SSC bills for site 0737
Site Number
0737
0737
Interagency
Agreement No.
MODW96412301
MO DW96952301
SCORPIOS Costs
$9,315,872.86
$19,845,510.72
Compass Costs
$4,693,230.43
$13,075,092.89
Duplicate Charges
$4,622,642
$6,770,418
Calculated Costs $1 1 ,393,060
Cost Share 10%
Amount Overbilled $1,139,306
Source: OIG analysis of EPA data.
A duplicate charge in the site's cost recovery report occurred when the region did not properly
reconcile the site costs with Compass. As a result, the EPA misstated accounts receivables.
Without reconciling SCORPIOS costs to Compass, other sites could have contained duplicate
charges. Thus, the EPA may have double billed costs, creating a potential for refunds.
Recommendation
We recommend the Chief Financial Officer:
25. Work with the Assistant Administrator for Solid Waste and Emergency Response to
direct the regions to track, manage and reconcile SSC financial data by site.
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Agency Comments and OIG Evaluation
The agency concurred with our findings and agreed to issue new SSC model provisions that
include an updated final financial statement reconciliation and new language on periodic reviews.
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10 - OCFO Lacked Internal Controls When Assuming Responsibility
for Account Management Procedures of Financial Systems
OCFO assumed responsibility for managing oversight of users' access to the Payment Tracking
System without ensuring the system had documentation covering key account management
procedures. OMB Circular A-123 states that internal control needs to be in place over
information systems. Also, the circular reiterates that general control applies to all information
systems including end-user environments.
National Institute of Standards and Technology (NIST) Special Publication (SP) 800-53,
Revision 4, April 2013, Security and Privacy Controls for Federal Information Systems and
Organizations, security control number Access Control (AC)-l, Access Control Policies and
Procedures, requires an organization to develop, document, and disseminate procedures to
facilitate the implementation of the access control policy and associated access controls.
Additionally, NIST SP 800-53's security control number AC-2, Account Management, requires
the organization to, among other things:
• Identify and select [organization-defined] types of information system accounts to
support organization missions/business functions;
• Establish conditions for group and role membership;
• Create, enable, modify, disable, and remove information system accounts in
accordance with [organization-defined procedures or conditions]; and
• Review accounts for compliance with account management requirements [on an
organization defined frequency].
Account management for the Payment Tracking System is performed by the Application
Management Staff under OCFO's Office of Technology Solutions. Application Management
Staff use a contractor to assist with account management for the Payment Tracking System.
Control of the Payment Tracking System's account management was transferred to the
Application Management Staff group around July 2012. However, there was no established
process for transitioning account management responsibilities when an application's account
management was taken over by the Application Management Staff. There was no process to
document procedures specific to OCFO applications, such as the Payment Tracking System.
Additionally, no documentation was transferred or developed to establish consistent account
management procedures.
Without documented procedures for access management of the Payment Tracking System
application, institutional knowledge of the performance of account management procedures is
not maintained, and management lacks a standard to measure whether employees are carrying
out established processes as intended. The lack of oversight over access management can lead to
employees being granted access to information systems without documented approval and users
maintaining access to systems they no longer need to perform their duties.
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Recommendations
We recommend that the Chief Financial Officer:
26. Implement an internal control process for transferring the management of an
application's user access to the Application Management Staff.
27. Conduct an inventory of OCFO systems managed by the Application Management Staff
and create or update supporting access management documentation for each application.
28. Work with the contracting officer to update applicable contract clauses and distribute
updated access management documentation to contractors supporting the user account
management function for applications managed by the Application Management Staff.
This should include establishing a date when the contractors would start using the
updated account management documentation.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations. Subsequent to its response to the
draft report, in an amended response to Recommendation 26, the agency agreed to implement a
process for transferring the management of an application's user access.
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11 - Financial and Mixed-Financial Applications Did Not Comply
With Required Account Management Controls
EPA financial and mixed-financial applications complied with 11 of the 28 required account
management controls selected for review, or 39 percent. For the majority of the five key
applications noted in Table 3, the EPA implemented processes for establishing conditions for
groups and role membership (control requirement AC-2c). However, more management
emphasis is needed to ensure responsible individuals fully develop and implement required
account management controls. In particular, we found that the EPA's Payment Tracking System
and travel system (Concur) show the greatest need for improvement to comply with federal
requirements. The possibility exists that the unauthorized access could be used to commit fraud
that could go undetected for a significant amount of time.
Table 3: EPA's compliance with required NIST access controls for account management
Systems
Compass
Payment
Tracking
System
PeoplePlus
Concur
% Compliant
Access controls tested
Account
manager
assigned
(AC-2D)
S
X
s
X
50%
Establishes
conditions
for user
group/role
membership
(AC-2c)
^
/
s
X
75%
Authorized
official
approves
accounts
(AC-2e)
v
X
s
X
50%
Monitors for the
use of
information
system accounts
(AC-2g)
X
X
X
X
0%
Account
managers
notified of
changes in
need to
restrict
access
(AC-2h)
X
X
X
X
0%
Authorized
information
system access
based on
criteria
(AC-21)
s
X
s
X
50%
Accounts
reviewed for
compliance
with account
management
requirements
(AC-2J)
7
X
s
X
50%
Overall
compliance
percent
71%
14%
71%
0%
39%
» = Application was compliant with the access control tested.
X= Application was not fully compliant with the access control tested.
Source: Generated by OIG based on NIST SP 800-53 controls tested.
NIST SP 800-53, Revision 4, Security Control AC-2, Account Management, requires the
organization to implement the following:
• AC-2b. Assign account managers for information system accounts.
• AC-2c. Establish conditions for group and role membership.
• AC-2e. Requires approvals by [Assignment: organization-defined personnel or roles]
for requests to create information system accounts.
• AC-2g. Monitors the use of information system accounts.
• AC-2h. Notifies account managers:
i. When accounts are no longer required.
ii. When users are terminated or transferred.
iii. When individual information system usage or need-to-know changes.
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• AC-21. Authorizes access to the information system based on:
i. A valid access authorization.
ii. Intended system usage.
iii. Other attributes as required by the organization or associated
missions/business functions.
• AC-2J. Review accounts for compliance with account management requirements
[on an organization defined frequency]
According to EPA representatives in OCFO, weaknesses within the agency's account
management practices stem from the following:
• Creating user accounts is a manual process that relies on account management
personnel's institutional knowledge.
• Account management personnel, for Compass, rely on an automated access request
systems, for which the approval routing list contains unauthorized approvers, to control
the access approval and notification processes.
• Within Concur, a user's access privileges can be increased by any user with those
privileges without supervisory approval.
• The capability to log user account creation and system activity exists, but regular
reviews of the logs for anomalies and suspicious activity are not part of established
procedures.
• Account management procedures for access recertification are not established or
documented.
Notwithstanding the above reasons, our analysis indicated there is a lack of oversight processes
to ensure that responsible individuals (1) perform required controls and (2) report compliance
with information system security controls as required by EPA policy. For the Payment Tracking
System and Concur, responsible individuals had not performed user access recertifications or
entered data into Xacta1 regarding how the system complied with information system security
requirements. We also noted that Concur was not listed in Xacta and, therefore, lacked
management oversight of the system's compliance with mandated information system security
requirements.
Account management is important because it helps to prevent unauthorized access to the EPA's
systems that manage resources used to protect human health and the environment. Weaknesses in
account management controls reduce the integrity of financial data and user accountability.
1 The EPA implemented Xacta to be the EPA's official system for recording and maintaining information about the
agency's compliance with mandated information system security requirements.
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Recommendations
We recommend that the Chief Financial Officer:
29. Review and update account management documentation and establish procedures for
financial systems, as needed, to include implementation of the following controls:
a. Assign account managers for user accounts.
b. Establish role conditions for system access privileges.
c. Require approvals to create accounts.
d. Monitor use of accounts.
e. Notify account managers when accounts are removed or changed.
f. Authorize access based on valid authorizations.
g. Review accounts for appropriateness of current access privileges.
30. Issue a memorandum to personnel responsible for controlling access to financial systems
emphasizing the importance of following access control procedures—specifically,
periodic access reviews and proper access removal.
31. Conduct an inventory of all financial applications and ensure the systems are entered into
Xacta for monitoring of compliance with required information systems security controls.
32. Implement a process to notify the Chief Financial Officer of the status of corrective
actions entered into Xacta.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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12 - OCFO Needs to Strengthen Password Change Procedures
OCFO needs better HelpDesk procedures for distributing passwords to users locked out of
OCFO's financial systems. In particular, the OCFO HelpDesk does not have a process to verify
the user's identity prior to providing new passwords over the phone. NIST and EPA criteria
require the adequate protection of system passwords. A perpetrator could access applications—
such as PeoplePlus and the Payment Tracking System—and could manipulate leave records or
process unauthorized financial transactions.
NIST SP 800-53, security control for Identification and Authentication 5,Authenticator
Management, states that organizations must manage information system passwords by protecting
them from unauthorized disclosure and modification. EPA Chief Information Officer Transmittal
No. 12-003 states that, "Users should be permitted access to the HelpDesk to release their
account prior to the 30 minutes lock out period if it hinders productivity." Additionally, the
Transmittal No. 12-003 states that "Authenticator content must be protected from unauthorized
disclosure or modification."
The conditions existed because the OCFO HelpDesk procedures need improvement. Specifically,
the OCFO HelpDesk escalation procedures—supported by two separate EPA contractors who
manage password resets for EPA employees—require HelpDesk personnel to (1) distribute
temporary passwords to users locked out of OCFO applications verbally over the phone and
(2) instruct users to change the password upon their next log in. The HelpDesk personnel create a
ticket for the issue and sends an automated email with the ticket number and problem description
to the user's government email address. To resolve the ticket, HelpDesk personnel verbally
provide them with a temporary password. We found that individuals can obtain a new password
over the phone by providing the HelpDesk with a user's name and Local Area Network
identification that predominantly consist of the employee's first initial and last name.
By distributing OCFO application passwords over the phone and not assuring that the caller is
the account user, HelpDesk personnel could expose passwords to unauthorized users. While
automated emails are sent to the user's government email to track the creation and closing of the
ticket related to the password issue, this process is not secure because the HelpDesk does not
require the email recipient to refer to the email before issuing the recipient a new password
verbally. A perpetrator could execute an attack on the user's account when the user would not be
checking their email. This could compromise the security of the EPA's financial resources used
to protect human health and the environment.
Recommendation
We recommend that the Chief Financial Officer:
33. Establish new procedures and update the OCFO HelpDesk Escalation Procedures to
require validation of users before the distribution of passwords.
Agency Comments and DIG Evaluation
The agency concurred with our findings and recommendation.
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13 - EPA's Travel System Needs Improved Credit Card
Data Protection and Independent Compliance Reviews
The EPA's Concur travel system (1) allows users more access to credit card information than
users need, and (2) lacks required independent reviews of the Concur service provider's2
compliance with Payment Card Industry Data Security Standards (PCI DSS). In particular;
• There are currently 623 Concur users who could unnecessarily view employees' full
credit card numbers in clear text.
» Concur currently has a Service Provider Level II Validation that does not meet the
PCI DS S standard for the number of credit card transactions process ed. Concur processed
955,804 transactions through June 2015, but any service providing that processes over
300,000 transactions per year must obtain a Service Provider Level I Validation.
NIST SP 800-53, security control number AC-6, Least Privilege, states that the organization
must only allow the authorized access to users that is necessary to accomplish their tasks in
accordance with organization missions. The PCI DSS* Requirements and Security Assessment
Procedures, Version 3.0, dated November 2013, and Version 3.1, dated April 2015, provide a
minimum set of standards for protecting account data that allow the service provider to enhance
with additional controls. The EPA issues MasterCard credit cards to its travelers and MasterCard
has enhanced these standards by requiring service providers that process over 300,000
transactions per year to obtain a Level 1 Validation. A Level I Validation includes an annual
onsite assessment conducted by a Qualified Security Assessor. Concur currently conducts a
Level II Validation, which only requires Concur to conduct an annual self-assessment.
The EPA obtained travel services from the Concur service provider through issuing Task Order
EP-G13C-00378 on General Services Administration (OS A) contract GS-33f-y0026. Since
Concur stores credit card information to process credit card transactions between government
travelers and merchants, Concur appears to meet the definition of a service provider and,
therefore, is subject to enhanced PCI DSS requirements. Concur processed 955,804 transactions
through June 2015 and, therefore, must obtain a Service Provider Level I Validation to meet the
PCI DSS requirement. The EPA representative provided us with a GSA point of contact to
discuss security concerns discovered during our audit. Upon raising this issue with GSA, its
representative stated that GSA believed the PCI DSS compliance process may not apply to their
contract or their government customers. The GSA representative further stated that the
representative will contact others within GSA to find more information about PCI DSS
compliance. However, GSA has not provided further updates on whether Concur must meet PCI
DSS requirements.
Personnel have excessive access to credit card information because the EPA users with the
Federal Agency Travel Administrator role in Concur can see the full credit card number for
travelers under their purview. Our analysis of 10 EPA Concur users with the Federal Agency
Travel Administrator role disclosed that thev were mistaken about how much access they needed
1 The PCI Security Standards Council defines a service provider as a business entity that is not a payment brand
directly involved in the processing, storage or transmission of cardholder data. This also includes companies that
provide sendees that control or could impact the security of cardholder data.
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to the employee's full credit card information. The users with the Federal Agency Travel
Administrator role stated they needed access to a traveler's full credit card information in order
to perform queries of a user's credit card history in Compass Data Warehouse. Our analysis
disclosed that full credit card numbers are unnecessary to query a user's credit card history in the
Compass Data Warehouse. Users with special Compass Data Warehouse system access can view
credit card history by entering the employee's name. Also, the EPA implemented a basic
Compass Data Warehouse access process that gives users the ability to obtain credit card charge
history by providing the last eight digits of the card number (part of the traveler's account
number and checksum) and not the entire 16-digit number.
The PCI DSS standard was created to increase controls around cardholder data to reduce credit
card fraud via its exposure. By not ensuring the Concur service provider is adequately protecting
this data, the EPA and all Concur users are potentially faced with the responsibility and expense
of providing breach notification and remediation services in the magnitude of the cost similar to
the most recent data breaches experienced by the Office of Personnel Management. Because
EPA management is unaware of the service provider's ability to protect credit card data, the EPA
lacks the information and ability to make plans needed to implement risk-based decisions to
minimize the agency's exposure. By not taking steps to restrict access to credit card data
unnecessarily needed by individuals within the agency, the EPA increases the potential this data
could be used for unauthorized purposes. This also places an undue Financial expense on EPA in
order to protect the effected employee from fraud.
Recommendations
We recommend that the Chief Financial Officer:
34. Work with the contracting officer to have the Concur service provider limit the visibility
of credit card numbers for people with the Federal Agency Travel Administrator role.
35. Formally raise the concern to the General Services Administration that the Concur
vendor does not perform the required assessment to meet the Payment Card Industry
Data Security Standards for the number of credit card transactions it processes and
request that the General Services Administration work with the service provider to
conduct and provide its government clients the appropriate assessment report.
Agency Comments and DIG Evaluation
The agency concurred with our findings and recommendations.
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Attachment 2
Compliance With Laws and Regulations
Table of Contents
14 EPA Did Not Comply With Federal Accounting Standards for
Recording Interest 41
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14 - EPA Did Not Comply With Federal Accounting Standards for
Recording Interest
The EPA did not record all applicable interest for some Superfund and installment interest as
required by applicable laws, federal accounting standards and EPA policy that require the EPA
to assess interest on delinquent accounts receivable. In following up on the agency's proposed
corrective actions, we found that the EPA did not implement a correction in the Compass system
related to Superfund and installment interest. By not recording all applicable interest, the EPA
did not collect all the funds to which it was entitled and did not comply with applicable laws,
standards and policies.
CERCLA Section 107 states that the amounts recoverable in an action under this section shall
include interest on the amounts recoverable. Such interest shall accrue from the later of the date
payment of a specified amount is demanded in writing or the date of the expenditure concerned.
The Debt Collection Act of 1982 [Public Law 97-365, Section ll(e)(l)] addresses the collection
of amounts owed to the federal government and provides for a minimum annual rate of interest
to be charged on overdue debts owed.
SFFAS No. 1, Accounting for Selected Assets and Liabilities, paragraph 53, states that interest
receivable should be recognized for the amount of interest income earned but not received for an
accounting period.
The EPA's RMDS 2550D, Chapter 14, Superfund Accounts Receivable and Billings, page 14,
states that pursuant to Section 107 of CERCLA, the EPA will assess interest on all overdue
amounts.
The EPA's RMDS 2540-9-P2, Non-Federal Delinquent Debt, pages 6-7, directs the agency to
assess and record overdue interest, handling and penalty charges in 30-day increments for late
payments as appropriate. The finance centers calculate interest, handling and penalty charges
manually, or rely on the agency financial management system to automatically calculate and post
all charges.
We had previously reported in our audit of the FY 2014 financial statements that the EPA did not
comply with accounting standards for recording interest. Table 4 below notes our FY 2014
recommendations and status of EPA actions. These recommendations, made to OCFO, involved
actions involving CFC and LVFC.
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Table 4: FY 2014 recommendations, corrective actions and OIG evaluation
No.
35
36
37
38
OIG Recommendation
Instruct CFC to perform an
analysis of delinquent
receivables to determine
whether interest is being
properly recorded in Compass
in accordance with the
applicable laws, federal
accounting standards and EPA
policy, and record any
unrecorded interest.
Instruct CFC to follow the terms
in the legal source documents
when recording interest
receivables.
Instruct LVFC to follow EPA
policy and the terms of the legal
source document and record
the document effective date in
Compass as the account
receivable document date for
grant receivables.
Determine and correct the
cause of Compass system
problems related to Superfund
and installment interest.
EPA Corrective Action
Concur. OCFO will continue to
review delinquent receivables to
ensure interest is accruing
properly and will continue to work
closely on Compass issues to
resolve them on a long-term basis
in cases where interest has not
been calculated in Compass (and
it should be).
Concur. OCFO will explore having
Compass functionality enhanced
to allow for interest to be
calculated from a date other than
the receivable date.
Concur. OCFO will work with the
Grants Management Office to
ensure source documentation for
grant receivables is submitted to
the LVFC in a timely manner.
Concur. OCFO implemented a fix
on November 16, 2014, to correct
the known system issues related
to interest.
OIG Evaluation
Corrective action not effective.
CFC did not perform an analysis to
determine whether Compass is
properly recording interest. At
FY 2014 year-end, CFC sampled
several bills to ensure the interest
was calculated correctly and in
Compass for the year-end financial
statements. CFC submits tickets as
issues arise. At FY 2015 year-end,
CFC did not perform an overarching
interest review and instead reviewed
interest as the receivable status was
updated or when collections were
received.
As of September 30, 2015, the
agency's corrective action was not
complete. In FY 2015, we found that
CFC personnel still relied on the
Department of Justice and EPA
regional personnel direction and did
not record interest related to a large
settlement, instead of following the
provisions in the legal document.
LVFC began recording FY 2015
transactions for grant receivables with
the effective date of the originating
document. This corrective action is
effective at eliminating the interest
noncompliance. LVFC took sufficient
corrective action for
Recommendation 37 related to grant
receivables. Consequently, no further
recommendations are made to LVFC.
System issues related to interest
were not corrected; therefore,
corrective action was not effective.
On November 18, 2014, Compass
deleted over $7 million of interest on
over 70 Superfund receivables.
Compass also stopped calculating
interest on numerous other
receivables on April 20, 2015. When
Compass deletes and/or does not
calculate interest on Superfund
receivables, there is no assurance
interest is properly recorded.
Source: OIG analysis of EPA data.
When the EPA does not record interest, the agency may not collect all the funds to which it is
entitled and does not comply with applicable laws, federal accounting standards and EPA policy.
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Recommendations
We recommend that the Chief Financial Officer:
36. Complete the corrective actions previously identified in Table 4.
37. Perform a comprehensive analysis of delinquent accounts receivable to determine
whether interest is being properly recorded in Compass in accordance with the
applicable laws, federal accounting standards, and EPA policy, and record any
unrecorded interest.
38. Follow the terms in the legal source documents when recording interest by ensuring
interest is recorded in the system when a receivable becomes past due, either through
Compass automatic calculations or manual interest calculations prepared by CFC.
39. Determine and correct the cause of Compass system problems related to Superfund and
installment interest, to include determining why:
o Compass deletes Superfund interest and implement a correction.
o Compass stops calculating interest and implement a correction.
Agency Comments and OIG Evaluation
The agency concurred with our findings and recommendations.
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Attachment 3
Status of Prior Audit Report Recommendations
The EPA is continuing to strengthen its audit management to address audit follow-up issues and
complete corrective actions expeditiously and effectively to improve environmental results.
During FY 2015, the EPA's Chief Financial Officer, as the Agency Follow-Up Official,
developed and implemented a strategy for increasing the agency's attention to its audit follow-up
responsibilities, including timely completion of corrective actions in response to OIG audit
recommendations. As one component of the strategy, the Chief Financial Officer issued a
memorandum to senior agency leadership, reminding senior managers of their stewardship
responsibilities for audit management and reviewing their Action Official roles and
responsibilities. Other notable actions included:
• In December 2014, the agency launched new online training for using its Management
Audit Tracking System to ensure timely and effective audit follow-up in compliance with
EPA Manual 2750: Audit Management Procedures. All new Audit Follow-up
Coordinators completed the online training, which focuses on how to use the system,
including generating reports, to ensure that EPA audit data are accurate, complete and up
to date.
• The EPA made oversight of audit follow-up a focus area for its FY 2015 Management
Integrity Program, requiring all national program and regional offices to review a sample
of their OIG audits using a questionnaire and template developed by OCFO and report
findings in their FY 2015 assurance letters to the Administrator. Results indicated no
agency-level internal control weaknesses in audit management.
• The agency undertook an update of EPA Manual 2750, Audit Management Procedures,
which was last revised in FY 2013. Manual 2750 is a comprehensive audit management
guide that addresses OIG, Goveniment Accountability Office, and Defense Contract
Audit Agency audits. OCFO expects to release the updated policy in December 2015.
• OCFO continued to issue first and third quarter audit management progress reports,
highlighting the status of management decisions and corrective actions. The reports are
shared with program office and regional managers throughout the agency to keep them
informed of the status of progress on their audits.
• Additionally, OCFO continued to conduct onsite reviews of national and program offices,
initiated in FY 2009 and scheduled on a rotating basis. These quality assurance/quality
control reviews focus on offices' audit follow-up procedures, data entered in the
Management Audit Tracking System, and availability of supporting documentation.
In FY 2015, OCFO completed on-site reviews in two regional offices and one national
program office.
Based on a review of Management Audit Tracking System data, OCFO reported that the number
of OIG audits closed on issuance increased to 77 percent in FY 2015 (up from 57 percent in
FY 2014), indicating sustained OIG-agency progress in reaching timely agreement on audit
recommendations and corrective actions. In addition, the number of late corrective actions at the
end of FY 2015 decreased by 28 percent from FY 2014.
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Table 5: Significant deficiencies—issues not fully resolved
EPA Failed to Capitalize Software Costs, Leading to Restated Fiscal 2013 Financial
Statements
In our FY 2014 audit, we identified the agency's accounting for software as a material weakness. In
FY 2014, the agency found it had undercapitalized software by expensing approximately $255 million
in software costs over a 7-year period. The undercapitalized software and related equity accounts
indicate the agency has a material weakness in internal controls over identifying and capitalizing
software because such controls failed to detect and correct the errors, resulting in a misstatement of
the FY 2013 financial statements. During FY 2015, the agency took corrective actions to improve its
accounting for software. While the agency has made progress and taken steps to correct
weaknesses, all corrective actions have not been completed. Corrective actions for the remaining two
recommendations are not due to be completed until 2018.
EPA Did Not Capitalize Lab Renovation Costs
In our FY 2014 audit, we found that the EPA did not capitalize approximately $8 million of Research
Triangle Park lab renovations. As a result, the EPA did not properly classify the lab renovation as a
capital improvement. The agency capitalized and booked the Research Triangle Park lab renovation
costs and related depreciation. The EPA Office of General Counsel believed that the 1999 legal
opinion is still a viable legal opinion, but did not provide examples to guide the agency's
determinations of when renovation work should be funded from agency program appropriations or
Building and Facilities funds. Therefore, the corrective action was partially completed. In addition,
corrective actions for other recommendations related to this finding are not due until 2016.
EPA's Internal Controls Over Accountable Personal Property Inventory Process Need
Improvement
In our FY 2014 audit, we noted that the EPA reported a $2.6 million difference between the amount of
accountable personal property recorded in the property management system (Maximo) and the
amount of physical inventory for FY 2014. The EPA also identified 573 property items not recorded in
Maximo. During FY 2015, we found that the agency made progress and has taken steps to correct its
differences between the amount of personal property recorded in Maximo and the amount of physical
inventory. The agency has implemented the corrective actions. However, we have not assessed the
effectiveness of these actions.
EPA's Property Management System Does Not Reconcile to its Accounting System
(Compass)
During FY 2014, we found that the EPA did not reconcile $100 million of capital equipment within its
property management subsystem (Maximo) to relevant financial data within its accounting system
(Compass). The inability to reconcile the property subsystem with Compass can compromise the
effectiveness and reliability of financial reporting. We previously reported on this issue in our 2012
and 2013 financial statement audit reports. In FY 2014, the agency issued procedures to reconcile
capital property. The agency stated it had begun to resolve the differences between Maximo and
Compass; however, problems continue to exist. In FY 2015, we again reported this weakness as a
significant deficiency; therefore, the EPA's corrective actions were not yet effective.
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to the
Finance Center
In FY 2014, we found that the EPA and Department of Justice did not timely forward accounts
receivable source documents to finance centers. During FY 2015, the EPA's Office of Enforcement
and Compliance Assurance in a memorandum reminded the regions to timely provide accounts
receivable enforcement documentation to the finance center. In addition, OCFO updated the EPA's
Superfund guidance to direct originating offices to timely send accounts receivable control forms to
the finance center. In 2015, while we noted improvements in CFC's timely receipt of legal documents,
we still identified instances of untimely receipt, principally related to stipulated penalties. Therefore,
the agency's corrective actions are not completely effective and we will continue to evaluate the
timeliness of receipt of accounts receivable source documents from the EPA and Department of
Justice in FY2016.
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EPA Did Not Properly Reconcile Accounts Receivable
During FY 2014, we found the EPA did not properly reconcile its accounts receivable subsidiary
ledger to the general ledger. In FY 2015, the EPA did not correct the significant deficiency or did not
completely implement its corrective actions for investigating variances between the accounts
receivable detail and the general ledger; reconciling federal and non-federal accounts receivable
separately; or developing accurate reports. Because the EPA did not change its process from the
prior year, we reported the agency's accounts receivable reconciliation process as a significant
deficiency again in FY 2015.
Unneeded Funds Not Deobligated Timely
In FY 2014, we reported weaknesses with the agency's management of unliquidated obligations. We
found $4.4 million in idle unliquidated obligations for which the EPA had not taken timely actions to
notify the appropriate offices to deobligate the unneeded funds. The average age (days funds sat idle
since last activity) of these funds was 732 days old, with the oldest being 996 days old. The agency
concurred with our finding. The agency planned corrective action to update and implement a new
unliquidated obligations tool to improve its unliquidated obligations review process and timely
deobligations of funds deemed unneeded by program /regional offices. To streamline and simplify the
unliquidated obligations management process, the OCFO Office of Financial Management in
FY 2015 developed a new tracking tool and updated requirements for review of all open obligations.
The Office of Financial Management developed and provided unliquidated obligation reviewers a
comprehensive user guide and instructions upon release of the new tool. We believe the agency's
corrective action is resulting in timely review of unliquidated obligations. However, there are still
significant amounts of idle funds that agency unliquidated obligation reviewers have deemed valid
unliquidated obligations. Many of these unliquidated obligations remain open but idle with significantly
large age dates. For those unliquidated obligations that were identified for deobligation or were not
reviewed by the agency's due date, we will continue to monitor these unliquidated obligations for
actual deobligation and inactivity.
EPA Did Not Comply With Federal Accounting Standards for Recording Interest
In FY 2014, we found that the EPA did not record all applicable interest for some accounts receivable
in the accounting system as required by applicable laws, federal accounting standards and EPA
policy. While the EPA and the CFC have made some improvements with recording interest, we found
in FY 2015 that the agency corrective actions were not effective at eliminating the noncompliance
primarily due to Compass system problems. Therefore, we will continue to evaluate the agency's
recording of interest in FY 2016,
Compass Reporting Limitations Impair Accounting Operations and Internal Controls
In FY 2012, we reported that following the agency's conversion of its accounting system to Compass,
the EPA was unable to obtain reports it needed for many accounting applications. Following the
conversion, accounts receivable reports used by the finance centers for reconciliations and
calculating allowance for doubtful accounts were no longer available at the finance center level. Since
the conversion, the EPA has not developed accounts receivable reports at the finance center level,
which are needed to reconcile accounts receivable and update allowance for doubtful account
estimates.
EPA Should Improve Compliance With Internal Controls for Accounts Receivable
During FY 2012, we found that CFC did not timely receive accounts receivable judicial legal
documents from the Department of Justice and EPA. In FY 2013, the EPA revised agency accounts
receivable guidance to remove the requirement for Regional Legal Enforcement Offices to forward
copies of executed judicial orders to CFC within 5 workdays. In FY 2014, the Office of Enforcement
and Compliance Assurance reported its corrective action as completed; however, we reported
untimely receipt of accounts receivable legal documents as a significant deficiency in FY 2014. In
2015, while we noted improvements in CFC's timely receipt of legal documents, we still identified
instances of untimely receipt. Therefore, we do not consider the agency's corrective actions
completely effective and will continue to evaluate the effectiveness in FY 2016.
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Cincinnati Finance Center Should Clear Suspense Transactions Timely
During our FY 2014 audit, we found that CFC was not clearing collection and disbursement
transactions from the federal budget clearing (suspense) account within 60 days after posting. EPA
guidance, requires each servicing finance office to classify and transfer transactions in the agency's
federal budget clearing accounts to appropriate general ledger accounts within 60 days. Untimely
clearing of suspense transactions influences the agency's ability to reflect financial activity in the
correct fund. We recommended that the Assistant Administrator for Administration and Resources
Management require project officers to approve federal disbursements timely and that the Chief
Financial Officer require CFC staff to follow up with project officers and regions to obtain the
necessary disbursement approvals and information needed to clear transactions timely from the
federal budget clearing (suspense) account. The agency concurred with our recommendations and
agreed to take corrective actions. According to the agency's corrective action status report as of
May 6, 2015, the agency completed corrective action for the second recommendation but not the
first. However, in our FY 2015 review, we found that, once again, the CFC did not clear the federal
suspense account within 60 business days; therefore, we consider the corrective actions for both
recommendations to be incomplete. We reported untimely clearance of transactions in the suspense
account as a significant deficiency again in our FY 2015 report.
EPA Should Improve Controls Over Expense Accrual Reversals
In FY 2012, the EPA did not reverse approximately $108 million of FY 2011 year-end expense
accruals. The EPA did not reverse the accrual transactions because the Compass posting
configuration for the applicable fund category was inaccurate. By not reversing the accruals timely,
the EPA materially overstated the accrued liability and expense amounts in the quarterly financial
statements. EPA Policy Announcement No. 95-11, Policies and Procedures for Recognizing Year-
End Accounts Payable and Related Accruals, requires the agency to "recognize and report all
accounts payable and related accruals in its year-end financial reports." In our final audit report
issued November 16, 2012, we recommended that the EPA update its Policy Announcement 95-11 to
require reconciliations of accruals and accrual reversals. EPA officials concurred with our finding and
recommendations and took corrective action by implementing an independent review of the FY 2012
accruals and reversals. The EPA also performed accrual reviews prior to the issuance of the FY 2013
quarterly financial statements. In the FY 2013 audit, the EPA extended the target due date to update
Policy Announcement 95-11 until June 2014. In the FY 2014 audit, the EPA extended the target due
date to update the policy until December 31, 2015, due to the additional workload and resource
constraints. However, during FY 2015, the EPA revised the target due date to update the policy until
December 31, 2016, as the EPA considers the opportunity to explore new methods to streamline the
accrual processes and take advantage of efficiencies available in Compass upgrade scheduled for
February 2016 prior to revising the policy.
Financial Management System User Account Management Needs Improvement
The EPA had previously considered these recommendations closed; however, OCFO agreed in
FY 2014 to develop alternative corrective action for Recommendation 27 from our FY 2009 audit
report. OCFO is in the process of performing those corrective actions with an estimated completion
date of December 2015.
Source: OIG analysis.
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Attachment 3
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Rec.
No.
Page
No.
Subject
Status'
Planned
Completion
Action Official Date
Claimed
Amount
Agreed To
Amount
14 Continue planned corrective actions and its C
outreach to program offices to validate all software
costs in development and asset values in
production.
14 Require staff to ensure all software costs,
including adjustments, are accurately recorded in
the agency's property management system and
Compass; and that an audit trail is maintained for
software projects analyzed.
16 Reclassify the $226,336,107 in special account
collections recorded as past costs to future costs
to ensure the current year financial statements are
properly stated
16 Develop and implement policies and procedures
to require finance offices to review the terms of
settlement agreements, and communicate with
regional counsel or program offices when
necessary to ensure special account funds are
correctly recorded
16 Reclassify special accounts receivable totaling
$5,310,918 that were previously recorded as past
costs, classifying them instead as future costs to
ensure current year financial statements are
properly stated.
16 Develop and implement policies and procedures
to require CFC to review the terms of Superfund
agreements, and communicate with regional
counsel or program offices to ensure special
account funds are correctly recorded.
18 Complete the planned corrective actions and
continue to research and resolve differences
between Compass and the property management
system timely.
18 Advise all regional finance management officers
and finance centers of the requirement that
quarterly certifications must reflect an accurate
accounting of any differences between Maximo
and Compass.
18 Work with the Assistant Administrator for
Administration and Resources Management to
ensure all capital software adjustments made by
RAS are recorded in Maximo accurately and
timely.
U
Chief Financial Officer 9/30/18
Chief Financial Officer
Chief Financial Officer 10/30/15
Chief Financial Officer 8/13/15
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
10/30/15
8/13/15
6/30/16
10/28/15
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RECOMMENDATIONS
Rec.
No.
No.
Subject
Status1
Planned
Completion
Action Official Date
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Claimed Agreed To
Amount Amount
20
22
23
20 Require RAS to monitor and work with the finance C
centers to resolve all internal cash difference.-, to
ensure the EPA resolves all the differences with
the Treasury.
20 Require the Payroll accounting point and 0
Washington Finance Center to research and
resolve cash differences.
22 Complete the planned corrective actions to 0
require project officers to approve federal
disbursements timely.
22 Require CFC staff to follow up with project officers C
and regions more often to obtain the necessary
disbursement approvals and information needed
to clear transactions timely from the federal
budget clearing (suspense) account. When project
officers do not respond and approve
disbursements timely, elevate the matter for
resolution.
23 Develop and implement a policy and/or procedure 0
to require secondary approval for the cancellation
of accounts receivable and collection transactions
in Compass to ensure that canceled transactions
are appropriate and approved according to
internal control standards.
23 Modify Compass to route accounts receivable and U
collection cancellations for secondary approval.
24 Review and analyze the accounts receivable and C
collections canceled without secondary approval
and correct inappropriate cancellations.
25 Require CFC to record accounts receivable as C
provided in legal documents.
25 Perform a thorough review of existing receivables C
to ensure the amounts recorded are consistent
with amounts in legal documents.
29 Complete the corrective actions previously
identified in Table 1.
29 Reconcile the balances in its accounts receivable
general ledger accounts to its subsidiary ledger
quarterly.
29 Reconcile federal and non-federal accounts
receivable separately.
29 Resolve variances between the general level and
receivable detail report for receivable principal,
interest, handling and penalties; and correct errors
at the transaction level.
29 Develop accurate reports for accounts receivable
principal and non-principal charges (such as
interest, handling and penalties) to reconcile such
charges to the general ledger accounts.
0
Chief Financial Officer
Chief Financial Officer
9/30/15
2/28/16
Assistant Administrator 3/31/16
for Administration and
Resources Management
Chief Financial Officer 11710/15
Chief Financial Officer 9/30/16
Chief Financial Officer
Chief Financial Officer 11/6/15
Chief Financial Officer 11/10715
Chief Financial Officer 11/10/15
Chief Financial Officer 3/31/17
Chief Financial Officer 1/31/16
Chief Financial Officer 3/31/17
Chief Financial Officer 6/15/15
Chief Financial Officer
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RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Planned
Completion
Action Official Date
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Claimed Agreed To
Amount Amount
24
25
26
29 Correct the Compass reporting issues that
prevent the proper reports to be produced.
28
30
33
33
33
29
30
36
36
32
Work with the Assistant Administrator for Solid 0
Waste and Emergency Response to direct the
regions to track, manage and reconcile SSC
financial data by site.
Implement an internal control process for U
transferring the management of an application's
user access to the Application Management Staff.
Conduct an inventory of OCFO systems managed U
by the Application Management Staff and create
or update supporting access management
documentation for each application.
Work with the contracting officer to update U
applicable contract clauses and distribute updated
access management documentation to
contractors supporting the user account
management function for applications managed
by the Application Management Staff. This should
include establishing a date when the contractors
would start using the updated account
management documentation.
Review and update account management U
documentation and establish procedures for
financial systems, as needed, to include
implementation of the following controls:
a. Assign account managers for user
accounts.
b. Establish role conditions for system access
privileges.
c. Require approvals to create accounts.
d. Monitor use of accounts.
e. Notify account managers when accounts
are removed or changed.
f. Authorize access based on valid
authorizations.
g. Review accounts for appropriateness of
current access privileges.
Issue a memorandum to personnel responsible for U
controlling access to financial systems
emphasizing the importance of following access
control procedures—specifically, periodic access
reviews and proper access removal.
Conduct an inventory of all financial applications U
and ensure the systems are entered into Xacta for
monitoring of compliance with required
information systems security controls.
Implement a process to notify the Chief Financial
Officer of the status of corrective actions entered
into Xacta.
Chief Financial Officer 9/30/15
Chief Financial Officer 12/31/15
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
U
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
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RECOMMENDATIONS
Rec. Page
No. No.
Subject
Planned
Completion
Status1 Action Official Date
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed To
Amount Amount
33 37 Establish new procedures and update the OCFO
HelpDesk Escalation Procedures to require
validation of users before the distribution of
passwords.
34 39 Work with the contracting officer to have the
Concur service provider limit the visibility of credit
card numbers for people with the Federal Agency
Travel Administrator role.
35 39 Formally raise the concern to the General
Services Administration that the Concur vendor
does not perform the required assessment to
meet the Payment Card Industry Data Security
Standards for the number of credit card
transactions it processes and request that the
General Services Administration work with the
service provider to conduct and provide its
government clients the appropriate assessment
report.
Chief Financial Officer
Chief Financial Officer 7/30/16
Chief Financial Officer 1/31/16
36 43 Complete the corrective actions previously
identified in Table 4.
37 43 Perform a comprehensive analysis of delinquent
accounts receivable to determine whether interest
is being properly recorded in Compass in
accordance with the applicable laws, federal
accounting standards, and EPA policy, and record
any unrecorded interest.
38 43 Follow the terms in the legal source documents
when recording interest by ensuring interest is
recorded in the system when a receivable
becomes past due, either through Compass
automatic calculations or manual interest
calculations prepared byCFC.
39 43 Determine and correct the cause of Compass
system problems related to Superfund and
installment interest, to include determining why:
o Compass deletes Superfund interest and
implement a correction.
o Compass stOps calculating interest and
implement a correction.
Chief Financial Officer
Chief Financial Officer 9/30/16
Chief Financial Officer
Chief Financial Officer 9/30/16
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
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Appendix I
EPA's FYs 2015 and 2014
Consolidated Financial Statements
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Appendix II
\
Agency Response to Draft Report
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
NOV 10208
OFFICE OF THE
CHIEF FINANCIAL OFFICER
MEMORANDUM
SUBJECT: Response to Office of Inspector General Draft Audit Report No. OA-FY15-0176, "Audit
of EPA '.? Fiscal 2015 and 2014 Consolidated Financial Statements, " dated November 9,
FROM:
TO:
uty Chief Financial Officer
Paul C. Curtis. Director
Financial Statement Audits
Thank you for the opportunity to respond to the issues and recommendations in the subject draft
audit report. Following is a summary of the agency's overall position, along with its position on
each of the report recommendations. We have provided high-level intended corrective actions
and estimated completion dates to the extent we can.
AGENCY'S OVERALL POSITION
The agency concurs with 38 of the recommendations and non-concurs with one
recommendation. We have attached technical comments which explains the agency's position on
some of the report findings.
AGENCY'S RESPONSE TO DRAFT AUDIT RECOMMENDATIONS
Agreements
No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated Completion by
Quarter and FY
Continue planned corrective
actions and its outreach to
program offices to validate
all software costs in
development and asset values
in production.
Concur. The agency will continue
to review software project cost in-
development and in-production to
correct the values of the software
assets.
Also, the agency will validate all
software expenses before they are
September 3 0,2018
September 3 0,2016
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2
3
4
5
Require staff to ensure all
software costs, including
adjustments, are accurately
recorded in the agency's
property management system
and Compass; and that an
audit trail is maintained for
software projects analyzed.
Reclassify the $226,336,107
in special account collections
recorded as past costs to
future costs to ensure the
current year financial
statements are properly
stated.
Develop and implement
policies and procedures to
require finance offices to
review the terms of
settlement agreements, and
communicate with regional
counsel or program offices
when necessary to ensure
special account funds are
correctly recorded.
Reclassify special accounts
receivable totaling
$5,310,918 that were
previously recorded as past
costs, classifying them
entered into the agency fixed
assets system.
Concur. OCFO/OFM will
continue to validate all software
expenses and record them into
FAS. All documentation for the
software transactions will be kept
in a project file.
Concur. The agency changed its
accounting practice to record
special accounts settlement
proceeds as unearned revenue as
these collections are generally
used for future clean-up activities.
The FY 2015 financial statements
reflect this change. OECA is
evaluating how this change will
affect enforcement settlements
and will coordinate with OCFO.
(See attached technical
comments.)
Concur. OCFO already has
established procedures contained
in EPA's Resource Management
Directives System 2550D-14-T1,
Superfund Accounts Receivables
and Billings. It was revised on
August 13, 2015, in coordination
with Office of Enforcement and
Compliance Assurance, to require
the Superfund Accounts
Receivable Standard Control
Form to be completed by legal
counsel and forwarded to CFC.
CFC will ensure that regional
contacts fill out the control form
completely for both
administrative and judicial
documents, including the fund
type(s) to be used as the basis for
the receivable.
Concur. The agency changed its
accounting practice to record
special accounts settlement
proceeds as unearned revenue as
these collections are generally
October 21, 2015 (ongoing
activity)
Completed October 30,
2015
Completed August 13, 2015
Completed October 30,
2015
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instead as future costs to
ensure current year financial
statements are properly
stated.
used for future clean-up activities.
The FY 2015 financial statements
reflect this change. OEC A is
evaluating how this change will
affect enforcement settlements
and will coordinate with OCFO.
(See attached technical
comments.)
Develop and implement
policies and procedures to
require CFC to review the
terms of Superfund
agreements, and
communicate with regional
counsel or program offices to
ensure special account funds
are correctly recorded.
Concur. OCFO already has
established procedures contained
in EPA's Resource Management
Directives System 2550D-14-T1,
Superfund Accounts Receivables
and Billings. It was revised on
8/13/15, in coordination with
Office of Enforcement and
Compliance Assurance, to require
the Superfund Accounts
Receivable Standard Control
Form to be completed by legal
counsel and forwarded to CFC.
CFC will ensure that regional
contacts fill out the control form
completely for both
administrative and judicial
documents, including the fund
type(s) to be used as the basis for
the receivable.
Completed August 13, 2015
Complete the planned
corrective actions and
continue to research and
resolve differences between
Compass and the property
management system timely.
Concur. OCFO has developed a
process to research and resolve
differences between Compass and
the agency property management
system. To date, the agency has
resolved over S50M of the
differences between Compass and
Maximo. The agency will
continue to clear the differences
and anticipates completing by
June 30, 2016.
June 30, 2016
Advise all regional finance
management officers and
finance centers of the
requirement that quarterly
certifications must reflect an
accurate accounting of any
differences between Maximo
and Compass.
Concur. The policy has been sent
to all FMO's ensuring policy is
followed. We currently have
concurrence from all Security
Orgs.
Completed October 28,
2015
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Work with the Assistant
Administrator for
Administration and
Resources Management to
ensure all capital software
adjustments made by RAS
are recorded in Maximo
accurately and timely.
Concur. OCFO will ensure that
software adjustments are
processed correctly in the agency
property module in Compass
(e.g., FAS); however, no
coordination with OARM is
required because software
transactions are not entered into
MAXIMO.
Completed October 21,
2015 (ongoing activity)
10
Require RAS to monitor and
work with the finance centers
to resolve all internal cash
differences to ensure the EPA
resolves all the differences
with the Treasury.
Concur, In September, RAS
initiated a process to require the
Centers to provide the
transactional details for the
identifiable differences, not
including timing differences, per
the revised policy RMDS 2540-
03-P1. RAS will continue to
monitor all internal cash
differences working with the
finance centers to report their
differences at the transaction
level.
Completed September 30,
2015
11
Require the Payroll
accounting point and
Washington Finance Center
to research and resolve cash
differences.
Concur. The Office of Financial
Services will update our
reconciliation procedures and
reinforce our current
reconciliation procedures to
research and resolve cash
differences for payroll and the
WFC.
February 28, 2016
12
Complete the planned
corrective actions to require
project officers to approve
federal disbursements timely.
Concur. In September of each
fiscal year, OGD issues this
guidance for consideration in
assessing Project Officer and
Supervisor/Manager compliance
with key grants and IA
management policies during end-
of-year performance appraisals
and developing next year's PARS
performance agreements.
IASSC has completed a
comprehensive review of the
existing EPA 1610 manual and
identified necessary changes,
including a description of the
billing requirement. That
Completed September 30,
2015
March 31,2016
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description will be contained in
the revised version of the Manual.
13
Require CFC staff to follow
up with project officers and
regions more often to obtain
the necessary disbursement
approvals and information
needed to clear transactions
timely from the federal
budget clearing (suspense)
account. When project
officers do not respond and
approve disbursements
timely, elevate the matter for
resolution.
Concur. The Cincinnati Finance
Center (CFC) has procedures in
place to monitor, follow-up, and
address suspense account items
that remain for more than 60
days. CFC will continue to stress
the importance of clearing items
out of the suspense account in
less than 60 days. The Payment
Branch Chief will review the
open items more frequently and
elevate on a shorter time table.
Completed (ongoing
activity)
14
Develop and implement a
policy and/or procedure to
require secondary approval
for the cancellation of
accounts receivable and
collection transactions in
Compass to ensure that
canceled transactions are
appropriate and approved
according to internal control
standards.
OCFO will review the existing
separation of duties policy to
ensure that it's being
implemented as designed. Under
the reorganization, OCFO will
review all waivers and take
appropriate action based on our
new structure. Based upon the
review, OCFO will update
policy/procedures if applicable.
September 30, 2016
15
Modify Compass to route
accounts receivable and
collection cancellations for
secondary approval.
Concur. Secondary approval
already exists in Compass.
N/A
16
Review and analyze the
accounts receivable and
collections canceled without
secondary approval and
correct inappropriate
cancellations.
Concur. CFC has reviewed all of
the 72 cancellations cited in the
position paper and all have
appropriate documentation
supporting the cancellation, either
in the file or attached in Compass.
Completed November 6,
2015
17
Require CFC to record
accounts receivable as
provided in legal documents.
Concur. CFC will continue to
record the accounts receivable as
provided in legal documents. See
the attached technical comments
for the specific issue cited in the
audit report.
Completed (ongoing
activity)
18
Perform a thorough review of
existing receivables to ensure
the amounts recorded are
consistent with amounts in
legal documents.
Concur. CFC reviews all
settlement documents to ensure
the accounts receivables are
established for the amounts due
(or claim amounts related to
Completed (ongoing
activity)
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bankruptcies). They will continue
to thoroughly review documents
to ensure receivables are
established for the appropriate
amounts.
19
Complete the corrective
actions previously identified.
See below for information for
Recommendations 20 thru 24 for
the agency's planned actions to
complete these recommendations.
See dates for
Recommendations 20
through 24
20
Reconcile the balances in its
accounts receivable general
ledger accounts to its
subsidiary ledger quarterly.
Concur. Starting in FY 2016,
RAS will reconcile balances in
the accounts receivable general
ledger account to its subsidiary
ledgers going forward. [RAS]
January 31, 2016
21
Reconcile federal and non-
federal accounts receivable
separately.
Concur. RAS designed a
framework for providing separate
timely and accurate
reconciliations of federal and
non-federal accounts receivable.
Changes within Compass are
needed to implement this design.
Due to the pending Compass
version enhancement, system
changes have been placed on hold
until CVE is completed. CVE
implementation is currently
scheduled as Compass 7.3 for
February 2016. We will obtain an
estimate of when change will be
made in Compass.
March 31, 2017
22
Resolve variances between
the general level and
receivable detail report for
receivable principal, interest,
handling and penalties; and
correct errors at the
transaction level.
Concur. The scope of the
recommendation in 2014 was to
correct the remaining FY 2011
period 16 billing document
activity that did not post to the
general ledger. This was
completed June 30, 2015. The
Reporting and Analysis Staff
continues to identify and correct
the variances that occur during
the current year.
Completed June 30, 2015
(continuing activity)
Correct the Compass
reporting issues that prevent
the proper reports to be
produced.
24
Concur. OCFO implemented
redundancy amongst staff to
ensure backup in the event a
report does not execute.
Completed September 30,
2015
The agency agrees that the
regions should continue to follow
the practices outlined in the
25
Work with the Assistant
Administrator for Solid
Waste and Emergency
December 31,2015
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Response to direct the
regions to track, manage and
reconcile SSC financial data
by site.
Resource Management Directive
System 2550D-09-P1 related to
tracking, managing and
reconciling SSC financial data by
site. By the end of the calendar
year, OSWER will issue new
SSC model provisions that
include an updated final financial
reconciliation provision and new-
language on periodic financial
review, which reinforce for both
states and regions the need to
carefully track site-specific
remedial action costs and state
cost share payments.
26
Implement an internal control
process for transferring the
management of an
application's user access to
the Application Management
Staff.
Concur. Upon the reallocation of
resources, OCFO will transfer the
management of all application
user access processes to the OTS
Application Management Staff.
TBD/based on available
resources
27
Conduct an inventory of
OCFO systems managed by
the Application Management
Staff and create or update
supporting access
management documentation
for each application.
Concur. Upon allocation of
resources, OTS will conduct an
inventory of OCFO systems
managed by the Application
Management Staff and create or
update supporting access
management documentation for
each application.
TBD/based on available
resources
28
Work with the contracting
officer to update applicable
contract clauses and
distribute updated access
management documentation
to contractors supporting the
user account management
function for applications
managed by the Application
Management Staff. This
should include establishing a
date when the contractors
would start using the updated
account management
documentation.
Concur. Upon the reallocation of
resources, we will work with the
contracting officer to update the
contract clauses and update
distribute access management
documentation.
TBD/based on available
resources
Review and update account
management documentation
and establish procedures for
Concur. Upon the reallocation of
resources, OCFO will review the
account management
TBD/based on available
resources
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financial systems, as needed,
to include implementation of
the following controls:
a. Assign account managers
for user accounts.
b. Establish role conditions
for system access privileges.
c. Require approvals to create
accounts.
d. Monitor use of accounts.
e. Notify account managers
when accounts are removed
or changed.
f. Authorize access based on
valid authorizations.
g. Review accounts for
appropriateness of current
access privileges.
documentation, document the
results of the review and make
any necessary updates/additions.
30
Issue a memorandum to
personnel responsible for
controlling access to financial
systems emphasizing the
importance of following
access control procedures—
specifically, periodic access
reviews and proper access
removal.
Concur. OCFO will issue a
memorandum emphasizing access
control procedures.
TBD/based on available
resources
31
Conduct an inventory of all
financial applications and
ensure the systems are
entered into Xacta for
monitoring of compliance
with required information
systems security controls.
Concur. OCFO will conduct
an inventory or all financial
applications and ensure the
systems are entered in
XACTA.
TBD/based on available
resources
32
Implement a process to notify
the Chief Financial Officer of
the status of corrective
actions entered into Xacta.
Concur. OTS will implement
a process to notify the CFO of
the status of corrective actions
in XACTA, in addition to
current practices including:
OCFO's PISO conducting
weekly meetings with OCFO
ISSOs and reviewing the
corrective actions/POAMs in
XACTA, along with OCFO's
CMA and risk assessment
processes.
TBD/based on available
resources
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33
Establish new procedures and
update the OCFO HelpDesk
Escalation Procedures to
require validation of users
before the distribution of
passwords.
Concur. OCFO will change the
procedure to add an encrypted
email to the user's EPA address
to communicate the temporary
password while the Help Desk
analyst remains on the phone and
verifies that the individual was
able to log in.
TBD/based on available
resources
34
Work with the contracting
officer to update the EPA's
task order with the Concur
service provider to include a
clause limiting visibility of
credit card numbers for
people with the Federal
Agency Travel Administrator
role.
Concur. OCFO will bring the
issue of the visibility of credit
card numbers to the attention of
the Concur service provider to
evaluate the feasibility of limiting
the visibility of credit card
numbers with the Federal Agency
Travel Administrator role.
July 3 0,2016
35
Formally raise the concern to
the General Services
Administration that the
Concur vendor does not
perform the required
assessment to meet the
Payment Card Industry Data
Security Standards for the
number of credit card
transactions it processes and
request that the General
Services Administration
work with the service
provider to conduct and
provide its government
clients the appropriate
assessment report.
Concur. OCFO will contact the
GSA of OIG's finding that the
required assessments are not
being performed as required to
meet the Payment Card Industry
Data Security Standards for the
number of credit card transactions
it processes.
January 31, 2016
Complete the corrective
actions previously identified.
See below for information for
Recommendations 37 thru 39 for
the agency's planned actions to
complete these recommendations.
See dates for
Recommendations 37
through 39.
37
Perform a comprehensive
analysis of delinquent
accounts receivable to
determine whether interest is
being properly recorded in
Compass in accordance with
the applicable laws, federal
accounting standards, and
EPA policy, and record any
unrecorded interest.
Concur. On a daily basis, CFC
staff analyze, review, and update
Superfund receivables. As issues
arise, help tickets are submitted.
CFC pulled a sample of
receivables and manually
compared interest to what
Compass accrued, and found that
the differences were immaterial.
CFC will continue to review
September 30, 2016
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interest on Superfund receivables
and submit help tickets for any
differences that may arise. After
the new version of Compass is
rolled out in 2016, CFC will
complete a larger review of
receivables to ensure that the new
version of Compass is calculating
interest appropriately.
38
Follow the terms in the legal
source documents when
recording interest by ensuring
interest is recorded in the
system when a receivable
becomes past due, either
through Compass automatic
calculations or manual
interest calculations prepared
bv CFC.
Concur. CFC will ensure that
Compass is set to accrue interest
when a debt becomes delinquent.
Compass was customized to
account for Superfund interest to
accrue on a daily basis. Since it
is based on the receivable date,
Compass would start accruing
interest on day 2 (though the debt
is not delinquent until day 30 or
later). To resolve this, the
interest flag is checked so that
interest does not accrue when first
established. Once the debt
becomes delinquent, staff has to
manually uncheck the waiver flag
so that interest will begin
accruing. Until this is changed in
Compass, staff will have to
continue to manually uncheck the
flag.
TBD
39
Determine and correct the
cause of Compass system
problems related to
Superfund and installment
interest, to include
determining why:
• Compass deletes
Superfund interest and
implement a correction.
• Compass stops
calculating interest and
implement a correction.
Concur. Many of the causes for
the Compass system problems
related to Superfund will be
resolved with the Compass
version enhancement scheduled
for implementation in
2016. OCFO will validate how
the enhanced system handles
Superfund and installment
interest and submit requests for
any further system adjustments
that might be needed. In the
interim, CFC will continue to
monitor Superfund and
installment interest calculations to
ensure they are correct.
September 30, 2016
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Disagreements
No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated Completion by
Quarter and FY
23
Develop accurate reports for
accounts receivable principal
charges and non-principal
charges that do not include
interest, handling and
penalties; or journal
vouchers.
Non-concur. The use of line
numbers in the bill report
designates interest, penalties and
handling charges. This is
necessary to ensure that the
proper calculation of these
charges with applicable laws and
agency policy in Compass. The
bill report RAS uses clearly
identifies the interest, handling
and penalty amounts.
Journal vouchers should also be
included as bill detail. To the
extent practical, the agency
makes corrections within the
individual billing documents. In
other cases, in order to properly
reflect balances in the general
ledger accounts, journal vouchers
are required to fairly state the
accounts receivable balances.
N/A
CONTACT INFORMATION
If you have any questions regarding this response, please contact Stefan Silzer, Director, Office
of Financial Management on (202) 564-4905.
Attachment
cc: Howard Osborne
Charles Sheehan
Karl Brooks
Cynthia Giles
Kevin Christensen
Rich Eyermann
Stefan Silzer
Jeanne Conklin
Meshell Jones-Peeler
Susan Shinkman
Cyndy Mackey
John Showman
Vaughn Noga
Quentin Jones
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Robert Hill
Paul Curtis
John O'Connor
Istanbul Yusuf
Richard Gray
Leo Gueriguian
Steven Blankenship
David Shelby
Lisa Ayala
Dale Miller
Jill Beresford
Jennifer Wilbur
Steven Kielm
Margaret Hiatt
Wanda Arlington
Arthur Budelier
Robert Hairston
Sheila May
Gwendolyn Spriggs
Sandy Womack
Brandon McDowell
Lorna Washington
Susan Lindenblad
Janice Kern
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Attachment
Technical Comments Related to OIG's Draft Audit Report No. OA-FY154-0176, "Audit of
EPA's Fiscal 2015 and 2014 Consolidated Financial Statements," dated November 10, 2015
OIG Finding #2 - "EPA Incorrectly Recorded Super fund Special Account Collections and
Receivables"
OIG Statement: In the last statement of the first paragraph OIG stated that," In addition, not
having the funds available in the future to fund site clean-up costs could require additional funds
from taxpayers."
Agency Position on Finding: This is an incorrect statement. Whether the funds are recorded as
past costs (earned revenue) placed into a special account (i.e., "TR2B" fund code) or future costs
(unearned revenue) placed into a special account (i.e., "TR2" fund code), they are available for
future work at a site by the fact they are in a special account. Their designation as earned or
unearned revenue would not change their availability to be used for future site clean-up costs and
would not have any effect as to whether additional funds from taxpayers will be needed for the
site.
OIG Finding #7 - "EPA Did Not Record More Than $8 Million in Accounts Receivable for a
$9 Million Suverfund Judgment"
OIG Statement: OIG stated that, "EPA did not record as a Superfund accounts receivable more
than $8 million of a $9 million judgment in a consent decree... CFC recorded the receivable
based on discussions at the direction of EPA personnel instead of amounts due to the EPA as
stipulated in the provisions of the legal document. "
Agency Position on Finding: CFC reviews and records accounts receivables per the payment
terms of the settlement documents. For the settlement outlined above, there is not an accounts
receivable due and owing in the amount of $9 million from LPA in this settlement. All of the site
costs (past and future) are a joint and several liability for all of the PRPs at the Portland Harbor
site. However, when a PRP settles with the United States, both parties agree to a payment
amount which is usually less than the full joint and several amount incurred by the EPA and the
PRPs at any given site. Thus, the amount to be entered as an accounts receivable is the amount
the settlement document says that particular PRP owes the United States as a payment, not the
overall judgment amount. In certain instances, for purposes of recovering proceeds from a
PRP's insurance policies, the PRP may confess to how much money it owes the EPA (the United
States), which then allows the United States to pursue insurance proceeds based on that
amount. The size of the confessed judgment is not indicative of the amount that the United States
could recover from insurance, as that depends on various factors specific to the insurance
policies on hand. If a PRP were to make a confession to judgment for a lesser amount, or not
make a confession to judgment at all, then, due to how insurance law works, the insurance
companies would have a good argument for reducing any possible payouts considerably, as they
would argue that the PRPs remaining liability is limited to only that lesser amount. Any
insurance recovery is always quite speculative, we may recover funds, or not recover any at all.
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Appendix III
Distribution
Office of the Administrator
Chief Financial Officer
Assistant Administrator for Administration and Resources Management
Assistant Administrator for Solid Waste and Emergency Response
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Agency Audit Follow-Up Coordinator
Assistant Deputy Chief Financial Officer
Director, Office of Policy and Resource Management, Office of Administration and
Resources Management
Director, Office of Grants and Debarment, Office of Administration and Resources Management
Director, Office of Acquisition Management, Office of Administration and Resources
Management
Director, Office of Administration, Office of Administration and Resources Management
Director, Office of Superfund Remediation and Technology Innovation, Office of Solid Waste
and Emergency Response
Director, Office of Budget, Office of the Chief Financial Officer
Director, Office of Financial Management, Office of the Chief Financial Officer
Deputy Director of Operations, Office of Financial Services, Office of the Chief Financial Officer
Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Director, Las Vegas Finance Center, Office of the Chief Financial Officer
Director, Office of Planning, Analysis and Accountability, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Office of Technology Solutions, Office of the Chief Financial Officer
Deputy Director of Strategic Planning and Oversight, Office of Financial Services
Office of the Chief Financial Officer
Deputy Director, Office of Policy and Resource Management, Office of Administration and
Resources Management
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 Grants and Debarment, Office of Administration and
Resources Management
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SECTION III-
OTHER ACCOMPANYING INFORMA TION
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MANAGEMENT INTEGRITY AND CHALLENGES
Overview of EPA's Efforts
Management challenges and integrity weaknesses represent vulnerabilities in program operations that may impair
EPA's ability to achieve its mission and threaten the agency's safeguards against fraud, waste, abuse and
mismanagement These areas are identified through internal agency reviews and independent reviews by EPA's
external evaluators, such as OMB, the U.S. Government Accountability Office (GAO), and EPA's DIG. This section of
the APR discusses in detail two components related to challenges and weaknesses: 1) key management challenges
identified by EPA's OIG, followed by the agency's response and 2) a brief discussion of EPA's progress in addressing
its FY 2015 management integrity weaknesses.
Under the FMFIA, all federal agencies must provide reasonable assurance that policies, procedures and guidance
are adequate to support the achievement of their intended mission, goals and objectives. (See Section I,
"Management Discussion and Analysis," for the Administrator's assurance statement.) Agencies also must report
any material weaknesses identified through internal and/or external reviews and their strategies to remedy the
problems. Material weaknesses are vulnerabilities that could significantly impair or threaten fulfillment of the
agency's programs or mission. In FY 2015, no new material weakness was identified by OIG. (See following
subsection for a discussion of new, existing, and corrected weaknesses and significant deficiencies.)
The agency's senior managers remain committed to maintaining effective and efficient internal controls to ensure
that program activities are carried out in accordance with applicable laws and sound management policy. Agency
leaders meet periodically to review and discuss EPA's progress in addressing issues raised by OIG and other
external evaluators, as well as progress in addressing current weaknesses and emerging issues. The agency will
continue to address its remaining weaknesses and report on its progress.
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2015 KEY MANAGEMENT CHALLENGES
Office of Inspector General-Identified Key Management Challenges
The Reports Consolidation Act of 2000 requires the OIG to report on the agency's most serious management and
performance challenges, known as the key management challenges. Management challenges represent
vulnerabilities in program operations and their susceptibility to fraud, waste, abuse or mismanagement For FY
2015, the OIG identified six challenges. The table below includes issues the OIG identified as key management
challenges facing the EPA, the years in which the OIG identified the challenge, and the relationship of the challenge
to the agency's goals in its strategic plan [http://epa.gov/planandbudget/strategicplan.html].
OIG-Identified Key Management Challenges for the EPA
EPA
FY FY FY strategic
2013 2014 2015 goal
Oversight of Delegations to States: Due to differences between state and federal policies,
interpretation, strategies and priorities, the EPA needs to more consistently and effectively
oversee its delegation of programs to the states, assuring that delegated programs are
achieving their intended goals.
Safe Reuse of Contaminated Sites: The EPA's duty is to ensure that reused contaminated
sites are safe for humans and the environment. The EPA must strengthen oversight of the
long-term safety of sites, particularly within a regulatory structure in which non-EPA parties
have key responsibilities, site risks change overtime, and all sources of contamination may
not be removed.
Enhancing Information Technology Security to Combat Cyber Threats (formerly Limited
Capability to Respond to Cyber Security Attacks): The EPA has a limited capacity to effectively
respond to external network threats. Although the agency has deployed new tools to
improve its architecture, these tools raise new security challenges. The EPA has reported
that over 5,000 servers and user workstations may have been compromised from recent
cyber security attacks.
EPA's Framework for Assessing and Managing Chemical Risks: The EPA's effectiveness
in assessing and managing chemical risks is limited by its authority to regulate chemicals
under the Toxic Substances Control Act. Chemicals manufactured before 1976 were not
required to develop and produce data on toxicity and exposure, which are needed to
properly and fully assess potential risks.
Workforce Planning / Workload Analysis: The EPA's human capital is of concern in part
due to requirements released under the President's Management Agenda. The OIG identified
significant concerns with the EPA's management of human capital. The EPA has not
developed analytical methods or collected data needed to measure its workload and the
corresponding workforce levels necessary to carry out that workload.
Abuse in Time and Attendance, Computer Usage, and Real Property Management:
Recent events and activities indicate a possible "culture of complacency" among some
supervisors at the EPA regarding time and attendance controls, employee computer usage,
and real property management. As stewards of taxpayer dollars, EPA managers must
emphasize and reemphasize the importance of compliance and ethical conduct throughout
the agency and ensure it is embraced at every level of the organization
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Cross-Goal
GoalS
Cross- Goal
Goal 4
Cross- Goal
Cross-goal
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.rtto sr4.
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
FY2015
EPA Management
Challenges
Scan this mobile
code to learn more
about the EPA DIG.
15-N-0164
May 28, 2015
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Abbreviations
EPA U.S. Environmental Protection Agency
FY Fiscal Year
GAO U.S. Government Accountability Office
OIG Office of Inspector General
RCRA Resource Conservation and Recovery Act
Are you aware of fraud, waste or abuse in an
EPA program?
EPA Inspector General Hotline
1200 Pennsylvania Avenue, NW (2431T)
Washington, DC 20460
(888) 546-8740
(202) 566-2599 (fax)
OIG HotlineO.epa.gov
More information at www.epa.aov/oia/hotline.html.
EPA Office of Inspector General
1200 Pennsylvania Avenue, NW (241OT)
Washington, DC 20460
(202) 566-2391
www.epa.gov/oig
Subscribe to our Email Updates
Follow us on Twitter fS.EPAoiq
Send us your Project Suggestions
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
15-N-0164
May 28, 2015
Wfraf/lre
Management
Challenges?
According to the Government
Performance and Results Act
Modernization Act of 2010,
major management challenges
are programs or management
functions, within or across
agencies, that have greater
vulnerability to waste, fraud,
abuse and mismanagement
where a failure to perform well
could seriously affect the ability
of an agency or the federal
government to achieve its
mission or goals.
As required by the Reports
Consolidation Act of 2000, the
Office of Inspector General is
providing the issues we
consider as the
U.S. Environmental Protection
Agency's (EPA's) major
management challenges for
fiscal year 2015.
This report addresses all of the
EPA's strategic goals and
cross-agency strategies.
EPA's Fiscal Year 2015 Management Challenges
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oiq.
The full report on management
challenges is at:
www.epa.qov/oig/reports/2015/
20150528-15-N-0164.pdf
Attention to agency management challenges could result in stronger
results and protection for the public, and increased confidence in
management integrity and accountability.
The EPA Needs to Improve Oversight of States Authorized to Accomplish
Environmental Goals:
• We have identified the absence of robust oversight by the EPA of the
states authorized to implement environmental programs. Oversight of state
activities requires that the EPA establish consistent national baselines that
states must meet, and the EPA must monitor the states.
Limited Controls Hamper the Safe Reuse of Contaminated Sites:
• As the EPA promotes and encourages the redevelopment and reuse of
contaminated properties, it must strengthen its oversight of the long-term
safety of sites, particularly when non-EPA parties have key responsibilities.
The EPA Faces Challenges in Managing Chemical Risks:
• EPA needs to enhance program management and overcome statutory
limitations on data availability to effectively ensure that the production and
use of chemicals does not harm human health or the environment.
The EPA Needs to Improve Its Workload Analysis to Accomplish Its
Mission Efficiently and Effectively:
• The EPA's program and regional offices have not conducted a systematic
workload analysis or identified workforce needs for budget justification
purposes; such analysis is critical to mission accomplishment.
The EPA Needs to Enhance Information Technology Security to Combat
Cyber Threats:
• The EPA faces information security challenges involving risk management
planning, implementation of security tools, computer security incident
response capability, and follow-up on remediation actions taken.
The EPA Continues to Need Improved Management Oversight to
Combat Fraud and Abuse and Take Prompt Action Against Employees
Found to Be Culpable:
• Recent events and activities indicate a possible "culture of complacency
among some supervisors at the EPA regarding time and attendance
controls, employee computer usage, real property management, and
taking prompt action against employees.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
May 28. 2015
MEMORANDUM
SUBJECT: EPA's Fiscal Year 2015 Management Challenges
Report No. 15-N-0164
FROM: Arthur A. Elkins Jr. fh/W U ' (fr*
TO: Gina McCarthy. Administrator
We are pleased to provide you with a list of areas the Office of Inspector General considers as key
management challenges confronting the U.S. Environmental Protection Agency (EPA). According to the
Government Performance and Results Act Modcrni/ation Act of 2010. major management challenges
are programs or management functions, within or across agencies, that have greater \-ulnerabiliry to
waste, fraud, abuse and mismanagement where a failure to perform well could seriously affect the
ability of an agency or the federal government to aclucve its mission or goals.
The Reports Consolidation Act of 2000 requires our office to report what we consider the most serious
management and performance challenges facing the agency. We used audit, evaluation and investigative
work, as well as additional analysis of agency operations, to identify the challenges presented in the
attachment. Additional challenges may exist in areas that we have not yet reviewed, and other
significant findings could result from additional work. We provide detailed summaries of each challenge
in the attachment.
Challenge
The EPA Needs to Improve Oversight of States Authorized to Accomplish Environmental Goals
Limited Control;, Hamper the Safe Reuse of Contaminated Sites
The EPA Faces Challenges in Managing Chemical Risks
The EPA Needs to Improve Its Workload Analysis to Accomplish Its Mission Efficiently and Effectively
The EPA Needs to Enhance Information Technology Security to Combat Cyber Threats
The EPA Continues to Need Improved Management Oversight to Combat Fraud and Abuse and
Take Prompt Action Against Employees Found to be Culpable
Page
1
5
7
10
12
15
Just as the U.S. Government Accountability Office does with its High Risk List, each year we assess the
agency's efforts against the following five criteria to justify removing a management challenge from the
prior year's list:
1. Demonstrated top leadership commitment.
2. Capacity - people and resources to reduce risks, and processes for reporting and accountability.
3. Corrective action plan - analysis identifying root causes, targeted plans to address root causes.
and solutions.
4. Monitoring - established performance measures and data collection/analysis.
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5. Demonstrated progress - evidence of implemented corrective actions and appropriate
adjustments to action plans based on data.
While the EPA has made progress, we retained all six management challenges from last year's list due
to persistent issues. We welcome the opportunity to discuss our list of challenges and any comments you
might have.
Attachment
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CHALLENGE: The EPA Needs to Improve Oversight of States Authorized to
Accomplish Environmental Goals
CHALLENGE FOR THE AGENCY
In recent years, our work has identified the absence of
robust oversight by the U.S. Environmental Protection
Agency (EPA) of states authorized to implement
environmental programs under several statutes. The EPA
has made important progress, but recent and ongoing
EPA Office of Inspector General (DIG) and
U.S. Government Accountability Office (GAO) work
continues to support this as an agency management
challenge.
BACKGROUND
To accomplish its mission, the EPA develops regulations and establishes programs that implement
environmental laws. Many federal environmental laws establish state regulatory programs that give
states the opportunity to enact and enforce laws. The EPA may authorize states to implement
environmental laws when they request authorization and the EPA determines a state capable of
operating the program consistent with federal standards. The EPA performs oversight of state
programs to provide reasonable assurance that they achieve national goals to protect human health
and the environment. Oversight of state activities requires that the EPA establish consistent national
baselines that state programs must meet, and monitor state programs to determine whether they
meet federal standards.
The EPA relies heavily on authorized states to obtain environmental program performance data and
implement compliance and enforcement programs. Forty-nine of 50 states administer Safe Drinking
Water Act programs, 48 states are authorized to administer the Resource Conservation and Recovery
Act (RCRA) hazardous waste program, 46 states administer point source programs under the Clean
Water Act, and every state administers Title V of the Clean Air Act. These states perform a critical role
in supporting the EPA's duty to execute and enforce environmental laws. However, the EPA has the
authority and responsibility to oversee state programs, and to enforce environmental laws when states
do not. Many EPA programs implement a variety of formal and informal oversight processes that are
not always consistent across EPA regions and states.
THE AGENCY'S PROGRESS
The OIG has identified EPA oversight of authorized state programs as an agency management
challenge since fiscal year (FY) 2008. The EPA has made progress in reviewing and measuring
inconsistencies in its oversight of state programs, using EPA authority when states have failed to use
their delegated authority, and revising EPA policies to improve consistency in oversight.
Since 2008, the EPA has made state oversight an EPA priority. The EPA developed a "key performance
indicator" and included it in the EPA's FYs 2012 and 2013 Action Plans for Strengthening State, Tribal,
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and International Partnerships. In 2013, the EPA developed the new performance indicator referred to
as Oversight of State Delegations Key Performance Indicator. The EPA presented the new performance
indicator in a 2013 report that identified a number of other improvement areas on the EPA's oversight
and relationships with states. The EPA formed a senior-level workgroup that noted additional
recommendations on state oversight, including improving consistency for identifying regional and state
roles during EPA program review, and developed an initial set of common principles. The EPA is
drafting a series of draft principles and best practices for state oversight activities for improving the
oversight process for the National Pollutant Discharge Elimination System, Title V, and RCRA Subtitle C
permitting programs. It plans to issue its report in the summer of 2015. EPA also adopted a cross-
agency strategy on "Launching a New Era of State, Tribal, Local, and International Partnerships" in its
FYs 2014—2018 Strategic Plan, and revised its planning and commitment-setting process beginning in
FYs 2016-2017 to provide "earlier and more meaningful engagement with states and tribes."
The EPA has made positive changes in response to recommendations contained in our reports. For
example, in 2009, we found that High Priority Violations under the Clean Air Act were not being
addressed in a timely manner because regions and states did not follow policy, EPA headquarters did
not oversee regional and state High Priority Violations performance, and EPA regions did not oversee
state High Priority Violations performance. We recommended that the EPA revise the High Priority
Violations policy to improve the EPA's ability to oversee High Priority Violation cases and clarify the
roles and responsibilities of EPA headquarters and regions, the states, and local agencies. The EPA
issued its revised policy in August 2014.
Our March 2014 quick reaction report identified continuing challenges the EPA faces in overseeing
authorized state and U.S. territory environmental programs. In that report, we found that the
U.S. Virgin Islands experienced a lapse in monitoring under the Beaches Environmental Assessment
and Coastal Health Act—a portion of the Clean Water Act. The EPA had known of key challenges that
the U.S. Virgin Islands' Department of Natural Resources was having with its beach monitoring
program and had attempted to resolve the matters. However, sampling lapsed without the EPA's
awareness. The EPA had not developed a contingency plan for ensuring that sampling of the USVI
beaches continued or that the public was notified of sampling results, but did so after we issued our
report.
WHAT REMAINS TO BE DONE
We continue to conduct reviews of the EPA's oversight of state authorized programs. For example:
• In an April 2015 report, in addition to the issue cited in the 2014 quick reaction report above,
we found that the U.S. Virgin Islands has not met program requirements for numerous activities
related to implementing Clean Air Act, Clean Water Act, Safe Drinking Water Act, and
Underground Storage Tank/Leaking Underground Storage Tank programs. Moreover, EPA
Region 2 oversight identified numerous program deficiencies in the U.S. Virgin Islands over the
last few years, but the deficiencies continued. Since the EPA retains responsibility for programs
implemented on its behalf, such as those in the U.S. Virgin Islands, we concluded that the
agency needs to act to ensure that the public and environment are protected. We made
19 recommendations, ranging from withdrawing the U.S. Virgin Islands' authority to implement
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EPA programs to providing additional EPA oversight. The EPA agreed and has committed to
taking appropriate corrective actions, and the completion of actions is pending.
• In a February 2015 report, we found that EPA Region 8 is not conducting inspections at
establishments that produce pesticides in North Dakota. Moreover, since 2011, Region 8 has
failed to conduct inspections of pesticides imported into North Dakota. The failure to conduct
inspections increases the risk that pesticides are not in compliance with federal law, which
could result in potential risks from toxics being undetected and adverse human health and
environmental impacts occurring. The EPA has committed to taking appropriate corrective
actions, and the completion of actions is pending.
• In December 2014, we reported that the EPA does not obtain all required Drinking Water State
Revolving Fund project data from states, despite grants that require states to input key project
information into EPA databases. The EPA also does not always use annual reviews of state
Drinking Water State Revolving Fund programs to assess project outcomes. We recommended
that the EPA enforce grant requirements that states input all necessary data in the project-level
tracking database and review data completeness as part of the EPA's annual review of state
performance. We also recommended that the EPA enhance coordination between Drinking
Water State Revolving Fund and Public Water System Supervision programs and periodically
evaluate program results. The EPA agreed to these recommendations, and the completion of
corrective actions is pending.
• In October 2014, we reported weaknesses in the EPA's oversight of state and local Title V
programs' fee revenue practices. Title V permitting requirements are designed to reduce
violations and improve enforcement of air pollution laws for the largest sources of air pollution,
such as petroleum refineries and chemical production plants. We found that Title V program
expenses often exceeded revenue even though the Clean Air Act requires these programs to be
solely funded by permit fees. The agency's weaknesses in identifying and obtaining corrective
actions for Title V revenue sufficiency and accounting practices, coupled with declining
resources for some permitting authorities, jeopardizes state and local Title V program
implementation. These weaknesses also increase the risk of permitting authorities misusing
funds. We recommended that the EPA assess, update and re-issue its 1993 Title V fee guidance
as appropriate; establish a fee oversight strategy to ensure consistent and timely actions to
identify and address violations; emphasize and require periodic reviews of Title V fee revenue
and accounting practices in Title V program evaluations; address shortfalls in staff expertise as
regions update their workforce plans; and pursue corrective actions as necessary. The EPA has
committed to taking appropriate corrective actions, and the completion of actions is pending.
• In September 2014, we issued a report on how effectively the EPA and states administer the
Clean Water Act's "pretreatment" and permit programs. We found that the EPA is not
adequately overseeing significant portions of most states' programs. EPA Region 9 is the only
region that ensures that the states they oversee issue discharge permits to sewage treatment
plants that include provisions for broad monitoring of hazardous chemicals from industrial
users. Without this monitoring, sewage treatment plants may be unaware of hazardous
chemicals discharged to them and have little knowledge of required hazardous waste discharge
notifications. In addition, exceedances of chemical limits in permits and toxicity tests do not
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trigger notification to enforcement programs. As a result, the EPA may not be ensuring that
states are using permits to minimize potentially harmful contamination of water resources. The
EPA has committed to taking appropriate corrective actions, and the completion of actions is
pending.
• In 2012, we recommended that the EPA's Office of Solid Waste and Emergency Response
require the EPA and states to enter into memorandums of agreement that reflect program
changes from the 2005 Energy Policy Act and address oversight of municipalities conducting
underground storage tank inspections. The EPA expects to finalize regulations by June 30, 2015.
The EPA also announced in 2014 that it will be conducting its own evaluation of the
effectiveness and protectiveness of third party programs in the underground storage tank
inspection program.
While important progress has been made, our work continues to identify challenges throughout
agency programs and locations, and many of our recommendations remain to be fully implemented.
We continue to perform work in this area and will continue to monitor the agency's progress in
addressing this challenge.
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CHALLENGE: Limited Controls Hamper the Safe Reuse of
Contaminated Sites
CHALLENGE FOR THE AGENCY
As the EPA promotes and encourages the redevelopment
and reuse of contaminated properties, it must strengthen
its oversight of the long-term safety of sites, particularly
within a regulatory structure in which non-EPA parties have
key responsibilities and authority but can lack resources to
effectively carry out long-term oversight of reused
contaminated sites. Photo of the former Intel Mountain View Plant,
Mountain View, California. (EPA photo)
BACKGROUND
Many contaminated sites, such as Superfund sites, must be monitored for decades because
contamination is not fully removed or cleaned up, and controls to keep the public and environment
protected from contamination must be maintained and enforced. The EPA has multiple and complex
challenges to ensuring that long-term monitoring of contaminated sites is done and done properly.
These include a regulatory structure in which the EPA has delegated authority or lacks the authority to
ensure long-term monitoring is performed, and those who do have the authority lack resources and
information to properly or fully execute long-term monitoring. The EPA's emphasis on reusing
contaminated sites for a variety of purposes, including residential use, has amplified its existing
challenges in ensuring that contaminated sites are safe and remain safe for reuse in the long term.
The EPA's FYs 2014-2018 Strategic Plan states that the EPA is establishing an Agency Priority Goal for
FYs 2014—2015 to measure and report sites ready for anticipated use, which is a continuation of the
Priority Goal for FYs 2012-2013. Ready for Anticipated Use is an indicator that the local, state or
federal agency has determined that the necessary cleanup goals, engineering controls and institutional
controls have been implemented at the site to make it available for a community's current or
reasonably anticipated future use or reuse. The EPA's Superfund, RCRA corrective action, Leaking
Underground Storage Tank and Brownfields cleanup programs all contribute to the Priority Goal to
make sites ready for anticipated use.
THE AGENCY'S PROGRESS
According to the agency's FY 2014 financial report, the EPA has advanced significant efforts to oversee
and manage the long-term stewardship of contaminated sites within its control to address the
management challenges. For example, the EPA states that:
• The agency has developed a guide, Institutional Controls: A Guide to Preparing Institutional
Controls Implementation and Assurance Plans at Contaminated Sites, that will assist regions in
systematically establishing and documenting the activities associated with implementing and
ensuring the long-term stewardship of institution controls. Among other things, these plans will
provide information to stakeholders on the legal authorities for enforcing institutional controls,
including relevant state laws, agency orders or agreements, or voluntary cleanup agreements.
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• The agency will continue to encourage state and tribal response program funding of tracking
and management systems for land use and institutional controls.
• The agency has developed general education and outreach materials about institutional
controls and their importance in supporting safe land reuse. The EPA continues to include
training sessions on institutional controls as part of its national Brownfields program. The EPA
will also continue to develop and maintain information systems—such as "Cleanups in My
Community"—to educate and inform the public regardingfederally funded contaminated site
assessment and cleanup activities.
• The agency is continuing to promote reuse and involves communities in clean-up and reuse
discussions. The EPA will continue to explore tools to ensure appropriate reuse and enhance
long-term protectiveness, including:
o Ready for Reuse determinations (environmental status reports on site reuse).
o Comfort and status letters (which convey status of the site remediation and liability
issues).
o EPA-funded reuse planning.
o Site reuse fact sheets (which highlight critical remedial components in place, long-term
maintenance activities and institutional controls).
• The most current toxicity values used when evaluating human risks follow a hierarchy of peer-
reviewed toxicity value data. This hierarchy was issued in 2003 and expanded in 2013; further,
the EPA has updated the toxicity values for two common chlorinated volatile contaminants
often identified at Superfund sites as VI chemicals of concern—tetrachloroethylene (also known
as perchloroethylene) and trichloroethylene.
WHAT REMAINS TO BE DONE
The OIG has made previous recommendations designed to help the Office of Solid Waste and
Emergency Response manage this challenge. Some of the recommendations remain unimplemented.
Specifically, our 2014 report, EPA Needs to Improve Its Process for Accurately Designating Land as
Clean and Protective for Reuse, recommended that the office improve controls over its guidance,
review and reporting of site reuse accomplishments. Until these recommendations are completed, the
risk that designations may not be sufficiently protective of human health remains. Our 2013 report,
Lack of Final Guidance on Vapor Intrusion Impedes Efforts to Address Indoor Air Risks, recommended
that the office issue final vapor intrusion guidance. We also recommended that the office train EPA and
state staff and managers and other parties on the newly updated, revised and finalized guidance
document. These recommendations continue to be addressed by the Office of Solid Waste and
Emergency Response.
We continue to conduct additional evaluation work related to this challenge and plan to issue
additional reports in 2015. Until the Office of Solid Waste and Emergency Response improves its
management controls for designating sites as Ready for Anticipated Use and maintains an accurate
designation in the long term, and addresses unimplemented OIG recommendations on risks from
vapor intrusion, we believe this issue should remain as a management challenge.
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CHALLENGE: The EPA Faces Challenges in Managing Chemical Risks
CHALLENGE FOR THE AGENCY
The EPA's ability to effectively ensure that the production and use of
chemicals does not harm human health or the environment is
dependent upon statutory authorities, availability of data required by
laws, and the effectiveness of the EPA's program management. Limited
authorities and data on chemical toxicities and exposures inhibit the
EPA's effective implementation of the laws that regulate chemical use
and production. In addition, the EPA's management and oversight of its
implementation of existing authorities and initiatives to reduce
chemical risks are falling short in several programs.
BACKGROUND
The EPA manages chemical risks under several statutes. Under the Toxic Substances Control Act, the
EPA is charged with the responsibility for assessing the safety of commercial chemicals and regulating
those chemicals if there are significant risks to human health or the environment. The act places legal
and procedural requirements on the EPA before the agency can compel the generation and submission
of data on the health and environmental effects of existing chemicals. The act requires that the EPA
demonstrate that certain health or environmental risks are likely before the EPA can require
companies to develop and provide it with toxicity and exposure information. Even when the EPA has
toxicity and exposure information and determines that chemicals pose an unreasonable risk, the
agency has had difficulty banning or placing limits on the production or use of chemicals. The EPA has
used its authority to limit or ban the use of only five chemicals since the act was enacted.
The EPA has developed a three-part strategy for addressing potential risks from existing chemicals:
• Identify existing chemicals for risk assessment and take actions as appropriate (the EPA's
Existing Chemicals Program Strategy).
• Increase opportunities for industry to move toward using safer chemicals (the EPA's Design for
the Environment and Green Chemistry programs).
• Increase public access to data on chemicals that have been developed by the EPA and/or
provided by industry (the EPA's ChemView initiative).
Chemical risks are also managed under the Federal Insecticide, Fungicide, and Rodenticide Act and the
Pollution Prevention Act. The Federal Insecticide, Fungicide, and Rodenticide Act regulates the sale and
use of pesticides through the registration and labeling of pesticide products. Pesticides are widely used
in agricultural, commercial and household settings and have the potential to pollute air, water and
land. The Pollution Prevention Act established a national policy to achieve pollution prevention by
reducing industrial pollution at its source. Pollution prevention is defined as reducing or eliminating
waste at the source by modifying production processes, promoting the use of non-toxic or less-toxic
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substances, implementing conservation techniques, and re-using materials rather than putting them
into the waste stream.
THE AGENCY'S PROGRESS
In February 2012, the EPA issued its Existing Chemicals Program Strategy to pursue a multi-pronged
approach focusing on risk assessment and reduction, data collection, screening, and furthering public
access to chemical data and information. While it has made progress implementing this approach to
manage Toxic Substances Control Act chemicals, at its current pace, it would take the EPA at least
10 years to complete risk assessments for the 83 chemicals identified in Toxic Substances Control Act
work plans.
In 2013, the EPA launched ChemView—an online database with information on more than 1,500
chemicals designed to help businesses, consumers and others make more informed decisions about
the chemicals they use. The EPA has also committed that by September 30, 2015, it will have
completed more than 250 assessments of pesticides and other commercially available chemicals to
evaluate risks they may pose to human health and the environment, including the potential for some
of these chemicals to disrupt endocrine systems.
WHAT REMAINS TO BE DONE
To ensure the continued effectiveness of the various chemical programs, the agency will conduct
several evaluations over the next 4 years. In FY 2015, the EPA will initiate a Pesticide Registration
Review Program. The EPA plans to conduct the Integrated Pest Management in Schools Program
Review in FY 2016, and the Endocrine Disrupters Screening Program Review and the Antimicrobial
Testing Program Review in FY 2017. To help formulate Toxic Substances Control Act reform legislation,
the EPA has set forth six essential reform principles that encompass the EPA's review authority, access
to data, timeliness, transparency, safety of sensitive populations, and implementation funding.
The agency is also responding to program management and data availability challenges identified by
the DIG andGAO:
• A 2014 DIG evaluation of the implementation of quality management policies in the EPA's
Office of Pollution Prevention and Toxics' Risk Assessment Division found that, without a robust
quality management system, the EPA risks making environmental and human health policy
decisions that rest on a faulty foundation. The agency needs to complete planned internal
quality assurance audits, an analysis of staff training needs, and a review quality assurance
needs in other related divisions.
• A 2014 OIG report on the implementation of the Design for the Environment Safer Product
Labeling Program found that strengthened controls in the program are needed to help
consumers better identify safer products. The agency needs to complete a review of
partnership agreement compliance, and develop transparent and adequately supported
performance measures that capture the program's results.
• A 2014 OIG evaluation on the EPA's Conventional Reduced Risk Pesticide Program found that
the number of newly registered reduced risk pesticides may continue to decline unless the EPA
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can reduce barriers to industry participation. The agency needs to explore fees charged to
applicants for reduced risk products when the authorizing statute is reauthorized and use
available data to create a standardized measure for non-agricultural uses.
• A 2010 DIG evaluation of the EPA's policies, procedures and authority for managing risks posed
by new chemicals found that the EPA had limitations in three processes intended to identify
and mitigate new risks—assessment, oversight and transparency. The agency still needs to
complete work to establish criteria and procedures for identifying classes of chemicals to
undergo assessments for low-level and cumulative exposure assessments, and propose a
regulation to establish sunsetting provisions for confidential business information claims.
• Transforming EPA's Processes for Assessing and Controlling Toxic Chemicals has been on GAO's
High Risk List since 2009 due to concerns about the EPA's ability to conduct credible and timely
assessments of the risks posed by chemicals. Specifically, GAO has highlighted the EPA's need
to ensure that sufficient resources are dedicated to implement the Toxic Substances Control
Act, and its ability to demonstrate progress by its risk assessment and risk reduction initiatives.
The OIG has initiated evaluations to determine the efficacy of the EPA's oversight of the states'
implementation of Federal Insecticide, Fungicide, and Rodenticide Act programs and will also evaluate
the EPA's oversight of genetically engineered corn registrants.
Given the work that remains—coupled with the size, complexity and significance of chemical risks to
human health and the environment—we believe this issue warrants retention as an agency
management challenge.
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CHALLENGE: The EPA Needs to Improve Its Workload Analysis to
Accomplish Its Mission Efficiently and Effectively
CHALLENGE FOR THE AGENCY
The EPA has not fully implemented controls and a methodology
to determine workforce levels based upon analysis of the
agency's workload. The EPA's program and regional offices have
not conducted a systematic workload analysis or identified
workforce needs for budget justification purposes. The EPA's
ability to assess its workload and estimate workforce levels
necessary to carry out that workload is critically important to
mission accomplishment. Due to the broad implications for accomplishing the EPA's mission, we
included this as an agency management challenge for 2013, 2014, and again this year.
BACKGROUND
In 2010, we reported that the EPA did not have policies and procedures requiring that workforce levels
be determined based upon workload analysis. In 2011, we reported that the EPA does not require
program offices to collect and maintain workload data. Without such data, program offices are limited
in their ability to analyze their workload and justify resource needs. The GAO also reported that the
EPA's process for budgeting and allocating resources does not fully consider the agency's current
workload. In March 2010, the GAO reported that it had brought this issue to the attention of EPA
officials through reports in 2001, 2005, 2008 and 2009.
Since 2005, EPA offices have studied workload issues at least six different times, spending nearly
$3 million for various contractors to study the issues. However, for the most part, the EPA has not used
the findings resulting from these studies. According to the EPA, the results and recommendations from
the completed studies were generally not feasible to implement.
The EPA's workload has continued to increase over the years while its workforce levels have declined.
This trend is likely to continue, with downward pressure on budgets.
THE AGENCY'S PROGRESS
In response to the OIG and GAO reports, the EPA stated that it recognized the need to improve its
ability to understand and quantify the workload of its component organizations and to make resource
allocation decisions based on those assessments. The EPA said that it was committed to improving its
analytical capabilities and examining workload measures to support the resource allocation process.
In 2013, we conducted a follow-up review of actions the EPA has taken to address previous OIG
recommendations. We found that the EPA:
• Initiated pilot projects in Regions 1 and 6 to analyze the workload for air State Implementation
Plans and permits as well as water grants and permits.
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• Surveyed numerous front-line agency managers on the functions performed, thereby creating
an inventory of common functions among program offices. The Office of the Chief Financial
Officer also consulted with 23 other federal agencies about their workload methodologies. As a
result of that analysis, the EPA selected an approach referred to as the "Table Top" method
used by the U.S. Coast Guard. The method is designed to use subject matter experts as well as
actual data to provide estimates of workload. The Table Top approach provides flexibility in
implementation, which allows for differences in organizational functions and workloads rather
than attempting to fit all regions and programs into a one-size-fits-all approach. The EPA has
conducted limited testing on this approach within two program areas—grants and Superfund
Cost Recovery. According to EPA officials, while the methodology appears promising for grants,
it became overly complicated for Superfund Cost Recovery.
During 2014, the EPA continued to test the workload models in other areas, including:
• Working with Grant Project Officers to evaluate and try to balance uneven workloads.
• Developing a Project Officer Estimator Tool for organizations to examine Project Officer
workloads.
• Working with Grants Specialists to refine the Interagency & Grants Estimator Tool.
• Submitting a Draft Funds Control Manual to the Office of Management and Budget and
receiving and incorporating that office's comments.
WHAT REMAINS TO BE DONE
The EPA continues to test the Table Top approach for conducting workload analysis in the EPA's grants
program. The Office of the Chief Financial Officer is in the process of updating its Funds Control Manual
to provide program offices and regions with guidance on collecting and using data for workload
analysis. While the EPA continues to take action to improve its workload analysis capabilities,
agencywide implementation is far from complete and will require a concerted effort by all program
managers. The EPA's ability to assess its workload and estimate workforce levels necessary to carry out
that workload is critically important to mission accomplishment. As such, we are maintaining workload
analysis as a management challenge for FY 2015 and we will continue to monitor agency progress.
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CHALLENGE: The EPA Needs to Enhance Information Technology Security
to Combat Cyber Threats
CHALLENGE FOR THE AGENCY
The EPA's information security challenge stems from five key areas:
(1) risk management planning, (2) security information and event
management tool implementation, (3) computer security incident
response capability and network operation integration, (4) computer
security incident response capability relationship building, and (5) audit
follow-up to ensure timely and effective actions are being taken to
remediate cyber security weaknesses identified. Management oversight
underlies all five areas and needs to ensure comprehensive
implementation of the information security program throughout the
agency; and that offices follow through with executing EPA policies,
procedures and practices, as well as taking timely and effective actions to
remediate cyber security weaknesses identified.
BACKGROUND
The EPA, like other federal agencies, has adapted to the increase of global Internet usage to become
more citizen-focused and enhance its business operations. The EPA's decentralized structure to
implement security controls makes it increasingly important for the EPA's executives to adopt
information technology and cyber security strategies that ensure these practices are fully integrated
throughout the agency.
The EPA previously had significant deficiencies in the following security areas: Continuous Monitoring
Management, Configuration Management, Risk Management, Plans of Action and Milestones, and
Contractor Systems. While the EPA has made plans to address many of these areas, weaknesses
continue to exist. The EPA needs senior leadership emphasis; follow-through to ensure planned
corrective actions are taken, are taken timely, and are effective at remediating the cyber security
deficiencies identified via various sources including OIG reports; and an oversight structure that
ensures implementation of key information security practices. Without such actions, the EPA will
continue to not realize a fully implemented information security program or have effective processes
to identify, respond to and correct security vulnerabilities that place agency data and systems at risk.
THE AGENCY'S PROGRESS
The agency acknowledges that advanced persistent cyber threats pose a significant challenge. The EPA
has to prioritize its security funds and make some hard choices on where/how to expend its security
resources. Within these budget constraints, the agency indicated it has undertaken a number of
actions, including implementing specific automated tools to address cyber security challenges. The
following are examples from the EPA's FY 2014 Agency financial Report of activities the agency is
conducting to improve cyber security:
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• Reviewing users with container administrator access rights and reducing the number of users
per program or regional office with this level of access to no more than three.
• Conducting continuous monitoring of privileged user access to the Decision Support System—
including roles, responsibilities and procedures—to ensure that the activities of privileged users
are appropriate.
• Continuing to expand the Security Information and Event Management tool's field of coverage
to encompass as many enterprise assets as possible.
• Tracking remediation activities from audits, continuous monitoring assessments and server
vulnerability scans via the Plan of Actions & Milestones Monitoring and Validation Process.
• Conducting monthly vulnerability scans and transmitting the results to Information Security
Officers and system owners for remediation according to agency policy.
• Developing role-based training and credentialing programs that encompass all agency roles
with significant information security responsibilities. Roles have been documented using
standard terminology and definitions of responsibilities.
Based on discussions with the EPA, the agency is finalizing the specific training requirements for the
roles with the biggest impact on security and has initiated a workgroup under the Information Security
Task Force to review and make recommendations on the plan. The agency is also making plans to
implement a new credentialing program for the identified roles, which will also be reviewed by the task
force.
Our 2011 report on the key actions EPA needs to take to combat cyber threats highlights the need for
more management vigilance to address this challenge. In particular, our audit highlighted the growing
concerns and made recommendations that could help the agency strengthen cyber security practices.
However, some of those recommendations remain unimplemented, and we continue to find and
report on similar weaknesses at other EPA locations. We noted that the EPA should address open
recommendations, be proactive in implementing agreed-upon actions without further delay, and take
steps to improve cyber security practices throughout the entire agency.
According to our 2014 audit report on training personnel with significant information security
responsibilities, the EPA's decentralized structure provides management with the flexibility to tailor
information security controls to address local needs. However, the structure proves to be problematic
in ensuring that controls are consistently implemented agencywide and that weaknesses are properly
reported for remediation tracking. The EPA's leadership must continue to meet the information
technology and cyber security challenge head on as it defines ways to protect its infrastructure and the
data within the network. Stronger executive leadership—with emphasis on enhancing the information
technology management control structure and holding EPA offices accountable for following the
structure—is needed. DIG audit work, including our FY 2014 Federal Information Security Management
Act report, continues to highlight the need for management to take recommended actions to
strengthen information technology security practices pivotal to combating the growing cyber threat.
Without immediate action, the EPA will not have the requisite tools to implement an effective, risk-
based security program capable of addressing the most sophisticated threats on the horizon.
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WHAT REMAINS TO BE DONE
The EPA acknowledges that advanced persistent threats pose a significant challenge for all federal
agencies. Our recent reports identified five areas that need to be addressed to meet cyber security
challenges:
1. Establishing methods to control network access and evaluate inactive accounts.
2. Strengthening internal control processes for monitoring and completing corrective actions for
agreed-to audit recommendations.
3. Developing a vulnerability remediation program and incorporating needed modifications to the
agency's vulnerability management standard operating procedure. This includes implementing
oversight to ensure EPA offices correct known vulnerabilities and provide training on the use of
vulnerability reporting tools and management reports.
4. Implementing the drafted training requirements for the roles with the biggest impact on
information by the end of the fourth quarter of FY2015 and providing additional training
options specific to the federal information security environment and EPA information security
roles.
5. Developing and implementing management oversight processes of the audit follow-up process
for cyber security deficiencies to provide adequate monitoring to ensure:
o Corrective actions for all open recommendations are completed by the originally
agreed-upon completion dates.
o Appropriate supporting documentation is maintained and readily available.
o Data are recorded accurately in the EPA's Management Audit Tracking System.
o The corrective actions taken actually fix the deficiency that led to the recommendation.
o The offices continue to use the improved processes.
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CHALLENGE: The EPA Continues to Need Improved Management
Oversight to Combat Fraud and Abuse and Take Prompt Action Against
Employees Found to Be Culpable
CHALLENGE FOR THE AGENCY
Recent events and activities indicate a possible "culture of complacency"
among some supervisors at the EPA regarding time and attendance
controls, employee computer usage, real property management and
taking prompt action against employees. As stewards of taxpayer dollars,
EPA managers must emphasize and reemphasizethe importance of
compliance and ethical conduct throughout the agency and ensure it is
embraced at every level of the organization.
BACKGROUND
The EPA employs over 15,000 people at its headquarters, 10 regional offices, and numerous
laboratories and other locations. The agency's size necessitates effective communication, oversight
and management. Issues we noted recently could lead the public to conclude that there is a lack of
commitment to management policies and internal control at the EPA:
• Based on work we did in response to fraud committed over more than a dozen years by an EPA
Senior Policy Advisor, we have initiated several audits to determine whether internal control
deficiencies exist, and have recently completed assignments on retention pay and passports:
a. The EPA did not comply with Office of Management and Budget regulations or agency
policies for retention pay, resulting in unauthorized bonuses being paid. These bonuses
were paid dueto management confusion, lack of adequate system controls, and lack of
follow-up by managers and Human Resources.
b. The EPA did not comply with guidance over the control of agency passports. Of the 417
passports reported to be in the agency's possession, 199 could not be located. This
happened because the agency did not adequately maintain its passport database and
was not enforcing passport guidance.
• Additional audits are in process regarding hiring practices, time and attendance, overtime, and
administrative leave. Our early warning report on administrative leave identified eight
employees who had administrative leave totaling 20,926 hours and cost the government an
estimated $1,096,868.
In some cases, the agency has not taken prompt action on OIG Reports of Investigation that
substantiate employee misconduct, which delays holding employees accountable. Some examples are:
• In June 2013, our Office of Investigations determined that an EPA senior executive employee
failed to adequately oversee another EPA employee's travel vouchers and time and attendance,
as the person's responsibilities required. Our investigation revealed that the senior executive
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approved or authorized the approval of fraudulent time and attendance and travel vouchers for
this EPA employee from 2000 to 2010. A Report of Investigation was submitted to the Office of
Air and Radiation on April 17, 2014, and the senior executive employee retired on February 28,
2015, without administrative action ever being taken.
• In December 2013, a Report of Investigation was issued to the Office of Administration and
Resources Management concerning a senior executive employee who, the investigation found,
had engaged in private business activities during official work time and misused government
property. During the period of the investigation, this employee received a Presidential
Meritorious Rank Award for $33,928. In November 2014, approximately 11 months after we
issued the Report of Investigation, the EPA issued a Notice of Proposed Removal of the
employee. The employee has been on paid administrative leave since November 2014 and is
appealingthe decision.
• In November 2013 and May 2014, respectively, EPA management was made aware that two
EPA employees, in two separate cases, were viewing and downloading pornography on EPA
computers during work hours. The investigations disclosed that the employees spent
approximately 1 to 6 hours a day viewing and downloading pornography. On March 24, 2015,
both employees received a Notice of Proposed Removal from the EPA for the misconduct. One
employee retired and the other is appealing the decision and remains on paid administrative
leave.
We previously reported this as a concern in our report, The EPA Needs to Respond More Timely to
Reports of Investigation (Report No. 2007-M-00003, issued May 7, 2007). In that report, we found that
it took the EPA, on average, almost 200 days to initiate disciplinary action when EPA policies required
action within 30 days of an OIG Report of Investigation. We also found that the EPA did not take severe
enough disciplinary action considering the nature of the misconduct. We made various
recommendations, including assuring that disciplinary actions are sufficient and appropriate, and
re-evaluating the 30-day reporting requirement. The agency generally agreed with our
recommendations, although, the agency has yet to revise its April 1998 "Disciplinary Process
Handbook" to consider a timeframe more in line with the length of time necessary to accomplish the
EPA's disciplinary process. We noted in 2007 that we would like to see the agency make more of a
commitment to dealing with employee misconduct. The agency's response at that time was "to
explore modifying our current leadership development program and mentoring and coaching activities
to emphasize to supervisors and managers the importance of holding employees accountable for
performance and conduct issues." However, lingering issues remain, as noted in the bullets above.
Lastly, one EPA office has impeded OIG investigations. EPA's Office of Homeland Security, which is a
component of the Office of the Administrator, is an administratively created component with no law
enforcement or investigative authority. Its mission is to serve as the agency's liaison for intelligence and
homeland security issues. EPA's Office of Homeland Security continues to impede the OIG by
withholding critical information about a variety of activities it conducts—or information it possesses—
about matters within OIG purview. EPA's Office of Homeland Security fails to refer certain information to
the OIG. Among these matters are employee misconduct, cyber intrusions, and matters which the Office
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of Homeland Security defines as "intelligence" or national security information, even though OIG
employees have the requisite security clearances for access to that information. In addition, EPA's Office
of Homeland Security continues to employ one or more criminal investigators, armed with firearms,
despite the fact that the office has no authority to engage in law enforcement or investigations.
THE AGENCY'S PROGRESS
Travel and Time and Attendance Fraud:
• The agency completed internal control assessments over the following sensitive payment areas:
executive payroll approvals, employee departures, statutory pay limits, parking and transit
subsidy, retention incentives, travel reimbursements exceeding the government rate, and
executive travel approvals. The agency will codify these new controls into EPA Travel Policy and
affected Travel Delegations 1-17-A, 1-17-B and 1-17-C. Also, the agency will track
implementation of these actions and assess progress through the agency's FY 2015 Office of
Management and Budget Circular A-123 process.
• The latest corrective actions regarding the internal control assessments are planned to be
completed by September 2015.
Management of Real Property:
• The agency agreed with recommendations in our report, EPA Needs Better Management of
Personal Property in Warehouses (Report 15-P-0033, issued December 8, 2014), and provided
corrective actions with estimated completion dates. All nine recommendations we made are
resolved and corrective actions are completed or ongoing.
• The agency indicated it will issue policy guidance for warehouses that requires the tracking of
non-accountable property, the accounting of all electronics-type property and all accountable
and sensitive property, and the recording of all property in warehouses in the agency's asset
management system. EPA's Office of Administration and Resources Management will update its
contracts accordingly for the three warehouses it operates (Landover, Research Triangle Park
and Cincinnati).
• The agency indicated it will issue guidance requiring EPA Senior Resource Officials to (1) assess
annually the operations of their warehouses, to efficiently and effectively manage them and to
make needed adjustments to their contracts as necessary; (2) assess annually used and unused
square feet, to consolidate warehouse space and the storage of personal property located
within the same city or metropolitan area; (3) annually assess the warehouses and the need to
store property items, to find costs savings and efficiencies in warehouse operations; (4) conduct
periodic unannounced visits to warehouses, to guard against unauthorized use of government
resources; and (5) perform an annual certification of non-accountable property residing in
those warehouses.
• The agency indicated it will implement a new mandated property management system and
provide guidance on incorporating emerging technologies along with best practices to generate
efficiencies and enhanced internal controls.
• The agency indicated it will develop and disseminate best practices for inventory and storage to
warehouse managers at Landover, Research Triangle Park and Cincinnati, and to property
management officers.
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WHAT REMAINS TO BE DONE
While the EPA is making progress, the agency needs to continue to confront this culture of
complacency. Failure to do so could seriously affect agency resources, impacting the ability of the
agency to achieve its mission and goals. Additionally, the EPA also needs to increase supervision over
computer misuse to prevent unauthorized access attempts and inappropriate misuse, as well as verify
results and accomplishments achieved during telework.
The agency should take affirmative measures to communicate its commitment to internal controls.
Commitment is not demonstrated by a one-time memo and a new policy. The message must be
communicated repeatedly throughout the organization by many means, both formal and informal, to
reinforce a strong "tone at the top."
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Agency Response to Office of Inspector General-Identified Key Management Challenges
Challenge #1—Improved Oversight of States Authorized to Accomplish Environmental Goals
Agency Response: The agency continues to improve its state oversight practices to ensure consistency by, for
example, establishing the State Program Health and Integrity Workgroup. This inter-agency workgroup is
composed of EPA's national program offices for air, enforcement, and water; it gathers and analyzes information
on oversight of state practices, identifies gaps, and develops solutions.
Direct oversight of delegated and approved Clean Air Act (CAA) programs is the responsibility of each regional
office, a role for which the national air program office provides support and assistance when necessary and
appropriate. The distinction between approved and delegated programs is that the former develop their own rules,
which must be consistent with enacted federal rules, whereas the latter do not develop their own rules, but rather
implement the federal rules as written. For example, the national air program office works to assist in developing
tools and guidance to reduce the SIP backlog, and emphasizes efforts to streamline the process with initiatives like
the eSIP program. The agency incorporates state oversight responsibilities into the Annual Commitment System
suite of regional performance measures. In response to the 2014 OIG Evaluation of CAA Title V Emissions Fees,
EPA is developing a fee oversight strategy and guidance and updating other associated Title V oversight guidance
documents. These documents will incorporate the principles and best practices developed by the cross-agency
oversight workgroup to ensure appropriate national consistency.
Additional efforts the agency is undertaking to address OIG concerns include:
• Publishing the final revised underground storage tank regulations that provides states that have State
Program Approval for the UST program three years from the rule's effective date to submit applications for
a reinstatement of their SPA.
• Improving the Drinking Water State Revolving Fund (DWSRF) data quality through increased engagement
of the regions and state quarterly reports. These reports will focus on projects with missing data for key
fields and up-to-date project data.
• Developing a usable format for sharing TRI data on discharges sent to POTWs. The agency will also develop
materials to explain the utility of TRI data to NPDES permit writers and pretreatment program personnel.
Challenge #2—Limited Controls Hamper the Safe Reuse of Contaminated Sites
Agency Response: Cleaning up contaminated sites and ensuring their safe reuse over the long term is an agency
priority and central to EPA's mission. EPA, state, and tribal response programs continue to make progress in
addressing contaminated sites to protect human health and the environment and support the safe use of
properties. The agency believes that it is communicating site risks and remedy information and will continue to
seek opportunities to improve communication and facilitate an increased understanding of the cleanup process.
As noted by OIG, EPA's authority and control over contaminated sites varies depending on the statutory authority
under which the site is being addressed. EPA's ability to oversee and manage the long-term stewardship of
contaminated sites must be based on these differences in its legal authority and on state and local governments'
responsibilities. The agency has the most direct control over sites undergoing cleanup through the Superfund
program, as it has the authority to order cleanups, provide oversight, seek penalties for non-compliance, and
negotiate the cleanup process. Forty-four states are authorized to implement the federal RCRA Corrective Action
Program and have the primary decision-making responsibility to ensure safe long-term remedies. In unauthorized
states, and where work share arrangements have been made, EPA regions are the lead for ensuring protective
long-term remedies. The agency retains enforcement authority at state-dele gated sites to ensure the proper
cleanup and management of hazardous wastes. The Brownfield Program provides funding to eligible entities to
clean up sites. Brownfield sites are cleaned up in accordance with state cleanup levels and oversight Cleanups
under the Underground Storage Tanks Program are typically conducted and overseen through state programs;
however, EPA typically conducts the cleanup of leaking underground storage tanks on tribal lands. For many of the
cleanup programs, the maintenance for long-term stewardship in many circumstances rests with a state or local
government, trust or other private entity.
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One of EPA's priority goals is the number of sites ready for anticipated use (RAU). This measure is met when (1) a
site has no pathway for human exposures to unacceptable levels of contamination based on current site conditions,
(2) all cleanup goals are achieved for media that may affect anticipated land use, and (3) all institutional controls
identified as part of the response action are in place. Any determination made for the purposes of the RAU measure
is based on the information available at the time the determination is made and may change if site conditions
change or if new or additional information is discovered regarding the contamination or conditions on the
site. RAU is an internal performance measure, and is not an external designation of any type. As such, parties
interested in finding out what uses would be protective for a particular property (e.g., land owners or developers)
should rely on site-specific cleanup documents and site-specific institutional controls.
Some of the actions the agency has taken to improve communication and understanding of the RAU measure
include the following:
• Clarified the language in our public communication materials to emphasize that the RAU is an internal
performance measure and not a reporting of site-specific risk.
• Revised Web applications to remove the RAU designation on Brownfield sites.
• Strengthened existing term and conditions language in Brownfields cleanup grants to ensure that
information regarding grantee-funded efforts is updated as part of grant closeout activities.2
• Worked with states during the midyear reporting period to ensure that Underground Storage Tanks
Program data were properly submitted.
• Worked with regional offices and states on how to document the RAU milestones in the RCRA Corrective
Action Program.
On June 11, 2015, the agency released two companion guides to address vapor intrusion risk from both petroleum-
and non-petroleum-based subsurface contaminants. The first guide, Technical Guide for Assessing and Mitigating
the Vapor Intrusion Pathway from Subsurface Vapor Sources to Indoor Air, is intended for use at any site being
evaluated by EPA pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), as amended, or the corrective action provisions of RCRA, as amended. This guide is also intended for use
by EPA's Brownfield grantees, or state agencies acting pursuant to CERCLA or an authorized RCRA corrective
action program where vapor intrusion may be of potential concern. The second guide, Technical Guide for
Addressing Petroleum Vapor Intrusion at Leaking Underground Storage Tank Sites, is intended for use at any site
subject to petroleum contamination from underground storage tanks where vapor intrusion may be of potential
concern. Consistent with the agency's commitment to DIG, EPA is actively developing outreach and training
materials to ensure all relevant stakeholders are familiar with the two guides and their content EPA expects the
training to be available for delivery in the fall of 2015.
Challenge #3—EPA Faces Challenges in Managing Chemical Risks
Agency Response: EPA agrees that statutory changes are needed to enable it to successfully meet its goal of
ensuring chemical safety now and in the future. The agency has put forward a set of essential principles for
reform of chemical management legislation that will modernize and strengthen the tools available in TSCA to
increase confidence that chemicals used in commerce are safe
[http://www.epa.gov/oppt/existingchemicals/pubs/principles.html].
However, until legislative reform takes place, EPA has adopted and is following an Existing Chemicals Strategy,
released in February 2012, which outlines a comprehensive approach for 1) prioritizing chemicals for risk
assessment and risk reduction, 2) increasing the public's access to chemical data, and 3) advancing innovation for
safer products and green chemistry. Integral to this approach are the steps of identifying chemicals for assessment,
2 This grantee reported data, however, reflects a snapshot in time towards the end of that grant period, and conditions may
change after the grant is closed.
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collecting and making effective use of chemical data, and pursuing action to reduce risks posed by existing
chemicals found to pose unreasonable risks to human health and the environment.
EPA has taken a number of specific steps to strengthen its chemical safety work within existing authorities. Among
the most significant are the following:
• Published an updated list of 90 TSCA Work Plan Chemicals for assessment under TSCA to help focus and
direct the activities of the Existing Chemicals Program over the FY2014-2018 Strategic Plan cycle.
Significant progress has already been made, with five assessments finalized and seven more expected
during FY 2015. In addition, EPA has completed multiple risk management actions, including 133 final
Significant New Use Rules for new chemicals and six proposed for existing chemicals since 2012. TSCA
Section 6 regulatory actions are in progress for certain commercial and consumer uses of TCE and for the
paint removers methylene chloride and n-methylpyrrolidone (NMP).
• EPA is filling information gaps on existing chemicals by taking a range of TSCA information gathering
actions (including the Chemical Data Reporting Rule and test rules); expanding electronic reporting of Pre-
Manufacture Notices (PMNs) and other submissions under TSCA; improving public access to non-
confidential chemical information via the agency's online ChemView database; and by reviewing, and
where appropriate, challenging: 1) new submissions under TSCA where confidential business information
is claimed in health and safety studies, and 2) all CBI cases submitted prior to August 2010. The ChemView
database contains information on almost 10,000 chemicals, including more than 640 declassified chemical
health and safety studies.
Improving IRIS. In 2009, GAO identified EPA's Integrated Risk Information System (IRIS) Program as a high risk
area needing broad-based transformation to address issues of transparency, program management, and timeliness.
The IRIS program currently remains on GAO's High Risk List
EPA's ability to protect public health and the environment depends on credible and timely assessments of the risks
posed by toxic chemicals. EPA is implementing significant program enhancements, including formal intra-agency
identification and priority setting of assessments, assessment streamlining, expanded stakeholder engagement,
and strengthened peer review.
Due to the 2009 IRIS process change, comments received from the interagency reviews of draft IRIS assessments
are now posted on the IRIS website and available for the public to view. From May 2009 (when the new IRIS
process went into place) to September 2014, the National Center for Environmental Assessment (NCEA) completed
28 IRIS assessments. These completions include some of the agency's highest priorities such as trichloroethylene,
tetrachloroethylene, and dioxin (noncancer). The most recent completions include biphenyl, 1, 4-dioxane, methanol
(non-cancer), and Libby Amphibole Asbestos. NCEA has also made significant progress on several other high-
profile assessments, including formaldehyde, inorganic arsenic, chromium VI, and benzo[a]pyrene. In addition,
EPA's IRIS Program is developing assessments of health effects for chemicals found in environmental mixtures such
as polycyclic aromatic hydrocarbons (PAHs), phthalates, and polychlorinated biphenyls (PCBs). These cumulative
assessments will increase the number of chemicals addressed by the IRIS Program.
The following enhancements and actions address many of GAO's concerns, including issues related to transparency
and development of timely, credible assessments:
• Incorporated the public release of preliminary materials in the early stages of developing an assessment
• Incorporated public meetings early in the assessment development process to identify available scientific
information and any data gaps for the chemical being assessed.
• Increased the use of the IRIS website to share information about assessment schedules and public
meetings.
• Issued "stopping rules" to help ensure that IRIS assessments are not delayed by new research findings or
ongoing debate of scientific issues after certain process points have passed.
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• Strengthened peer review practices, including establishing a standing committee of EPA's Science
Advisory Board and the Chemical Assessment Advisory Committee, for reviewing IRIS assessments and
evaluating conflicts of interests.
• Partnered with the National Academies' National Research Council (NRC) to sponsor an NRC review of
the IRIS assessment development process and the changes being implemented or planned by EPA.
• Increased the number of scientific workshops on critical issues in risk assessment.
• Delivered two reports to Congress, the last of which was submitted in 2013 and described the Agency's
progress in implementing the improvements in the IRIS process.
In 2014, EPA's regulatory program and regional offices were formally requested to identify their programmatic
needs for IRIS assessments and the basis for the need. EPA gathered information and analyzed data to develop a
coordinated and comprehensive five-year workplan for IRIS Program activities and assessments, positioning
the IRIS Program to be well-targeted to provide timely, state-of-the-art assessments in support of EPA
programs. In its 2015 report, GAO recognized this effort as addressing its recommendation that EPA "have a
clear strategy that formalizes intra-agency coordination and priority." EPA intends to release a version of this
plan to the public by the end of 2015.
Also in 2014, EPA engaged the NRC to identify independent scientific experts (screened for conflicts of interest
and bias) to participate in the discussions that occur at IRIS bimonthly public meetings. This action was in direct
response to concerns raised by the NRC in its 2014 report regarding uneven stakeholder participation during
these meetings. These NRC-identified experts immediately began to broaden the range of perspectives
represented at the IRIS bimonthly public meetings. For example, speaking on their own behalf, six such experts
attended the February IRIS public science meeting on phthalates to contribute to the scientific discussions of
issues among EPA, stakeholders, and the public. This was the first meeting where NRC-identified experts joined
EPA and the public to discuss key scientific questions and preliminary assessment materials.
EPA will continue to rely on reviews conducted by respected and independent scientific bodies to confirm that the
actions being implemented are effectively improving the IRIS program. Remaining actions the Agency plans to
take include the following:
• Finalize and release a comprehensive five-year workplan for IRIS assessments based on EPA's regulatory
and regional program needs for IRIS assessments.
• Update sections of the IRIS Handbook, including identified procedures and protocols to be used to
implement systematic review in the IRIS Program.
• Finalize the archiving of out-of-date pesticide assessments from the IRIS database.
• Finalize a process for updating IRIS assessments.
• Continue to develop and apply enhancements that respond to recent reviews and evaluations of the IRIS
Program. Enhancements will continue to be applied to individual assessments based on their state of
development (i.e., the full suite of enhancements is being implemented only in those assessments in the
beginning stage of development).
• Continue to provide sufficient monitoring and oversight Progress on milestones is assessed weekly by
the IRIS Program Director and the IRIS Management Council. Additional oversight is provided by the
newly-formed internal executive review committee to ensure that scientific decisions are discussed by a
greater number of senior scientists and managers within NCEA to maintain quality and consistency
across assessments.
Challenge #4—Improved Workload Analysis to Accomplish Mission Efficiently and Effectively
Agency Response: EPA agrees on the need to analyze workload, but does not believe that existing federal
government workload models would accurately capture EPA functions, provide actionable results, or be a wise
investment of scarce resources. Detailed workload models require substantial investments of time and resources,
and many EPA functions are highly variable and non-linear.
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EPA believes that the primary benefit of workload analysis is to better understand what organizations' employees
are actually doing to fulfill certain functions. What are the major tasks that take the most time, and why do they
take that much time? EPA plans to continue to use workload analysis to investigate major, replicable processes to
help managers plan and prioritize processes and procedures and target streamlining and Lean efforts.
Each year during the budget formulation process, EPA must carefully weigh how to fund areas of increased
priority, workload and need. In recent years, EPA has had to look at how to provide extra resources for developing
needed air rules and meeting the increased need for legal expertise to manage twice as many outside lawsuits and
provide counsel to program offices to help craft more legally defensible agency actions. Conversely, the agency
must also continually look for reductions elsewhere. In almost all of these cases there are no precise models that
provide an answer on how much is needed, and the agency must work within the limits of its budget.
EPA continues to focus analyses on process-oriented functions (such as permits, grants, funds control, or IT
security) primarily to better understand workflows, processes, and procedures and identify the most time-
consuming tasks, duplication, procedural roadblocks, management challenges and streamlining opportunities. EPA
has also focused on functions that cut across programmatic areas. To engage program officials, it is crucial to make
clear that the exercise is not designed to re-allocate resources or develop hypothetical total workforce needs, but
rather is aimed at better understanding what needs to be done to fulfill a particular function. EPA will continue to
use the lessons learned from its survey of 1,000+ frontline managers, benchmarking of 23 other agencies' efforts,
and reviews of water and air permitting, grants, and IT security functions.
In FY 2015, EPA incorporated OMB comments and additional OIG suggestions into its updated Funds Control
Manual. The new Manual includes a workload analysis section with guidance on how offices can use it to better
understand their programs' operations and plan future Lean and other streamlining efforts. Additionally, the
agency used workload analysis to streamline project officers' grant oversight assignments and to restructure its IT
security program.
Challenge #5—Enhance Information Technology Security to Combat Cyber Threats
Agency Response: EPA acknowledges that advanced, persistent threats continue to pose a significant challenge for
all federal agencies and has taken steps to ensure its information technology and cyber security practices are fully
integrated throughout the agency. The following summarizes the agency's progress in addressing growing
concerns identified by OIG:
• Establishing methods to control network access and evaluate inactive accounts. The agency is
establishing methods to ensure all accounts are proactively managed, beginning with inactive accounts and
accounts with elevated privileges. This approach will enhance existing processes and will include new,
repeatable processes to manage, correct and report on all accounts. Additionally, the agency is conducting
an inventory of all accounts to consolidate, refine, and standardize processes for assigning and removing
inactive accounts. The intent is to minimize the potential impact of cyber threats to systems and/or
applications(s) hosted in the agency's network environment. Additionally, the agency is working to
improve the integration of personnel actions (e.g., hiring, transfer, termination) with account management
• Strengthening internal control processes for monitoring and completing corrective actions for
agreed-to audit recommendations. The agency recognizes the importance of ensuring that corrective
actions in response to OIG recommendations are completed in a timely manner and tracked through the
agency's tracking systems (MATS and OATS). The agency continues to refine established procedures for
communicating, disseminating and resolving corrective actions to improve its audit follow-up practices.
• Developing a vulnerability remediation. The agency recognizes that vulnerabilities pose significant risk
to the agency and understands the importance of remediating those vulnerabilities in a timely manner. The
agency's strategy is to provide security practitioners the necessary guidance, tools and oversight to address
vulnerabilities effectively and in a time frame consistent with the associated risk impacts. In the third
quarter of FY 2015, the agency initiated a review of the vulnerability management processes. The
recommendations from the review are being used to develop a vulnerability management CONOPS that will
strengthen the agency's processes and procedures in remediating weaknesses.
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• Implementing the drafted training requirements for the roles with the biggest impact on
information. The agency recognizes the importance of security personnel in the overall protection of
information assets. The agency's approach is to develop a comprehensive training program that defines
skills and training requirements that correlate with various information security roles. The training
program will utilize the agency's internal and external training resources. In the first quarter of FY 2015,
the agency initiated a Task Force to make information security program improvement recommendations.
The Task Force's recommendations for implementing the draft training framework were approved and are
being implemented. For each defined security position, the agency will provide role-based training that
employees must obtain or maintain to keep their positions.
• Developing and implementing processes for management oversight of audit follow-up. EPA agrees
with OIG's assessment and continues to streamline audit follow-up management for cyber security and
other deficiencies to provide adequate monitoring. The agency will make every effort to complete
corrective actions for all open recommendations by the originally agreed-upon completion dates, where
feasible, by utilizing and refining processes already in place. EPA will improve access to supporting
documentation and ensure the data are properly and accurately recorded in MATS and that corrective
actions taken actually address and correct the deficiency.
Challenge #6—Improved Management Oversight to Combat Fraud and Abuse in Time and Attendance,
Computer Usage, and Real Property Management
Agency Response: The agency believes that enhancements and improved internal controls implemented over the
past fiscal year address concerns raised by OIG. Since FY 2013, EPA has made considerable efforts to strengthen
internal controls over T&A reporting and employee travel. The agency revised its T&A procedure, enhancing
leadership, attention and support to ensure that employees report, review, correct and attest to the accuracy of
their time promptly in the agency's payroll system, PeoplePlus. During the past three years, EPA has audited 100
percent of its travel vouchers prior to payment to confirm all expenses over $75 are verified by a receipt and that
expenses are consistent with regulations and policy.
To address OIG's T&A concerns, the agency also enhanced its payroll system, PeoplePlus, with new controls. The
system now:
• Generates automatic system reminders for employees, managers and supervisors to submit and approve
time cards on time.
• No longer supports an "approve all" feature for managers, forcing them to review every employee's T&A
individually.
• Automatically monitors and requires documentation when an employee's time is entered and/or approved
by alternates for three or more pay periods per quarter.
• Verifies that employees enter their time correctly, timekeepers sign off, and supervisors certify.
• No longer allows default pay and mass approval, ensuring that only employees who are in a legitimate pay
status receive their pay.
• Includes a leave management feature that allows employees and supervisors to better manage leave
requests.
To address employee travel, the Agency:
• Created a new framework for approval of executive travel and payroll.
• Created new controls for high-dollar high-risk travel and above-per-diem lodging.
• Strengthened travel-related policies on premium class travel areas, including the 14-hour rule, "mission
critical" travel, and travel made with reasonable accommodations considerations.
• Developed a checklist, located on EPA's intranet, to guide travel approvers.
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• Implemented a new travel system, Concur, which applies the new controls and policies alongside the new
system, and offers associated training.
Regarding real property management, specifically concerns over the management and oversight of property in
EPA's headquarters' main warehouse in Landover, Maryland, the agency has issued and amended various policy
guidance. To address these concerns, EPA:
• Revised standard operating procedures for warehouse operations and property management.
• Developed a security plan that covers surveillance and CCTV footage retention.
• Discontinued document shredding services to reduce document susceptibility to fraud and abuse.
• Expanded requirements for solicited warehouse inventory and management services.
• Established regular site visits by senior management to ensure internal controls are effective and in
compliance with operating policies and procedures.
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PROGRESS IN ADDRESSING FY 2015 WEAKNESSES
AND SIGNIFICANT DEFICIENCIES
In FY 2015, EPA continued to address its agency-level internal control weaknesses and significant deficiencies.
This section discusses the weaknesses and significant deficiencies EPA resolved in FY 2015, as well as those that
are new or for which corrective actions are still underway.
Material Weakness
Capitalized Software Costs
In FY 2014, the agency found it had undercapitalized software, which resulted in a material misstatement of
financial statements and led to the restatement of the FY 2013 financial statements. The OIG declared the material
misstatement of the financial statements contributed to the assessment that the agency's accounting for software is
a material weakness, related to the recording of transactions and capitalization of software costs.
To address this weakness, the EPA plans to perform process improvements using Lean techniques; update and
clarify guidance, including the Personal Property Policy and Procedures Manual; and strengthen procedures for the
accounting, depreciation, and valuation of software projects. In FY 2015, the Deputy Chief Financial Officer
required Assistant and Regional Administrators to certify that the approved payments for the cost of in-
development software are in accordance with agency policy. The agency will review the certifications to
determine whether additional action is required.
The projected closure date for this material weakness is FY 2018.
Agency Weaknesses
Electronic Content Management at EPA: e-Discovery. Email Records and FOIA
Inconsistencies in how the agency stores, maintains, and assesses electronic content have begun to impact critical
processes related to electronic records management. The slow transition from paper-based records management
to electronic records management is increasing costs and reducing agency efficiency. The challenges pertain to
electronic content retrieval, electronic records management, and email retention.
To implement effective changes to content management practices within the agency, corrective actions must be
addressed enterprise-wide. An enterprise approach will allow for integration with the agency's lines of business
and replace current piecemeal or ad hoc approaches. To accomplish this, the agency is implementing a system for
the effective management of its information assets that includes a governance structure for content management
and the selection of enterprise tools as well as the formulation of new policies for content-management
responsibilities and processes.
The agency has taken the following corrective actions to address this weakness:
• Developed interim procedures to address the storage and preservation of electronically stored information.
• Launched two pilot projects to evaluate tools for e-Discovery and the management of email records.
• Updated the Records Management Policy to include electronic communications management and to
address Instant Messaging (IM) and the use of personal email accounts to conduct agency business.
• Developed Email Record Tool roll out in conjunction with Enterprise Email Platform standardization.
The agency has developed a corrective action plan that focuses on three subareas of electronic content
management: FOIA, email records and E-Discovery. Additionally, the agency has developed a validation strategy
that will assess the effectiveness of various activities undertaken to address the identified weakness. The
validation strategy will consist of processes that allow the Agency to review and determine whether policies and
tools are being implemented and used.
The projected closure date for this agency-level weakness is FY 2017.
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Streamlining EPA's Process for Developing Chemical Assessments Under IRIS
In its January 2009 High Risk Series, GAO identified "Transforming EPA's Processes for Assessing and Controlling
Toxic Chemicals" as a high-risk area. GAO's report stated that the agency needs to take actions to increase the
transparency of the Integrated Risk Information System (IRIS) and enhance its ability under the Toxic Substance
Control Act to obtain health and safety information from the chemical industry.
The agency released a new IRIS process for completing health assessments. The goals of the process were to
strengthen program management, increase transparency, and expedite the timeliness of health assessments. The
agency's National Center for Environmental Assessment has since completed 27 assessments, which include some
of the Agency's highest priorities, such as trichloroethylene, tetrachloroethylene and dioxin (noncancer). The
agency has made significant progress on several other high-profile assessments, such as formaldehyde, inorganic
arsenic, chromium VI, methanol, benzo[a]pyrene and Libby asbestos. In addition, the EPA's IRIS program is
developing assessments of health effects for chemicals found in environmental mixtures such as polycyclic
aromatic hydrocarbons, phthalates and polychlorinated biphenyls. These cumulative assessments will increase the
number of chemicals that are addressed by the IRIS program and are based upon the agency's expressed needs.
In 2014, EPA's regulatory programs (air, water, toxics and Superfund) and regional offices were asked to identify
their programmatic needs for IRIS assessments; based on the needs identified, the IRIS program will develop a
comprehensive and coordinated five-year work plan. The following enhancements and actions address many of
GAO's concerns, including issues related to transparency and development of timely and credible assessments:
• Incorporated public meetings early in the assessment development process to identify available
scientific information and any data gaps for the chemical being assessed.
• Increased the use of the IRIS website to share information about assessment schedules and public
meetings.
• Issued "stopping rules" to help ensure that IRIS assessments are not delayed by new research findings
or ongoing debate of scientific issues after certain process points have passed.
• Strengthened peer review practices, including establishing a standing committee of EPA's Science
Advisory Board and the Chemical Assessment Advisory Committee, for reviewing IRIS assessments and
evaluating conflicts of interest.
• Partnered with the National Academies' National Research Council to sponsor an NCR review of the
IRIS assessment development process and the changes being implemented or planned by EPA.
• Drafted the 2014 Report to Congress that describes the agency's progress and plan for implementing
the 2014 NRC recommendations.
EPA will continue to rely on reviews conducted by respected and independent scientific bodies to confirm that
actions being implemented are effectively improving the IRIS program.
The projected closure date for this agency-level weakness is FY 2017.
Strengthening the Agency's Management and Accounting of Personal Property and Software
In FY 2014, the EPA declared Strengthening the Agency's Property Management System an agency-level weakness.
Property management has been an audit issue for the past several years. Some of the challenges the agency has
faced are: procedures for capitalizing internal-use software do not produce required results in Compass;
coordination of processes for managing inventory across offices needs improvements; and, guidance related to the
assignment of accounting codes for property such as laboratory equipment is outdated and unclear. While the
agency has made several critical improvements to the management of property, there still exist an opportunity to
clarify and improve how we manage and account for personal property and software.
To address this weakness, the EPA will perform process improvements using Lean techniques; update and clarify
guidance, including the Personal Property Policy and Procedures Manual; and strengthen procedures for the
accounting, depreciation, and valuation of software projects.
In FY 2014, the agency completed corrective actions related to property management oversight For instance,
assets identified and acknowledged as unaccounted for were entered into the property management system
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(Maximo) and verified electronically. Additionally, the agency required all Senior Resource Officials to certify
semi-annually that assets are updated in accordance with EPA's property bulletin No. 14-004.
The remaining corrective actions for this agency-level weakness are expected to be implemented and completed by
2018.
Significant Deficiencies
EPA's Internal Controls over Accountable Personal Inventory Process Needs Improvements
During the FY 2014 Financial Statement Audit, OIG stated that the EPA reported a $2.6 million difference between
the amount of accountable personal property recorded in the property management system (Maximo) and the
amount of physical inventory for fiscal 2014.
To address this significant deficiency, the agency updated inventory records according to EPA's Property Bulletin
No. 14-004, identified and recorded the missing personal property records into Maximo, and required that Board
of Survey reviews occur more frequently.
The agency has completed all corrective actions for this significant deficiency.
EPA Did Not Capitalize Lab Renovations Costs
During the FY 2014 Financial Statement Audit, OIG found that the EPA did not capitalize approximately $8 million
of Research Triangle Park lab renovations.
To address this significant deficiency, the agency made modifications to the EAS system for the lab renovations
costs and reversed the JV in the accounting system.
The agency has completed all corrective actions for this significant deficiency.
EPA Did Not Properly Reconcile Accounts Receivable
During the FY 2014 Financial Statement Audit, OIG found that the EPA did not properly reconcile accounts
receivable subsidiary ledger to the general ledger. The EPA improperly treated a general ledger error as an
addition to the detail receivables and combined federal and non-federal receivables in the reconciliation.
To address this significant deficiency, the agency corrected many of the variances from the prior year in the third
and fourth quarter of FY 2014. The remaining variances were corrected in the second quarter of FY 2015.
Additionally, errors related to how the agency handled principal interest, handling charges and penalties were
completed during subsequent reconciliations. The agency has designed a framework that provides timely and
accurate reconciliations of federal and non-federal accounts receivables.
The agency has completed all corrective actions for this significant deficiency.
Unneeded Funds Not Deobligated Timely
During the FY 2014 Financial Statement Audit, OIG stated that the EPA did not deobligate or notify appropriate
offices to deobligate unneeded funds totaling $4.4 million.
To address this significant deficiency, the agency designed a new unliquidated obligation desktop tool that allows
the agency to enhance its monitoring of funds.
The agency has completed all corrective actions for this significant deficiency.
EPA Needs to Document Management's Approval for Authorizing Changes to the Accounting Posting
Module
During the FY 2014 Financial Statement Audit, OIG stated that the EPA does not officially document management's
approval when making updates to the recording of general ledger account activity within the Compass accounting
posting module.
To address this significant deficiency, the agency implemented a procedure to document, by way of email,
management's approval for authorizing changes to the accounting posting module.
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The agency has completed all corrective actions for this significant deficiency.
EPA Needs to Consistently Enforce Restricted Entry Access to Server Rooms
During the FY 2014 Financial Statement Audit, OIG found that personnel were granted access to server rooms
without proper approval and that unauthorized personnel had access to a server room door. The agency has
completed all corrective actions for this deficiency.
EPA Needs to Ensure that Information Technology Assets are Properly Monitored and Secured
During the FY 2014 Financial Statement Audit, OIG found that a card reader located at the Las Vegas server room
did not consistently log or document alerts of attempts by unauthorized users to gain access, while server racks
within the Breidenbach Center telecommunication room and the National Computer Center computer room were
unlocked.
To address this significant deficiency, the agency's Las Vegas Finance Center completed recertification of all IT
related security controlled area doors. Additionally, server room access control standard operating procedures
were modified to reflect new restrictions.
The agency has completed all corrective actions for this significant deficiency.
EPA Needs to Establish Procedures for Protecting Information Technology Assets from Environmental
Threats
During the FY 2014 Financial Statement Audit, OIG found that the EPA lacks processes to enable personnel to
monitor environmental factors that are used to protect IT assets.
To address this significant deficiency, the agency added humidity sensors in the server rooms, relocated server
room water sensors to a more appropriate location, and established 24-hour monitoring of temperature and
humidity levels in server rooms.
The agency has completed all corrective actions for this significant deficiency.
Cincinnati Finance Center Should Clear Suspense Transactions Timely
During the FY 2014 Financial Statement Audit, OIG stated that the Cincinnati Finance Center is not clearing
collection and disbursement transactions from the federal budget clearing (suspense) account within 60 days after
posting.
To address this significant deficiency, the agency performed regular follow-up with project officers stressing the
importance of timely payment approval/disapproval. Also, the agency continues to remind all SROs to monitor
outstanding invoices through the IA Approval Performance Report in an effort to reduce/eliminate delinquency.
The projected closure date for this significant deficiency is FY 2016.
EPA Property Management System Does Not Reconcile to its Accounting System Compass
During the FY2014 Financial Statement Audit, OIG indicated that the EPA did not reconcile $100 million of capital
equipment within its property management subsystem (Maximo) to relevant financial data within its accounting
system (Compass).
To address this significant deficiency, the agency improved business processes and verified that capital assets are
updated in the agency's Property Management System. Also, the agency resolved the differences between Compass
and Maximo as required by the Resource Management Directive System. The differences were partially due to data
conversion from IFMS to Compass.
The remaining corrective action for this significant deficiency is for the agency to resolve the software overhead
voucher differences between FAS & GL.
The projected closure date for this significant deficiency is FY 2016.
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to Finance Center
During the FY 2014 Financial Statement Audit, OIG found that the EPA and the Department of Justice did not timely
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forward 40 accounts receivable source documents totaling $61.7 million to finance centers for recording in the
agency's financial system.
To address this significant deficiency, the agency instructed personnel on the importance of providing timely
source documents to the Finance Center and updated guidance to require originating offices to timely forward the
Superfund Accounts Receivable Control Forms to the Finance Center. Additionally, the agency continues to have
quarterly meetings with DOJ to discuss changes in accounts receivable procedures and guidance.
The agency will follow up to ensure that EPA forwards the documents timely.
The projected closure date for this significant deficiency is FY 2016.
Improvements Needed in Controls for Headquarters Personal Property
During the FY 2010 Financial Statement Audit, the OIG identified improvements needed in the controls for
Headquarters personal property. During the FY 2010 Financial Statement Audit, the OIG identified improvements
needed in the controls for personal property at the EPA headquarters. The agency acknowledged several
significant challenges related to tracking personal property for which headquarters is accountable.
The agency continues to make progress in carrying out the corrective actions for this significant deficiency and in
strengthening the overall management of the personal property program. To date, the agency has completed all
but one of the corrective actions required to close this deficiency. The remaining corrective action includes
developing mandatory property training for all managers and revising the current property policy and procedures
manual.
The agency is on schedule to implement a new property tracking system that will include individual, as well as
location, tracking features. This system will also include contract property tracking features (implementation of
the new system is contingent upon the upgrades to the financial system).
The projected closure date for this significant deficiency is 2016.
EPA Should Improve Controls over Expense Accrual Reversals
During the FY 2012 Financial Statement Audit, the OIG declared that the agency did not reverse approximately $18
million of FY 2011 year-end expense accruals in FY 2012.
The agency is updating its policy for recognizing year-end accruals to require reconciliation of accruals and accrual
reversals.
The projected closure date for this significant deficiency is FY 2017.
Misstating Earned and Unearned Revenue for Superfund Special Accounts
During the FY 2015 Financial Statement Audit, OIG stated that the EPAmisstated $226,336,107 of earned and
unearned revenue, and incorrectly recorded $5,310,918 of Superfund accounts receivable as earned rather than
unearned revenue.
To address this significant deficiency, the agency changed its accounting practices to record special accounts
settlement proceeds and established procedures to ensure that special accounts funds are correctly recorded.
The agency has completed all corrective actions for this significant deficiency as of October 2015 and will report it
as closed in FY 2 016.
Reconciling Property and Financial Systems
During the FY2015 Financial Statement Audit, OIG found that the EPA did not reconcile $356.4 million of capital
equipment within Maximo (a property management system) to relevant financial data within Compass.
This significant deficiency was also identified during the FY 2014 Financial Statement Audit. The agency
currently has a corrective action plan to address this significant deficiency and will continue to research and
resolve differences between Compass and the property management system. The projected closure date for this
significant deficiency is FY 2016.
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Resolving Long-standing Cash Differences with the U.S. Treasury
During the FY 2015 Financial Statement Audit, OIG stated that the EPA did not resolve long-standing cash
differences of $2.6 million between EPA and U.S. Treasury cash balances.
To address this significant deficiency, the agency will work to resolve all internal cash differences to ensure that
the differences are resolved with the Treasury. The projected closure date for this significant deficiency is FY
2016.
Cincinnati Finance Center Should Clear Suspense Transactions Timely
During the FY 2015 Financial Statement Audit, OIG stated that the Cincinnati Finance Center (CFC) is not clearing
transactions from the federal budget clearing (suspense) account within 60 business days after posting.
This significant deficiency was also identified during the FY 2014 Financial Statement Audit. The agency
currently has a corrective action plan to address this significant deficiency and will continue to stress the
importance of clearing items out of the suspense account in a timely manner. The projected closure date for this
significant deficiency is FY 2016.
Reviewing Cancellation of Accounts Receivable and Collection Transactions
During the FY 2015 Financial Statement Audit, OIG stated that the EPA canceled 72 accounts receivable and 113
collection transactions without proper reviews of the justification and authorizing approval in Compass.
To address this significant deficiency, the agency has reviewed all of the cancellations to ensure that the
appropriate supporting documentation is included in Compass and in hard copy file, as appropriate. Also, the
agency will review its existing separation of duties policy to ensure that it is being implemented as designed. The
projected closure date for this significant deficiency is FY 2016.
Recording Accounts Receivable from a Superfund Judgment
During the FY 2015 Financial Statement Audit, OIG stated that the EPA did not record as a Superfund accounts
receivable more than $8 million of a $9 million judgment in a consent decree. Federal accounting standards require
agencies to record accounts receivable based on legal provisions.
To address this significant deficiency, the agency will continue to record the accounts receivable as provided in
legal documents and will thoroughly review documents to ensure receivables are established for the appropriate
amounts.
The agency has completed all corrective actions for this significant deficiency as of October 2015 and will report
this significant deficiency as closed in FY 2016.
Reconciling Accounts Receivable Subsidiary Ledgers and General Ledgers
During the FY 2015 Financial Statement Audit, OIG stated that the EPA did not properly reconcile its accounts
receivable subsidiary ledger to the general ledger. The EPA did not correct reconciliation variances, separately
reconcile federal and non-federal receivables, or develop accurate detail reports.
To address this significant deficiency, the agency designed a framework that provides separate timely and accurate
reconciliations of federal and non-federal accounts receivable. Implementation of the design is dependent on
version enhancements to Compass. The projected closure date for this significant deficiency is FY 2017.
Overbilling a State for a Superfund State Contract
During the FY 2015 Financial Statement Audit, OIG stated that the EPA overbilled a state $1,139,306 for one
Superfund State Contract EPA guidance directs regional finance and program offices to reconcile Superfund State
Contract (SSC) financial data by site.
To address this significant deficiency, the agency plans to issue new SSC model provisions to include an updated
final financial reconciliation provision and new language on periodic financial reviews. This action will help
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reinforce to states and regions the need to carefully track site-specific remedial action costs and state cost share
payments. The projected closure date for this significant deficiency is FY 2016.
Overseeing User Access to the Payment Tracking System
During the FY 2015 Financial Statement Audit, OIG stated that the EPA assumed responsibility for managing
oversight of users' access to the Payment Tracking System without ensuring the system had documentation
covering key account management procedures.
To address this significant deficiency, the agency plans to implement an internal control process for transferring
the management of an application's user access to the appropriate office. Additionally, the agency will conduct an
inventory of systems and create/update supporting access management documentation for each application. The
agency will develop a detailed corrective action plan that outlines the major milestones and completion dates to
address OIG recommendations.
Complying with Controls for Financial and Mixed-Financial Applications
During the FY 2015 Financial Statement Audit, OIG stated that the EPA's financial and mixed-financial applications
complied with 11 of the 28 required account management controls selected for review, or 39 percent.
To address this significant deficiency, the agency will review its account management documentation and make
any necessary updates/additions. The agency will develop a detailed corrective action plan that outlines the major
milestones and completion dates to address OIG recommendations.
Managing HelpDesk Procedures for Distributing Passwords
During the FY 2015 Financial Statement Audit, OIG stated thatthe EPA needs better HelpDesk procedures for
distributing passwords to users locked out of the agency's financial systems.
To address this significant deficiency, the agency will revise its procedures to include an encrypted email to users
in order to validate the user before the distribution of passwords. The agency will develop a detailed corrective
action plan that outlines the major milestones and completion dates to address OIG recommendations.
Improving a Travel System's Credit Card Data Protection
During the FY 2015 Financial Statement Audit, OIG stated that the EPA's Concur travel system (1) allows users
more access to credit card information than users need, and (2) lacks required independent reviews of the Concur
service provider's compliance with Payment Card Industry Data Security Standards.
To address this significant deficiency, the agency will work with the Concur service provider to evaluate the
feasibility of limiting visibility of credit card numbers for personnel with the Federal Agency Travel Administrator
role. Additionally, the agency will inform the GSA that the required assessments necessary to meet the Payment
Card Industry Data Security Standard are not being performed. The projected closure date for this significant
deficiency is FY 2 016.
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Summary of Financial Statement Audit
Audit Opinion
Restatement
Unmodified
No
Material Weaknesses
Property Management
Total Material Weaknesses
Beginning
Balance
1
1
New
0
0
Resolved
0
0
Consolidated
0
0
Ending
Balance
1
1
Summary of Management Assurance
Effectiveness of Internal Control Over Financial Reporting (FMFIA § 2) (A-123 Appendix A)
Statement of Assurance
Qualified
Material Weaknesses
Property Management
Total Material Weaknesses
Beginning
Balance
1
1
New
0
0
Resolved
0
0
Consolidated
0
0
Reassessed
0
0
Ending
Balance
1
1
Effectiveness of Internal Control Over Operations (FMFIA § 2)
Statement of Assurance
Unqualified
Material Weaknesses
Total Material Weaknesses
Beginning
Balance
0
New
0
Resolved
0
Consolidated
0
Reassessed
0
Ending
Balance
0
Conformance With Financial Management System Requirements (FMFIA § 4)
Statement of Assurance
Systems Conform to Financial Management System Requirements
Non-Conformances
Total Non-Conformances
Beginning
Balance
0
New
0
Resolved
0
Consolidated
0
Reassessed
0
Ending
Balance
0
Compliance With FFMIA
1. System Requirement
2. Accounting Standards
3. USSGL at Transaction Level
Agency
No lack of substantial
non-compliance noted
No lack of substantial
non-compliance noted
No lack of substantial
non-compliance noted
Auditor
No lack of substantial non-
compliance noted
No lack of substantial non-
compliance noted
No lack of substantial non-
compliance noted
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FREEZE THE FOOTPRINT
Consistent with Section 3 of the OMB Memorandum-12-12, Promoting Efficient Spending to Support Agency
Operations and OMB Management Procedures Memorandum 2013-02, the "Freeze the Footprint" policy
implementing guidance, all CFO Act departments and agencies shall not increase the total square footage of their
domestic office and warehouse inventory compared to the FY 2012 baseline.
Freeze the Footprint Baseline Comparison
Square Footage (SF)
FY 2012 Baseline
5,906,847
FY2014
5,671,794
Change
(235,053)
EPA's FTP baseline, derived from the agency's FY 2012 FRPP submission and FY 2012 GSA Occupancy Agreement,
is 5,906,847 square feet (SF). The Freeze the Footprint offset square footage is composed of office and warehouse
assets reported as excess to GSA. EPA's FTP total in FY 2014 was 5,671,794 SF, a reduction of 235,053 SF from the
baseline.
Reporting of Operation & Maintenance Costs-Owned and Direct Lease Buildings
Operations & Maintenance Costs
FY 2012 Reported Cost
$1,938,736
FY2014
$1,918,631
Change
($20,106)
The EPA remains committed to reducing its environmental footprint through efficient management of its real
property portfolio. The agency will continue to take steps to monitor and assess space utilization at each of its
facilities and will take the appropriate steps to reduce underutilized space. Additionally, the agency will continue to
implement sustainable design, construction, and operations/maintenance projects. In the coming years, the EPA
will continue to explore options for teleworking, office sharing, and hoteling as alternative work strategies once
associated costs and impacts are identified.
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SCHEDULE OF SPENDING
(unaudited]
The Schedule of Spending (SOS) presents an overview of how and where EPA is spending money. The SOS that
follows reflects total budgetary resources available to the agency, gross outlays, and fiscal year-to-date total
obligations for the agency.
"What Money is Available to Spend"
This represents the authority that EPA was given to spend by law and the status of that authority. In this section:
• "Total Resources" represents amounts approved for spending by law.
• "Less Amount Not Agreed to be Spent" represents amounts that EPA was allowed to spend but did not
take actions to spend.
• "Less Amount Not Available to be Spent" represents the amount of total budgetary resources that were
not approved for spending.
• "Total Amounts Agreed to be Spent" represents the amount of spending actions taken by EPA for the
fiscal year. This represents contracts, orders and other legally binding obligations of the federal
government to pay for goods and services when received.
"How was the Money Spent"
This identifies the major categories for which EPA made payments during the year. In this section:
• "Total Spending" represents the sum of all payments EPA made during each year against "Amounts
Agreed to be Spent". Balances include payments made to liquidate "Amounts Agreed to be Spent"
originating in both the current as well as from prior fiscal years.
• "Amounts Remaining to be Spent" represents the difference between "Total Spending" versus "Amounts
Agreed to be Spent". Since payments can relate to spending activity initiated in the current and prior years,
it is not unusual for total payments in a fiscal year to exceed the amount of the new spending actions
originated that year, that are reported under "Amounts Agreed to be Spent". When this condition occurs,
negative amounts will be displayed as the balance of "Amounts Remaining to be Spent".
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United States Environmental Protection Agency
Schedule of Spending
For the Fiscal Years Ending September 30, 2015 and 2014
(Dollars in Thousands)
What Money is Available to Spend?
Total Resources
Less: Amount Not Agreed to be Spent
Less: Amount Not Available to be Spent
Total Amount Agreed to be Spent
How was the Money Spent?
Environmental Programs and Management
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Travel
Leaking Underground Storage Tanks
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Financial Transfer
Travel
Superiund
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Travel
Science and Technology
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Travel
State and Tribal Assistance Grants
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Travel
Other Funds
Contracts
Grants
Payroll
Rent, Communications and Utilities
Structures and Equipment
Travel
Total Spending
Amounts Remianing to be Spent
Total Amounts Agreed to be Spent
2015
2014
14,474,129
3,941,984
47,466
$ 10,484,679
714,345
222,053
1,427,640
39,494
191,034
22,548
2,617,114
4,909
86,006
7,315
71
639
233
99,173
793,344
92,189
384,381
18,397
53,992
9,395
1,351,698
272,039
77,513
325,956
18,999
72,994
5,594
773,095
$ 80,796
4,210,342
606
23
34
32_
$ 4,291,833
$ 1,178,177
3,140
119,766
1,695
45,649
2,339
$ 1,350,766
$ 10,483,679
1,000
$ 10,484,679
14,638,896
894,141
2,068,195
11,676,560
785,725
232,514
1,528,866
29,707
184,390
18,819
2,780,021
3,069
92,469
8,001
177
666
1,000,000
274
1,104,656
904,521
93,383
410,303
17,201
55,325
8,266
1,488,999
288,222
75,557
346,761
14,304
71,371
4,984
801,199
35,128
4,147,445
266
33
4,182,962
1,220,443
23,931
227,065
1,047
54,430
2,005
1,528,921
11,886,758
(210,198)
11,676,560
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IMPROPER PAYMENTS COMPLIANCE
The Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments
Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and Recovery
Improvement Act of 2012 (IPERIA)3, requires executive branch agencies to review all programs and
activities annually, identify those that may be susceptible to significant improper payments and report the
results of their improper payment activities to the President and Congress through their annual Agency
Financial Report or Performance and Accountability Report
EPA is dedicated to reducing fraud, waste, and abuse and presents the following improper payment
information in accordance with IPIA, as amended; OMB implementing guidance in Circular A-12 3,
Appendix C, Requirements for Effective Measurement and Remediation of Improper Payments; and IPIA
reporting requirements contained in OMB Circular A-136, Financial Reporting Requirements.
In October 2014, OMB issued revised implementing guidance to federal agencies in the form of OMB
memorandum M-15-02, which directs agencies to take the following steps:
1) Review all programs and activities to identify those that are susceptible to significant improper
payments, defined as gross annual improper payments exceeding the statutory threshold of both 1.5
percent of program outlays and $10 million of all program or activity payments during the fiscal year
reported, or $100 million (regardless of the rate).
2) Obtain a statistically valid estimate of the annual amount of improper payments in programs and
activities that are identified as susceptible to significant improper payments.
3) Implement a plan to reduce improper payments in risk-susceptible programs or activities.
4) Report estimates of the annual amount of improper payments in risk-susceptible programs, activities
undertaken to reduce them, and progress achieved.
IPIA defines an improper payment as any payment that should not have been made or that was made in an
incorrect amount under statutory, contractual, administrative, or other legally applicable requirements.
Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including
inappropriate denials of payment or service, any payment that does not account for credit for applicable
discounts4, payments that are for the incorrect amount, and duplicate payments). An improper payment
also includes any payment that was made to an ineligible recipient for an ineligible good or service, or
payments for goods or services not received (except for such payments authorized by law). In addition,
when an agency's review is unable to discern whether a payment was proper as a result of insufficient or
lack of documentation, this payment must also be considered an improper payment
The term "payment" means any payment or transfer of federal funds (including a commitment for future
payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-federal
person, non-federal entity, or federal employee, that is made by a federal agency, a federal contractor, a
federal grantee, or a governmental or other organization administering a federal program or activity. The
term "payment" includes federal awards subject to the Single Audit Act Amendments of 1996 that are
expended by both recipients and sub-recipients.
3 From this point, unless otherwise indicated, the term "IPIA" denotes "IPIA, as amended by IPERA and IPERIA."
4 Applicable discounts are "only those discounts where it is both advantageous and within the agency's control to claim
them."
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The information in this report describes the agency's efforts to prevent, detect, and reduce improper
payments in its principal payment streams. EPA is committed to improving performance by taking
corrective action for any payment stream that is determined to be susceptible to significant improper
payments.
In this report, it should be noted that Tables 1 through 7 correspond to the tables required in OMB Circular
A-13 6, and Figures A through H provide additional data collected by the agency to demonstrate results of
its improper payments program.
I. Risk Assessments
OMB Circular A-12 3, Appendix C, requires that agencies conduct risk assessments of their programs or
activities to determine whether they are susceptible to significant improper payments. Since the definition
of an improper payment includes payments made to federal employees, the agency began incorporating the
payroll and travel payment streams into its improper payment reporting starting in the FY 2014 reporting
cycle, at which time the agency also began reporting on purchase cards. Payroll, travel, and purchase cards
were all determined to be at low risk of significant improper payments.
OMB guidance permits agencies to adopt a three-year risk assessment cycle for low risk programs.
However, EPA updated and expanded its qualitative risk assessments in FY 2015 to address an DIG
recommendation stemming from the following audit report, "EPA Complied with Improper Payment
Legislation, But Opportunities for Improvement Exist," dated May 1, 2015. The agency updated and
improved the quantitative risk assessments, providing a more complete and accurate reflection of the risks
associated with each payment stream. For FY 2015 reporting, the agency introduced qualitative risk
assessments in grants, contracts, and commodities, while continuing to perform quantitative assessments
in these areas.
The quantitative risk assessments developed by OCFO require an evaluation of the following 12 risk
factors, which are tailored from the OMB guidance:
• The age of the payment stream.
• The complexity of the payment stream with respect to determining correct payment amounts.
• The percentage of payment eligibility decisions made outside the agency.
• Whether the number or frequency of payments increased substantially.
• Whether there were major changes in the level of program funding.
• The impact of any major procedural changes.
• The impact of any changes in technology.
• The level, experience, and quality of training for personnel responsible for making program eligibility
determinations or certifying that payments are accurate.
• The level of risk associated with any audit or internal control findings.
• Whether the agency uses effective systems, techniques, and technologies to prevent or identify illegal,
improper, or erroneous purchases.
• The inherent risks of improper payments due to the nature of the payment stream or its operations.
• The risk of the payment stream in accordance with results from prior year improper payment work.
The qualitative risk assessments consist of a questionnaire and an integrated scorecard to evaluate a
variety of risk factors while also identifying internal controls designed to mitigate those risks. Directions
for completion are provided to the program managers of each payment stream, who assign a score to every
risk factor on a scale of 1 to 10. Each score is further supported by a brief narrative providing a rationale
for the selection. Upon completion, OCFO performs a calculation to tabulate the scorecard and normalizes
the scoring on a scale of 10 to 100, which is the overall risk rating assigned to the payment stream. If the
final score falls below 3 5, the payment stream is at low risk of significant improper payments; if the score is
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between 35 and 70, the payment stream is susceptible to significant improper payments; and if the score is
above 70, the payment stream is at high risk of significant improper payments.
By contrast, quantitative risk assessments involve testing expenditures to identify the potential for
significant improper payments. For FY 2015 reporting, the agency performed both quantitative and
qualitative risk assessments for grants, contracts, commodities, and payroll, while conducting statistical
sampling in its risk-susceptible programs — CWSRF, DWSRF, and Hurricane Sandy. Performing a
combination of both quantitative and qualitative risk assessments provides a more in-depth analysis of the
agency's payment streams for the purpose of determining susceptibility to significant improper payments.
For FY 2015 reporting, the majority of EPA's payment streams were determined to be at low risk of
significant improper payments. The agency's three risk-susceptible programs — CWSRF, DWSRF, and
Hurricane Sandy — remain below the statutory thresholds. However, the SRFs are deemed risk-susceptible
by OMB, and Hurricane Sandy is automatically considered risk-susceptible by statute. None of the agency's
programs were found to be at high risk of improper payments, defined as exceeding $750 million of annual
estimated improper payments. Figure A, "Risk Assessment Results," summarizes the status of the agency's
risk assessments for all payment streams.
Figure A: Risk Assessment Results
Payment Stream
Grants
Contracts
Commodities
Payroll
Travel
Purchase Cards
CWSRF
DWSRF
Hurricane Sandy
Type of Risk
Assessment
Both m
Both
Both
Both
Qualitative
Qualitative
Statistical sampling
Statistical sampling
Statistical sampling
Scope Period
for Reporting
CY 2 014C2)
FY2015
FY2015
FY2014
FY2014
FY2014
FY2014
FY2014
FY2014
Low Risk
X
X
X
X
X
X
Risk-
Susceptible
X
X
X
High Risk
(l) "Both" refers to a combination of quantitative and qualitative risk assessments.
(2) In this table, "CY" refers to "Calendar Year."
A) Grants
(l) In this table, "CY" refers to "Calendar Year."
(2) Values reported in this column reflect the results of transaction testing on active grant recipient reviews closed in
Calendar Year 2014. Other improper payments identified from audits, enforcement actions, and
overpayments/adjustments are reported in Table 6, "Overpayments Recaptured Outside of Payment Recapture
Audits."
The agency also responds to Single Audits and OIG Audits to recover improper payments. These are
additional sources of improper payments discovered outside the scope of transaction testing conducted
during the review of randomly selected recipients. In addition to the 99 recipient reviews reported above
in Figure B, there were 54 Single Audits and six OIG Audits closed in Calendar Year 2014. Improper
payments identified from these sources are separately reported in Table 6, "Overpayments Recaptured
Outside of Payment Recapture Audits." Table 6 also presents improper payments originating from Grant
Adjustments and other Enforcement Actions, which occur when a recipient draws down funds but does not
fully expend them before the award period ends, or when it has been determined that a recipient received
improper payments by other means. The excess funds must be returned to EPA prior to closeoutofthe
grant and are considered overpayments, which are tracked and recovered by OCFO's Las Vegas Finance
Center (LVFC).
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The agency maintains internal controls to help prevent improper payments in grants from occurring. Since
2008, EPA has implemented annual "baseline" monitoring of all active assistance agreements to review
fund drawdowns for appropriateness. As part of the baseline monitoring, each assistance agreement is
reviewed pro grammatically by a Project Officer and administratively by a Grants Specialist, both of whom
review financial drawdowns for consistency with the project's duration and progress. Any irregularities
found are examined with the recipient and further scrutinized when warranted. Project Officers also
review progress reports submitted by recipients to ensure that projects are on schedule and progress
matches the amount of funding used. Additionally, LVFC routinely monitors all grant payments for
irregularities.
B) Commercial Payments (Contracts and Commodities)
The contracts and commodities payment streams are collectively known as the commercial payments. The
commercial payment streams had very low error rates and were determined to be at low risk of improper
payments. Given the historically low percentage of improper payments in these payment streams, the
agency relies on its internal review process to detect and recover improper payments.
For FY 2015 reporting, in addition to performing the quantitative assessments of expenditures that are
completed annually, the commercial payment streams also completed qualitative risk assessments to gauge
the level of risk associated with the twelve risk factors tailored from the OMB guidance. Within each
payment stream, both the quantitative and qualitative risk assessment supported the low risk
determination.
The agency produces monthly improper payment reports for the commercial payment streams and uses
them as its primary tool for tracking improper payments. These reports identify the number and dollar
amount of improper payments, the source and reason for the improper payment, the number of preventive
reviews conducted, and the dollar amount of recoveries made for current and prior years.
The agency's commercial payments are subject to financial review, invoice approval, and payment
certification. Since all commercial payments are subject to rigorous internal controls, the agency relies
upon its system of internal controls to minimize improper payments. The following is a brief summary of
the internal controls in place over the agency's commercial invoice payment process.
The payment processing cycle requires that all invoices be subjected to rigorous review and approval by
separate entities. Steps taken to ensure payment accuracy and validity, which serve to prevent improper
payments from occurring, include 1) the RTF Finance Center's review for adequate funding and proper
invoice acceptance; 2) comprehensive system edits to guard against duplicate payments, exceeding ceiling
cost and fees, billing in wrong period of performance dates, and payment to wrong vendor; 3) electronic
submission of the invoice to agency Project Officers and Approving Officials for validation of proper receipt
of goods and services, period of performance dates, labor rates, and appropriateness of payment, citing
disallowances or disapprovals of costs if appropriate; and 4) review by the RTF Finance Center of
suspensions and disallowances, if taken, prior to the final payment certification for Treasury processing.
Additional preventive reviews are performed by the RTF Finance Center on all credit and re-submittal
invoices. Additionally, EPA Contracting Officers perform annual review of invoices on each contract they
administer, and DCAA performs audits on cost-reimbursable contracts at the request of the agency.
Figures C and D summarize the agency's improper payment results for the commercial payments.
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Figure C: EPA Review of Contract Payments
Fiscal Year
2015
2014
2013
2012
2011
$ Outlays
$1,222,897,753
$1,169,273,101
$1,298,210,581
$1,496,607,743
$1,600,132,236
Number of Erroneous
Payments
120 (of 27,173]
77 [of 27,266]
43 fof 29,645]
29 [of 33,473]
21 fof 38,965]
$ Improper Payments
$275,984
$424,550
$406,835
$953,672
$162,909
Improper Payment
Rate
0.02%
0.04%
0.03%
0.06%
0.01%
Figure D: EPA Review of Commodity Payments
Fiscal Year
2015
2014
2013
2012
2011
$ Outlays
$226,509,511
$227,625,587
$259,846,331
$289,557,789
$326,151,314
Number of Erroneous
Payments
161 (of 28,991]
65 (of 29,576]
197 (of 33,467]
50 (of 3 4,9 08]
44 (of 40,083]
$ Improper
Payments
$784,365
$490,347
$156,773
$363,567
$2,178,573
Improper Payment
Rate
0.35%
0.22%
0.06%
0.13%
0.67%
Vendors doing business with federal agencies occasionally offer discounts when invoices are paid in full
and within the specified discount period (e.g., within 10 days of billing). EPA makes its best effort to take all
discounts, as they represent a form of savings to the agency. However, there are valid reasons for which it
is not feasible to take every discount that is offered, including: 1) an insufficient discount period to process
a discounted payment, such as an expired or short period upon receipt of the invoice or when the approval
process exceeds the discount period; and 2) a situation in which it is not economically advantageous to take
the discount (i.e., the discounted amount is not economically advantageous in comparison to the Treasury's
current value of funds rate).
OMB guidance acknowledges these situations by clarifying the term "applicable discounts" as it relates to
the definition of an improper payment. The guidance specifies that "applicable discounts" are "only those
discounts where it is both advantageous and within the agency's control to claim them." As a result,
effective with FY 2015 reporting, the agency incorporated this definition into its improper payments
reporting process. All improper payments stemming from lost discounts meeting the OMB definition are
reported in Figures C and D.
C) Payroll
Following the enactment of IPERIA, which requires agencies to evaluate payments to federal employees as
a source of improper payments, EPA began assessing the risk of improper payments in its payroll payment
stream in the FY 2014 reporting cycle. The agency utilizes the prior fiscal year as the basis for improper
payments reporting in payroll. Therefore, for FY 2015 reporting, the agency disbursed over $2.35 billion in
payroll payments in FY 2014. To determine the level of risk associated with payroll, EPA performed both a
quantitative risk assessment using statistical sampling, in which no improper payments were identified, as
well as a qualitative risk assessment, examining the 12 previously identified risk factors. Both methods
confirmed that EPA payroll is at low risk of significant improper payments. The following paragraphs
summarize key internal controls related to the prevention, identification and recovery of improper
payments in the payroll payment stream.
Payroll is largely an automated process driven by the submission of employee T&A records and personnel
actions. As of June 2014, under the Human Resources Line of Business, EPAtransitioned from the Defense
Finance and Accounting System to the Interior Business Center (IBC). IBC has extensive experience as a
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payroll provider, as it provides personnel and payroll support to numerous federal agencies. This initiative
allowed the agency to comply with the OMB mandate and the Office of Personnel Management e-
government initiative in automating HR services and integrating payroll operations. The transition to the
IBC went smoothly with EPA and IBC working together to ensure minimum issues occurred. Any payroll-
related errors were identified through the normal edit processes which include the establishment of
accounts receivable if needed.
Once a debt is identified, the employee is notified of the debt, given the right to dispute the debt, and
provided payment options. Then an accounts receivable is recorded. For out-of-service debts, EPA
establishes the debt and tracks recovery status.
On a bi-weekly basis, employees, timekeepers and managers are required to attest, review or approve
employee time in the agency's T&A system, PeoplePlus, prior to the time entry and approval deadlines.
Automated reminder notifications are sent as needed. When corrections are made to an employee's
timesheet, PeoplePlus overwrites the original timesheet with the corrected version to prevent duplicate
payments. The original timecards, as well as all corrected entries, are maintained in the EPA Audit
Summary Page and the Payable Time Detail. OCFO's Office of Financial Services performs quarterly reviews
of all PeoplePlus access roles to identify separated employees who no longer need functional user access.
As an additional control, the recertification of roles assigned in PeoplePlus ensures that the authority to
approve employee time is only granted to the appropriate frontline managers and supervisors assigned to
review employee time. The review of certifications ensures that authorized managers have certified that
the hours reported on automatically approved timecards are accurate. Finally, EPA has eliminated or
enforced various processes (e.g., Mass Approval, Default Pay, placing stop and start dates in PeoplePlus
where the pay cap lift cannot exceed 90 days) that will reduce the number of overpayments in payroll.
D) Travel
The agency's travel program updated its qualitative risk assessment for FY 2015 reporting and continues to
use the preceding fiscal year as the scope period for reporting improper payments. In FY 2014, there were
$37.1 million of outlays in the travel program, which is administered by the OCFO's Cincinnati Finance
Center. The agency's qualitative risk assessment for travel evaluates a variety of improper payment risk
factors, which include the 12 that were tailored from the OMB guidance, as well as the following eight risk
factors, which were tailored from the Government Charge Card Abuse Prevention Act of 2012:
• Whether there is a record of each travel card holder in the agency, annotated with the limitations on
amounts that are applicable to the use of each card by the card holder.
• Whether rebates and refunds based on prompt payment, sales volume, or other actions by the agency
on travel charge card accounts are reviewed for accuracy or properly recorded as a receipt to EPA.
• Whether periodic reviews are performed to determine whether each travel charge card holder has a
need for the travel charge card.
• Whether appropriate training is provided to each travel charge card holder or each official with
responsibility for overseeing the use of travel charge cards.
• Whether the agency has specific policies regarding travel charge cards issued by various component
organizations and categories of component organizations, the credit limits authorized for various
categories of card holders, and categories of employees eligible to be issued travel charge cards.
• Whether the agency has specific policies to ensure that its contractual arrangement with each travel-
charge-card-issuing contractor contains a requirement that a person's credit-worthiness be evaluated
before that person is issued a travel charge card, and that no one be issued a travel charge card who is
found not credit-worthy as a result of the evaluation.
• Whether the agency ensures that the travel charge card of each employee who ceases to be employed
by the agency is invalidated immediately upon termination of employment.
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• Whether the agency ensures that travel card payments are issued directly to the travel card-issuing
bank for credit to the employee's individual travel charge card account (where appropriate).
Based on the evaluation of all twenty risk factors, it was determined that the agency's travel program is at
low risk of significant improper payments.
E) Purchase Cards
The agency's purchase card program updated its qualitative risk assessment for FY 2015 reporting and
continues to use the preceding fiscal year as the scope period for reporting improper payments. In FY 2014,
there were $23.7 million of outlays made by the purchase card program, which is administered by OARM's
Office of Acquisition Management and is supported by OCFO's Cincinnati Finance Center. The agency's
qualitative risk assessment for purchase cards evaluates a variety of risk factors, which include the 12 that
were tailored from the OMB guidance, as well as the following 11 risk factors tailored from the Government
Charge Card Abuse Prevention Act of 2012:
• Whether there is a record of each purchase card holder in the agency, annotated with the limitations
on single transactions and total transactions that are applicable to the use of each such card or check
by that purchase card holder.
• Whether purchase card holders and individuals issued a convenience check are assigned an
approving official other than the card holder with the authority to approve or disapprove
transactions.
• Whether purchase card holders and authorizing officials reconcile charges with receipts and other
supporting documentation or forward summary reports to the certifying official in a timely manner
to enable the certifying official to ensure that only valid charges are paid.
• Whether disputed purchase card charges and discrepancies between receipts and other supporting
documentation are resolved in accordance with the GSA government-wide contract
• Whether payments on purchase card accounts are made promptly within prescribed deadlines to
avoid interest penalties.
• Whether records of each purchase card transaction (including records on associated contracts,
reports, accounts, and invoices) are retained in accordance with standard government policies on the
disposition of records.
• Whether periodic reviews performed to determine whether each purchase card holder has a need for
the purchase card.
• Whether appropriate training is provided to each purchase card holder and each official with
responsibility for overseeing the use of purchase cards.
• Whether the agency has specific policies regarding the number of purchase cards issued by various
component organizations and categories of component organizations, the credit limits authorized for
various categories of card holders, and categories of employees eligible to be issued purchase cards.
• Whether the agency immediately invalidates the purchase card of any employee who ceases to be
employed by the agency or transfers to another office, unless the new office is covered by the same
purchase card authority.
• Whether the agency takes steps to recover the cost of illegal, improper, or erroneous purchases made
with a purchase card or convenience check by an employee, including through salary offsets if
necessary.
Based on the evaluation of all 2 3 risk factors, it was determined that the purchase card program is at low
risk of significant improper payments.
II. Statistical Sampling
A) State Revolving Funds
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The SRFs are state-administered programs that provide federal funds to the states and Puerto Rico to
capitalize revolving loan fund programs. The states receive invoices from fund recipients, review them for
eligibility and accuracy, and electronically submit cash draw requests for batches of invoices to EPA. A cash
draw is a disbursement from Treasury for the payment of state grants. Each disbursement can refer to a
single invoice or a batch of invoices. The agency makes payments to the revolving loan funds and conducts
annual onsite reviews in each state. During the Agency's state reviews, EPA conducts improper payment
sampling, reviews invoices for eligibility, confirms that the total amount of invoices matches the amount of
cash draw, and examines accounting records to confirm that the states made matching deposits.
The SRFs are deemed by OMB to be risk-susceptible programs. In FY 2013, the agency developed a rigorous
sampling methodology to determine a statistically valid estimate of improper payments for each SRF. This
methodology continues to be applied annually and is used to calculate error rates for each SRF, which are
published in Table 1, "Improper Payments Reduction Outlook."
The statistical sampling methodology used for the CWSRF and DWSRF programs draws a random,
statistically valid, stratified sample of payments made by each SRF during the preceding federal fiscal year.
For FY 2015 reporting, statistical sampling was conducted on each SRF's universe of FY 2014 payments.
The samples were randomly selected and stratified by dollar amount, then tested for improper payments
during the annual state reviews conducted by the agency's financial analysts. In states where no samples
were randomly selected for review, supplemental transaction testing was conducted to ensure that at least
four transactions were reviewed per state. Results of these supplemental reviews are reported in Table 4,
"Improper Payment Recaptures with and without Audit Programs."
The sampling methodology for the CWSRF and DWSRF programs provides a sample size sufficient to
estimate the proportion of erroneous payments within a margin of error of plus or minus 2.5 percent and a
90 percent confidence level. The CWSRF and DWSRF samples conservatively assume an estimated
proportion of erroneous payments of 3.0 percent. Given the variability in the distribution of dollar
payments within each SRF, the agency uses stratified random sampling, which involves a greater
probability of selecting larger payments relative to the smaller payments and increases the precision of the
estimated percentage of erroneous payments. The dollar value of sampled DWSRF payments represents 9
percent of all DWSRF dollars paid. Similarly, the dollar value of sampled CWSRF payments represents 21
percent of all CWSRF dollars paid. The following figures provide an overview of the sampling undertaken in
each SRF for FY 2015 reporting. Sampling results are presented in the "Improper Payment Reporting"
section.
Figure E: Stratification of Clean Water State Revolving Fund Payments (i)
Stratum
1
2
Payment Range
<$100,000
$100,000-$999,999
$1,000,000-$1,499,999
$l,500,000-$3,499,999
$3,500,000-$9,999,999
$10,000,000-$39,999,999
>$40,000,000
Total
Total
Number of
Payments
1,116
824
88
162
65
16
2
2,273
Total Dollars
$28,618,097
$313,714,780
$105,712,646
$370,633,791
$360,682,623
$228,107,930
$142,456,700
$1,549,926,568
Number
of
Payments
Sampled
21
14
0
59
22
4
0
120
Dollars Sampled
$647,740
$5,838,870
$0
$134,287,067
$126,549,606
$57,761,527
$0
$325,084,810
(1) Amounts may not sum to total due to rounding.
228
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Figure F: Stratification of Drinking Water State Revolving Fund Payments (i)
Stratum
1
2
Payment Range
<$100,000
$100,000-$499,999
$500,000-$2,099,999
$2,100,000-$8,399,999
$8,400,000-$33,599,999
>$33,599,999
Total
Total
Number of
Payments
2,884
1,169
435
59
9
1
4,557
Total Dollars
$73,004,143
$270,777,260
$400,617,131
$220,943,881
$161,327,291
$36,233,041
$1,162,902,746
Number
of
Payments
Sampled
24
12
79
8
0
0
123
Dollars Sampled
$507,228
$2,745,653
$70,699,750
$30,202,248
$0
$0
$104,154,880
(1) Amounts may not sum to total due to rounding.
B) Hurricane Sandy
On January 29, 2013, the President signed into law the Disaster Relief Appropriations Act, which provides a
total of $50.5 billion in aid for Hurricane Sandy disaster victims and their communities. EPA was
appropriated over $600 million of funds under the Act for Hurricane Sandy recovery and other disaster-
related activities. The funding includes $500 million for CWSRF, $100 million for DWSRF, and $7 million for
non-SRF grants. Sequestration reduced these amounts by 5 percent for a total of $577 million.
Pursuantto OMB Memorandum M-13-07, Accountability for Funds Provided by the Disaster Relief
Appropriations Act, programs and activities receiving funds under the Act were automatically deemed
susceptible to significant improper payments and were required to calculate and report an improper
payment estimate. As a result, EPA designed a statistical sampling plan for testing Hurricane Sandy
expenditures. The sampling plan describes the methodology used for deriving a statistically valid estimate
of improper payments. The Agency implemented the sampling plan for use inFY 2014 reporting and
beyond, grouping all Hurricane Sandy appropriated funds into a consolidated payment stream, stratifying
them by component payment stream, conducting statistical sampling within each stratum, and reporting
improper payments on the basis of expenditures made during the preceding fiscal year. For FY 2015
reporting, no improper payments were identified in the statistical sample.
The agency applies a disproportionate stratified random sampling methodology to select payments for
review. For FY 2015 reporting, the Hurricane Sandy payment population was divided into four strata by
payment type, including grants, contracts, commodities, and payroll. Within each stratum, a simple random
sample of payments was selected for review. The strata for grants, contracts, and commodities were
sampled in their entirety due to the small number of actual transactions, and the stratum for payroll was
sampled in proportion to the dollars within that stratum. The impact of this stratification approach is to
maximize the total number of dollars being selected for review while also ensuring the efficient use of
agency resources. It is important to note that the stratum for grants-related expenditures includes all SRF
and non-SRF grant draws. However, since SRF funds were obligated in September 2014 and actual SRF
draws began in FY 2015, they will be sampled and reported starting with FY 2016 reporting.
Given the time required to plan, design and build complicated construction projects, EPA forecasts that the
states will expend the SRF portion of the Hurricane Sandy funding over many years. For this reason, the
agency requested and obtained a waiver from OMB from the Act's two-year expenditure requirement
Improper payment sampling will continue annually until all funds have been expended.
Figure G, "Stratification of Hurricane Sandy Payments," summarizes the population of Hurricane Sandy
expenditures sampled from FY 2014 expenditures. No improper payments were identified.
229
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Figure G: Stratification of Hurricane Sandy Payments (i)
Payment
Type
Payroll
Contracts
Commodities
Grants
Total
Total Number of
Payments
151
25
8
2
186
Total Dollars
$245,684
$658,863
$86,270
$303,853
$1,294,671
Payments
Sampled
57
9
8
2
76
Dollars
Sampled
$80,828
$174,915
$86,270
$303,853
$645,865
(1) Amounts may not sum to total due to rounding.
III. Improper Payment Reporting
Table 1, "Improper Payment Reduction Outlook," summarizes the agency's improper payment results in its
risk-susceptible programs, which include the Clean Water SRF, Drinking Water SRF, and Hurricane Sandy.
Table 1: Improper Payment Reduction Outlook (i)
[$ in millions)
Program
Clean
Water
SRF C2)
Drinking
Water
SRFC2)
Hurricane
Sandy (5)
Total
FY14
Outlays
$2,102
$1,032
$0.4
$3,134.4
FY14
IP%
0.22%
1.29%
0%
0.58%
FY14
IP$
$4.7
$13.4
$0
$18.1
FY15
Outlays
$1,549.93
$1,162.90
$1.29
$2,714.12
FY15
IP%
0.10%
0.19%
0.03%
0.14%
FY15
IP$
$1.51
P)
$2.23
P)
$.0004
$3.74
FY15
Over-
pmt
$0.90
(4)
$1.92
(4)
$.0004
$2.82
FY15
Under-
pmt
$0.61
(4)
$0.31
(4)
$0.00
$0.92
FY16
Est.
Outlays
$1,378.30
(est.)
$873.74
(est.)
$11.55
(est.)
$2,263.59
FY16
Est.
IP%
1.45%
target
1.99%
target
1.50%
target
1.66%
FY16
Est.
IP$
$19.99
(est.)
$17.39
(est.)
$0.173
(est.)
$37.55
FY17
Est.
Outlays
$1,269.19
(est.)
$940.20
(est.)
$138.62
(est.)
$2,348.01
FY17
Est.
IP%
1.43%
target
1.98%
target
1.50%
target
1.65%
FY17
Est.
IP$
$18.15
(est.)
$18.62
(est.)
$2.08
(est.)
$38.85
FY18
Est.
Outlays
$1,156.11
(est.)
$1,009.30
(est.)
$121.30
(est.)
$2,286.71
FY18
Est.
IP%
1.40%
target
1.97%
target
1.50%
target
1.66%
FY18
Est.
IP$
$16.19
(est.)
$19.88
(est.)
$1.82
(est.)
$37.89
(l) In this table, the fiscal year designations in each column refer to the year in which improper payment results are
reported. Since the SRFs and Hurricane Sandy report improper payments on the basis of expenditures made during the
prior fiscal year, the actuals data displayed in this table are derived from the statistical sampling of prior year
expenditures. For example, the outlays displayed in the "FY14 Outlays" column represent FY 2013 actuals, and the
outlays displayed in the "FY15 Outlays" column represent FY 2014 actuals. The out-year estimates are not similarly
adjusted; for example, the "FY16 Est. Outlays" column represents current projections for outlays in FY 2016, which
would be eligible for statistical sampling and reporting in the FY 2017 APR.
(2) The reduction targets provided for CWSRF and DWSRF are aggressive yet also realistic. They are consistent with each
program's historical record of performance while also encouraging the maintenance of improper payment rates to
levels that are near or below the statutory threshold for significant improper payments. From FY 2013 to FY 2015, the
actual improper payment rates in both SRFs declined dramatically. During this period, the CWSRF error rate declined
by 86%, and the DWSRF error rate declined by 95%. Thus, both programs have set appropriate out-year reduction
targets that are designed to sustainably maintain improper payment reductions over the long term.
(3) These are estimates derived by extrapolating the error rate identified from statistical sampling to the full population of
each program's payments.
(4) These are estimates derived by taking the ratio of actual overpayments and underpayments to total errors in the
sample, then multiplying each ratio by the estimate of total improper payments calculated for each SRF.
The out-year reduction targets for Hurricane Sandy are maintained at 1.5% as a projection because these funds have
not been fully measured due to the timing of the awarding of grant funds. However, once an actual improper payment
rate has been established for FY 2016 reporting, the out-year reduction targets will be re-evaluated.
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IV. Improper Payment Root Cause Categories
Table 2, "Improper Payment Root Cause Category Matrix," classifies by root cause all improper payments
identified in the agency's risk-susceptible programs.
Table 2: Improper Payment Root Cause Category Matrix (i) (2)
[$ in millions)
Reason for Improper Payment
Program Design or Structural Issue
Inability to Authenticate Eligibility
Death Data
Financial Data
Excluded
Failure to Party Data
Verify: Prisoner Data
Other
Eligibility
Data
Federal
Administrative Agency
or Process StateorLocal
Error Made .
Agency
uy' Other Party
Medical Necessity
Insufficient Documentation to
Determine
Other Reason
Total
CWSRF
Overpay
$0.90
$0.90
Underpay
$0.61
$0.61
DWSRF
Overpay
$1.92
$1.92
Underpay
$0.31
$0.31
Hurricane Sandy
Overpay
$0.0004
$0.0004
Underpay
$0.00
(1) CWSRF, DWSRF, and Hurricane Sandy report improper payments from the preceding fiscal year.
(2) The figures presented in this table are extrapolated estimates. See Table 1, note #3 for farther explanation.
V. Corrective Actions
This section is not required, as none of the agency's payment streams exceed the statutory threshold for
significant improper payments. While it is not required, Figure H, "Status of Corrective Actions for Risk-
Susceptible Programs," provides an update of corrective actions that were successfully implemented over a
multi-year period, demonstrating how EPA has consistently strengthened its oversight over risk-
susceptible programs.
231
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Figure H: Status of Corrective Actions for Risk-Susceptible Programs
Description
Utilize documentation of state internal
control procedures.
Provided feedback to regional offices on
improving compliance with PERs and
transaction testing worksheets.
Publish DWSRF Eligibility Handbook.
Tested a selection of cash draws with a
negative dollar value.
Conducted webinars, including materials
on improper payments and internal
controls, audits, and proportionality.
Conducted training for regions/states.
Participated in state annual reviews to
ensure proper understanding of SRF
proportionality and transaction testing.
Developed clarifying materials on
adequate documentation.
Developed a spreadsheet to track the
recovery of prior year improper
payments.
Published revised standard operating
procedures on transaction testing.
Developed a robust sampling
methodology for identifying improper
payments.
Designated senior agency official for
ensuring SRF compliance with IPIA.
Conducted training for regions to ensure
a proper understanding of SRF
proportionality errors.
Compared the Program Evaluation
Reports and transaction testing
worksheets to ensure data integrity.
Determined baseline measurements for
current year reporting and set
appropriate out-year reduction targets.
Program
DWSRF
Both SRFs
DWSRF
Both SRFs
DWSRF
Both SRFs
CWSRF
DWSRF
Both SRFs
Both SRFs
Both SRFs
Hurricane
Sandy
Both SRFs
Both SRFs
Both SRFs
Both SRFs
Hurricane
Sandy
Target
Completion
FY2015
FY2015
FY2015
FY2014
FY2014
FY2014
FY2014
FY2014
FY2014
FY2013
FY2013
FY2014
FY2013
FY2013
FY2013
FY2013
FY2014
Status
Completed in
FY2015.
Completed in
FY2015.
In progress
Completed in
FY2014.
Completed in
FY2014.
Completed in
FY2014.
Completed in
FY2014.
Completed in
FY2014.
Completed in
FY2014.
Completed in
FY 2013 and
FY2014.
Completed
and updated
annually.
Completed in
FY2013.
Completed in
FY2013.
Completed in
FY2013.
Completed in
FY2013.
Completed in
FY2014.
Anticipated Results
Strengthen state procedures.
Provide ongoing feedback throughout the year
while also holding a joint training for the
Regions to address common questions and
concerns.
Reduce improper payments due to ineligible
expenses.
Determined whether large negative draws are
refunds of previous erroneous cash draws
made by the state. Will be performed annually.
Strengthen internal controls and oversight of
both programs.
Improve transaction testing to ensure accuracy
in reporting.
Ensure a better understanding of SRF
proportionality to reduce improper payments.
Reduce improper payments due to inadequate
documentation. Presented at the DWSRF
webinar "Improper Payments & Internal
Controls."
Ensure prompt resolution of improper
payments and more accurate reporting of
recovered and outstanding amounts.
Ensure consistency in improper payments
reporting across the regions and incorporate
DIG recommendations from prior year IPIA
audits.
The methodologies are statistically valid,
providing the level of precision required by
OMB and allowing EPA to identify the root
causes of error while ensuring accurate results.
Appointed the Office of Water's Deputy
Assistant Administrator as the senior agency
official responsible for SRF compliance with
IPIA.
Applied lessons learned and clarified when
certain payments should be identified as
improper to ensure greater accuracy in
reporting.
Improved internal business processes to
capture improper payments from multiple
sources. Will be performed annually.
Provided an accurate reflection of each
program's improper payment rate and
established reasonable reduction targets over
time. Reduction targets are reviewed annually
for appropriateness.
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VI. Internal Control over Payments
This section is not required, as none of the agency's payment streams exceed the statutory threshold for
significant improper payments. Therefore, Table 3, "Status of Internal Controls," is not presented here.
Nevertheless, the agency maintains internal control over payments in each of its payment streams in order
to prevent, detect, and recover improper payments.
VII. Accountability
This section is not required, as none of the agency's payment streams exceed the statutory threshold for
significant improper payments. However, the agency continues to strengthen internal controls in key
payment processes and has taken steps to hold agency managers accountable for reducing and recovering
improper payments. In FY 2013, the Office of Water's Deputy Assistant Administrator was designated as
the senior agency official for ensuring compliance of the CWSRF and DWSRF programs with IPERA. The
agency's improper payments program is overseen by OCFO to ensure compliance with all IPERA reporting
requirements, and action is taken by appropriate program officials to identify and recover improper
payments. As previously noted, the agency revised qualitative risk assessments in FY 2015 and took other
corrective actions to address OIG audit recommendations.
VIII. Agency Information Systems and Other Infrastructure
This section is not required, as none of the agency's payment streams exceed the statutory threshold for
significant improper payments. However, the agency's internal controls, human capital, information
systems, and other infrastructure are sufficient to monitor the reduction of improper payments to targeted
levels.
IX. Barriers
This section is not required, as none of the agency's payment streams exceed the statutory threshold for
significant improper payments. However, there are no statutory or regulatory barriers limiting the agency's
corrective actions in reducing improper payments.
X. Recapture of Improper Payments Reporting
IPERA requires agencies to conduct payment recapture audit reviews in any program expending more than
$1 million annually. EPA's payment streams meet this requirement, so payment recapture activities are
performed in every payment stream, and the work is performed internally by agency employees who
continuously monitor each payment stream to identify and recapture overpayments. Past experience
demonstrated that the low dollar value of improper payments recovered by an external payment recapture
auditor resulted in an effort that was not cost-effective for the contractor to continue performing recapture
activities. Therefore, EPA no longer uses a private firm to recapture overpayments and operates an internal
program with agency resources. The results of the agency's efforts to identify and recover overpayments
are published annually in the APR. The agency's payment recapture audit program is part of its overall
program of internal control over disbursements, which includes establishing and assessing internal
controls to prevent improper payments, reviewing disbursements to identify improper payments,
assessing root causes of error, developing corrective action plans where appropriate, and tracking the
recovery of overpayments. The specific actions and methods used to prevent, identify, and recover
overpayments are described more specifically within each program's APR narrative, and each payment
stream follows agency-wide improper payments guidance, in addition to established internal procedures.
Within the agency's low risk programs, EPA takes steps to minimize errors to the extent possible. In
contracts and commodities, improper payments may include typographical errors, payments to incorrect
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vendors, duplicate payments, or lost discounts. For grants, the errors principally consist of ineligible
expenses and lack of supporting documentation. For payroll, out-of-service debt is a known cause of error,
which occurs when an employee leaves the agency and owes funds back to EPA following separation. For
travel, improper payments may include ineligible expenses, and for purchase cards, improper payments
may include ineligible purchases. When an overpayment is identified, the appropriate finance center
establishes an account receivable, and existing procedures are followed to ensure prompt recovery.
To recover improper payments in grants, EPA's OGD reconciles information unallowable cost repayment
information from LVFC with data posted in the Grantee Compliance and Recipient Activity Database. When
improper payments are identified, LVFC establishes a receivable, and EPA staff follows up with the
recipient to recapture all improper payments. In instances where it is unclear whether unallowable costs
have been recaptured, or if there is limited information in the database addressing how unallowable costs
were recovered, the Compliance Team follows up with the Grants Management Officer (GMO) assigned to
the respective assistance agreement to ensure that all supporting documentation related to an action is
uploaded into the GC&RA Database. And to help prevent improper payments in grants, OGD conducts pre-
award certification of all recipients that receive awards in excess of $200K to ensure their written policies
and procedures specify acceptable administrative, financial management systems and internal controls to
safeguard federal funds prior to issuance of the grant award; re-certifications are conducted every four
years. GMOs are also required to ensure that recipients are not listed in the Excluded Parties List System
within the System for Award Management (SAM). Additionally, EPA conducts annual baseline monitoring
reviews of all recipients to ensure overall compliance with assistance agreement terms and conditions, as
well as all applicable federal regulations. Furthermore, recipients that have been deemed "high-risk" are
put on a reimbursement payment plan and are required to submit cost documentation (receipts, invoices,
etc.) in support of allowable costs for review and approval, prior to receiving reimbursement for those
costs. Furthermore, to strengthen internal controls regarding improper payments, EPA is currently revising
its "Pre Award Certification" Training program to include provisions for the implementation of the Uniform
Grants Guidance. In addition, OGD is currently developing a standard operating procedure for Grant
Specialists to use when conducting administrative advanced reviews in order to ensure consistent review
and analysis of recipient documentation.
For contracts and commodities, numerous training sessions have been conducted, and standard operating
procedures have been reviewed and updated to ensure the most current processes are properly
documented. Any significant changes in policy or procedures are communicated in a timely manner. Due to
the inclusion of lost discounts as improper payments, there has been an increase in the number of
improper payments reported as compared to prior years. However, EPA continues to explore ways in
which the "discount taken" rate can be increased in order to reduce improper payments.
In the purchase card program, the agency implemented a block of an additional 130 Merchant Category
Codes to prevent transactions considered high risk, including codes considered non-applicable for routine
agency purchase card transactions. Transactions are declined at the point of sale. For blocked transactions,
cardholders are required to contact the purchase card program office to discuss the acquisition and
provide written supporting documentation for the purchase which is reviewed by a team member.
Determinations are made on a case-by-case basis providing closer review and scrutiny of transactions.
These controls reduce potential risks associated with abuse or misuse. EPA also utilizes the following
charge card vendor reports to detect possible card misuse: suspected split transactions, transactions
greater than $3,000, declined transaction report, inactive 365+ day report, approving official span of
control, bars/restaurant transaction report, training officer report, and convenience check report
Within the agency's risk-susceptible programs, which consist of CWSRF, DWSRF, and Hurricane Sandy, EPA
has a greater focus on the prevention of improper payments. Errors typically arise from duplicate
payments, funds drawn from the wrong account, incorrect proportionality used for drawing federal funds,
ineligible expenses, transcription errors, or inadequate cost documentation. In FY 2015, EPA conducted
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eleven training sessions for the state SRF programs. During each of the training sessions, identification and
reduction of improper payments was discussed. Identifying and reducing improper payments was also
discussed at a recent EPA/state SRF workgroup meeting where attendance included 150 state SRF staff.
EPA Regions are required to conduct annual reviews of state SRF programs using checklists developed by
Headquarters. Included in the checklist are questions about improper payments which the Regions discuss
with the state SRF staff during the reviews.5. Many of the payment errors are immediately corrected by the
state or are resolved by adjusting a subsequent cash draw. For issues requiring more detailed analysis, the
state provides the agency with a plan for resolving the improper payments and reaches an agreement on
the planned course of action. The agreement is described in EPA's Program Evaluation Report, and the
agency follows up with the state to ensure compliance. Figure H, "Status of Corrective Actions for Risk-
Susceptible Programs," provides an overview of the multi-year efforts undertaken by the agency to both
prevent and reduce improper payments within EPA's largest programs.
Despite the agency's best efforts to collect all overpayments, some overpayments are unrecoverable. For
example, for current year reporting, one grant overpayment totaling $575K was determined to be
unrecoverable due the bankruptcy of the recipient In addition, prior year amounts totaling $307K were
determined to be unrecoverable due to a recipient having been dissolved. Both cases were referred to DOJ
for resolution. For contracts and commodities, there were unrecoverable overpayments totaling $119K for
contracts and $16K for commodities due to lost discounts. Lost discounts occur when the agency is unable
to pay an invoice within the time period specified by the vendor and are uncollectible by their very nature.
The tables that follow provide detailed information concerning the agency's efforts to identify and
recapture improper payments across all payment streams.
5 Since most of the Hurricane Sandy funding is SRF related, Hurricane Sandy will follow the same process and
procedures as the SRFs. No improper payments were identified in Hurricane Sandy funding for current year
reporting, so there are no recoveries to report.
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Table 4: Improper Payment Recaptures with and without Audit Programs d) ra (3)
[$ in millions)
Program
or
Activity
CWSRF
DWSRF
Grants
Contracts (4)
Commodities
(4)
Hurricane
Sandy
Payroll
Travel
Purchase
Cards
Other (5)
Total
Overpayments Recaptured Through Payment Recapture Audits
Contracts
Amount Identified
$0.15
$0.59
$0.75
Amount
Recaptured
$0.14
$0.57
$0.71
CD
4_>
re
B:
CD
&H
3
n
re
u
CD
B:
u
92.8%
96.2%
95.5%
CY+1 Recapture
Rate Target
92.5%
93.0%
n/a
CY+2 Recapture
Rate Target
93.0%
93.5%
n/a
Grants
Amount Identified
$0.27
$0.16
$0.11
$.0004
$0.54
Amount
Recaptured
$0.27
$0.15
$0.11
.0004
$0.53
CY Recapture Rate
100%
93.5%
100%
100%
98.1%
CY+1 Recapture
Rate Target
90.5%
90.5%
88.0%
90.5%
n/a
CY+2 Recapture
Rate Target
90.6%
90.6%
89.0%
90.6%
n/a
Other
Amount Identified
$0.00
Amount
Recaptured
$0.00
CD
4_>
re
CD
&H
3
n
re
u
CD
B:
u
n/a
CY+1 Recapture
Rate Target
n/a
CY+2 Recapture
Rate Target
n/a
Total
Amount Identified
$0.27
$0.16
$0.11
$0.15
$0.59
$.0004
$0.00
$0.00
$0.00
$0.00
$1.29
Amount
Recaptured
$0.27
$0.15
$0.11
$0.14
$0.57
$.0004
$0.00
$0.00
$0.00
$0.00
$1.25
Overpay
Recaptured
Outside of
Payment
Recapture
Audits
Amount Identified
$0.77
$5.36
$2.79
$.005
$0.00
$0.00
$1.68
$0.00
$0.08
$4.17
$14.86
Amount
Recaptured
$0.77
$5.36
$2.05
$.005
$0.00
$0.00
$1.73
$0.00
$0.08
$3.52
$13.52
(1) Amounts shown in this table were recovered by the agency's internal payment recapture audit program via statistical sampling. The "Overpayments Recaptured Outside of Payment
Recapture Audits" were recovered through additional means available to the agency.
(2) All payment streams except grants, contracts, and commodities report on the prior fiscal year basis for improper payments reporting; grants report on a prior calendar year basis,
while contracts and commodities report on a current fiscal year basis.
(3) Amounts may not sum to total due to rounding. Current year recapture rates are calculated using non-rounded amounts to provide greater precision.
(4) Dollar values for contracts and commodities do not include lost discounts, which are uncollectible by definition.
(5) "Other" includes sensitive pay areas.
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Table 5: Disposition of Funds Recaptured Through Payment Recapture Audits d)
[$ in millions)
Program or
Activity
CWSRF
DWSRF
Grants
Contracts
Commodities
Hurricane
Sandy
Payroll
Travel
Purchase
Cards
Other
Total
Amount
Recovered
$1.04 C2)
$5.51 C2)
$2.16
$0.15
$0.57
$0.0004
$1.73
$0.00
$0.08
$3.52
$14.76
Type of
Payment
Grants
Grants
Grants
Contracts
Contracts
Other
Other
Other
Other
Other
n/a
Agency
Expenses to
Administer
the Program
$0.06 C3)
$0.06 C3)
$0.56 W
$0.04 ra
$0.04 ra
$0.00
$0.00
$0.00
$0.00
$0.00
$0.76
Payment
Recapture
Auditor
Fees
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Financial
Management
Improvement
Activities
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Original
Purpose
$0.98
$5.45
$1.60
$0.11
$0.53
$0.0004
$1.73
$0.00
$0.08
$2.63
$13.11
Office of
Inspector
General
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Returned
to
Treasury
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.89
$0.89
(1) Similar to Table 4, this table shows the results of statistical sampling in the agency's payment streams.
(2) All SRF recoveries are automatically returned to the program since the SRFs are funded with no-year money that does not expire.
(3) The same cost estimate applies to each SRF.
(4) Includes Calendar Year 2014 costs for post award monitoring contract and the cost of EPA personnel performing reviews.
(5) The same cost estimate applies to both contracts and commodities.
Table 6: Aging of Outstanding Overpayments Identified in the Payment Recapture Audits M P)
($ in millions)
Program or
Activity
CWSRF
DWSRF
Grants
Contracts
Commodities
Hurricane Sandy
Payroll
Travel
Purchase Cards
Other
Total
Type of
Payment
Grants
Grants
Grants
Contracts
Contracts
Grants
Other
Other
Other
Other
n/a
Amount
Outstanding
(Oto6
Months)
$0.00
$0.01
$0.00
$0.01
$0.02
$0.00
$0.00
n/a
n/a
n/a
$0.04
Amount
Outstanding
(6 Months to 1
Year)
$0.00
$0.01
$0.00
$0.00
$0.00
$0.00
$0.00
n/a
n/a
n/a
$0.01
Amount
Outstanding
(Over 1 Year)
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
n/a
n/a
n/a
$0.00
Amount
determined to
not be
collectable
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
n/a
n/a
n/a
$0.00
(1) This table shows the age of outstanding overpayments identified by statistical sampling, consistent with Table 4.
(2) The aging of an overpayment begins at the time the overpayment is detected.
XI. Additional Comments
None.
237
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XII. Reduction of Improper Payments with the Do Not Pay Initiative
The enactment of IPERIA in January 2013 codified requirements for federal agencies to implement the Do
Not Pay (DNP) initiative, which is a government-wide solution designed to prevent payment errors and
detect waste, fraud, and abuse in programs administered by the federal government
Since March 2013, EPA has used Treasury's DNP system for reviewing disbursements for improper
payments. Treasury analyzes each agency's payments and provides a monthly report itemizing any
payments made to potentially ineligible recipients. These potential matches are identified when the name
of an agency's payee matches the name of an individual or entity listed in federal databases contained in
Treasury's DNP system. In FY 2015, EPA used the following DNP databases on a post-payment basis: the
Death Master File (DMF) and the System for Award Management (SAM) Exclusion List6 Additionally,
agency payments are monitored by the Treasury Offset Program, which is a pre-payment tool used by
Treasury to offset federal payments to recipients with delinquent federal nontax debt
Treasury's monthly DNP report is reviewed by LVFC. LVFC uses the online single search feature in the DNP
portal to determine whether the potential matches identified by Treasury are conclusive. For conclusive
matches, LVFC notifies the appropriate Contracting Officer or Grants Official, who would review the
payment records, supporting documentation, and any circumstances involved to determine whether the
payment was proper or improper. Within 30 days of receiving Treasury's DNP report, the agency submits
an adjudication report back to Treasury detailing the results of its analysis, including the dollar value of any
improper payments identified, recovery status, and outstanding items requiring further research.
In FY 2015, approximately $1.8 billion of EPA payments were screened on a post-payment basis by the DNP
system's DMF and SAM Exclusion List. No improper payments were identified. In addition, over 62,500 EPA
payments totaling $4.46 billion were made via the Automated Standard Application for Payments (ASAP).7
ASAP's grantee listing is continuously monitored against DNP data sources for changes in grantee status.
Table 7, "Results of the Do Not Pay Initiative in Preventing Improper Payments," summarizes results from
EPA's use of Treasury's DNP system.
6 Formerly known as the General Service Administration's Excluded Parties List System.
7 EPA grant recipients are highly encouraged to obtain an ASAP account
238
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Table 7: Results of the Do Not Pay Initiative in Preventing Improper Payments d)
[$ in millions)
Reviews with the
IPERIA specified
databases
Reviews with
databases not
listed in IPERIA W
Number (#) of
payments
reviewed for
possible
improper
payments
175,385
62,500
Dollars ($) of
payments
reviewed for
possible
improper
payments
$1,929.27
$4,460.00
Number (#)
of
payments
stopped
0
0
Dollars ($)
of
payments
stopped
$0.00
$0.00
Number (#)
of potential
improper
payments
reviewed and
not stopped
11 C2)
0
Dollars ($) of
potential
improper
payments
reviewed and
determined
accurate
$0.38
$0.00
(1) This table presents data for FY 2015.
(2) All 11 payments were made to the same vendor and were determined to be proper payments upon further analysis.
(3) Includes ASAP amounts.
Finally, EPA conducts pre-award verification prior to issuing grant and contract awards. The agency
consults SAM, which contains a variety of federal databases, prior to the issuance of an award. Although
some of these databases are separate from the DNP system, they are useful in preventing improper
payments to ineligible recipients.
Conclusions
The agency commits to the following activities in FY 2016:
• Pursue the recovery of outstanding overpayments from prior years.
• Review and refine sampling strategies as appropriate.
• Sample Hurricane Sandy relief funding for improper payments until fully disbursed.
• Use Treasury's DNP program to identify payments made to potentially ineligible recipients.
239
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CIVIL MONETARY PENALTY ADJUSTMENT FOR
INFLATION
Summary: The Federal Civil Penalty Inflation Adjustment Act of 1990, as amended by the Debt Collection
Act of 1996 (DCIA), requires each federal agency to review the civil monetary penalties under the statutes
it administers at least once every four years and to adjust such penalties as necessary for inflation
according to a formula prescribed by the DCIA.8 Pursuantto the DCIA, in 1996, 2004, 2008 and, most
recently, in 2013, EPA reviewed each of the penalty amounts under its statutes and adjusted penalty
amounts for inflation when required under the DCIA.9 As part of EPA's review of each statutory penalty
amount, EPA applies the DCIA's prescribed formula for calculating the cost-of-living adjustment and the
DCIA's mandated rounding rules to determine if the penalty amount must be adjusted for inflation.
Background on the Implementation of the DCIA: Each time a federal agency reviews its penalty
amounts for purposes of determining whether they need to be adjusted, a particular penalty amount may
or may not be adjusted based on the level of inflation since that penalty amount was last adjusted and the
application of the DCIA's rounding rule. Specifically, penalty amounts are not adjusted for inflation when
the raw inflation increases are not high enough to round up to the required multiple, as prescribed by the
DCIA. From 2008 (the year in which the previous amendments to EPA's Penalty Inflation Rule were
promulgated) to 2012 (the year before EPA published its last Penalty Inflation Rule amendments10), the
rate of inflation was so low that only 20 of EPA's 88 statutory civil penalty provisions were increased for
inflation under the 2013 Rule.
The remaining 68 penalty amounts were not adjusted upwards under the 2013 Rule because the raw
inflation amount was not sufficient to warrant a penalty increase under the DCIA's rounding rules. For
example, under section 3008(a)(3) of the Resource Conservation and Recovery Act, 42 U.S.C. 6928(a)(3),
the Administrator may assess a civil penalty of up to $37,500 per day of noncompliance for each violation.
This penalty was last adjusted for inflation under the 2008 Rule. Multiplying the applicable 4.87 percent
cost-of-living adjustment (COLA) by the statutory civil penalty amount of $37,500, the raw inflation
increase equals only $1,827.40. The DCIA rounding rule requires a raw inflation increase to be rounded to
the nearest multiple of $5,000 for penalties greater than $10,000 but less than or equal to $100,000.
Because this raw inflation increase was not sufficient to be rounded up to a multiple of $5,000, in
accordance with the DCIA's rounding rule, the $37,500 penalty amount was not increased in 2013.
When EPA issues its next amendments to the Penalty Inflation Rule, expected in 2017, EPA will calculate
the COLA based on the percentage by which the CPI-U has increased as of June of the year in which a
particular penalty amount was last adjusted and June of 2016. Under the 2017 Rule, for penalties last
adjusted in 2008 to the amount of $37,500, the newly adjusted penalty amount will be $42,500, assuming
that the raw inflation increase since 2008 is high enough to round up to the nearest multiple of $5,000.
The following table, excerpted from Table 1 at 40 CFR § 19.4, identifies all civil monetary penalty
authorities under EPA-administered statutes at column 2; delineates the current operative penalty amount
at column 5; reflects at column 4 the date when the current penalty amount was promulgated; and reflects
at column 3 the date when that penalty amount was adjusted prior to the current amount. For a complete
8 See section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990,28 U.S.C. § 2461 note, as amended by the
DCIA, 31 U.S.C. § 3701 note.
9 See 61 Fed. Reg. 69,360 (December 31,1996); 69 Fed. Reg. 7,121 (February 13, 2004); 73 Fed. Reg. 75,340
(December 11, 2008), as corrected at 74 Fed. Reg. 626 (January 7,2009); and 78 Fed. Reg. 66,643 (November 6, 2013).
10 The DCIA provides that the cost-of-living adjustment must be determined by calculating the percentage increase, if
any, by which the Consumer Price Index for all-urban consumers (CPI-U) for June of the calendar year a specific
penalty amount was last adjusted exceeds the CPI-U for June of the year preceding the current penalty adjustment. See
section 5(b) of the DCIA.
240
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table reflecting the operative penalty amounts since 1996 under each penalty provision, see Table 1 at 40
CFR§19.4.
TABLE REFLECTING ERA'S CURRENT CIVIL PENALTY AMOUNTS, AS ADJUSTED FOR INFLATION
Penalty
(Name of
Penalty)
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Authority
(Statute)
FEDERAL
INSECTICIDE,
FUNGICIDE, AND
RODENTICIDEACT
(FIFRA), 7 U.S.C.
136/.fa]fl]
FIFRA, 7 U.S.C.
136/.fa]f2]
FIFRA, 7 U.S.C.
136/.fa]f2]
TOXIC SUBSTANCES
CONTROL ACT
(TSCA), 15 U.S.C.
2615(a](l]
TSCA, 15 U.S.C.
2647(a]
TSCA, 15 U.S.C.
2647fg]
PROGRAM FRAUD
CIVIL REMEDIES
ACT (PFCRA), 31
U.S.C. 3802(a](l]
PFCRA, 31 U.S.C.
3802(a)(2)
CLEAN WATER ACT
(CWA), 33 U.S.C.
1319(d]
CWA, 33 U.S.C.
1319fg]f2]fA]
CWA, 33 U.S.C.
1319fg]f2]fA]
CWA, 33 U.S.C.
1319(g)(2)(B)
CWA, 33 U.S.C.
1319fg]f2]fB]
CWA, 33 U.S.C.
1321fb]f6]fB]fi]
CWA, 33 U.S.C.
1321fb]f6]fB]fi]
CWA, 33 U.S.C.
1321(b)(6)(B)(ii)
CWA, 33 U.S.C.
1321fb]f6]fB]fii]
CWA, 33 U.S.C.
1321fb]f7]fA]
CWA, 33 U.S.C.
1321fb]f7]fA]
CWA, 33 U.S.C.
1321fb]f7]fB]
CWA, 33 U.S.C.
1321fb]f7]fC]
CWA, 33 U.S.C.
1321fb]f7]fD]
Date of Previous
Adjustment {i.e.,
Inflation Increase)
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
December 1996
February 2004
December 1996
December 2008
December 1996
February 2004
December 1996
December 2008
December 1996
February 2004
February 2004
February 2004
February 2004
Date of Current
(/.e., Latest)
Adjustment
December 2008
December 2008
February 2004
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
November 2013
December 2008
December 2008
December 2008
November 2013
November 2013
December 2008
December 2008
December 2008
November 2013
Current Penalty
Level
($ Amount)
$7,500
$750
$1,100
$37,500
$7,500
$7,500
$7,500
$7,500
$37,500
$16,000
$37,500
$16,000
$187,500
$16,000
$37,500
$16,000
$187,500
$2,100
$37,500
$37,500
$37,500
$5,300
241
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Penalty
(Name of
Penalty)
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Authority
(Statute)
CWA, 33 U.S.C.
1321(b)(7)(D)
MARINE
PROTECTION,
RESEARCH, AND
SANCTUARIES ACT
(MPRSA), 33 U.S.C.
1414bfd)fl)
MPRSA, 33 U.S.C.
14 15 (a]
MPRSA, 33 U.S.C.
14 15 (a]
CERTAIN ALASKAN
CRUISE SHIP
OPERATIONS
(CACSO), 33 U.S.C.
1901 note (see
1409fa]f2]fA]]
CACSO, 33 U.S.C.
1901 note (see
1409fa]f2]fA]]
CACSO, 33 U.S.C.
1901 note (see
1409(a)(2)(B))
CACSO, 33 U.S.C.
1901 note (see
1409fa](2](B]]
CACSO, 33 U.S.C.
1901 note (see
1409(b](l]]
SAFE DRINKING
WATER ACT
(SDWA), 42 U.S.C.
300g-3(b]
SDWA, 42 U.S.C.
300g-3fg]f3]fA]
SDWA, 42 U.S.C.
300g-3fg]f3]fB]
SDWA, 42 U.S.C.
300g-3(g](3](B]
SDWA, 42 U.S.C.
300g-3fg]f3]fC]
SDWA, 42 U.S.C.
300h-2(b](l]
SDWA, 42 U.S.C.
300h-2(c](l]
SDWA, 42 U.S.C.
300h-2(c)(l)
SDWA, 42 U.S.C.
300h-2(c](2]
SDWA, 42 U.S.C.
300h-2(c](2]
SDWA, 42 U.S.C.
300h-3(c]
SDWA, 42 U.S.C.
300h-3(c]
SDWA, 42 U.S.C.
300i(b]
SDWA, 42 U.S.C.
300i-l(c]
Date of Previous
Adjustment (i.e.,
Inflation Increase)
December 2008
February 2004
December 2008
December 2008
February 2004
February 2004
February 2004
December 2008
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
December 1996
December 2008
February 2004
December 2008
February 2004
December 1996
February 2004
December 2008
Date of Current
(i.e., Latest)
Adjustment
November 2013
December 2008
November 2013
November 2013
December 2008
December 2008
December 2008
November 2013
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
November 2013
December 2008
November 2013
December 2008
December 2008
November 2013
November 2013
Current Penalty
Level
($ Amount)
$150,000
$860
$75,000
$187,500
$11,000
$27,500
$11,000
$147,500
$27,500
$37,500
$37,500
$7,000
$32,500
$32,500
$37,500
$16,000
$187,500
$7,500
$187,500
$7,500
$16,000
$21,500
$120,000
242
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Penalty
(Name of
Penalty)
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Authority
(Statute)
SDWA, 42 U.S.C.
300i-l(c)
SDWA, 42 U.S.C.
300j(e](2]
SDWA, 42 U.S.C.
300j-4(c]
SDWA, 42 U.S.C.
300j-6(b)[2)
SDWA, 42 U.S.C.
300j-23(d]
SDWA, 42 U.S.C.
300j-23(d]
RESIDENTIAL LEAD-
BASED PAINT
HAZARD
REDUCTION ACT OF
1992, 42 U.S.C.
4852d(b](5]
NOISE CONTROL
ACT OF 1972, 42
U.S.C. 4910(a)(2)
RESOURCE
CONSERVATION
AND RECOVERY ACT
(RCRA), 42 U.S.C.
6928(a](3]
RCRA, 42 U.S.C.
6928(c]
RCRA, 42 U.S.C.
6928fg]
RCRA, 42 U.S.C.
6928(h](2]
RCRA, 42 U.S.C.
6934(e)
RCRA, 42 U.S.C.
6973 (b)
RCRA, 42 U.S.C.
6991e(a)[3)
RCRA, 42 U.S.C.
6991e(d](l]
RCRA, 42 U.S.C.
6991e(d](2]
CLEAN AIR ACT
(CAA), 42 U.S.C.
7413(¥)
CAA, 42 U.S.C.
7413fd]fl]
CAA, 42 U.S.C.
7413fd]fl]
CAA, 42 U.S.C.
7413(d)(3)
CAA, 42 U.S.C.
75 24 (a]
CAA, 42 U.S.C.
75 24 (a]
CAA, 42 U.S.C.
7524(c](l]
CAA, 42 U.S.C.
7545fd]fl]
Date of Previous
Adjustment (i.e.,
Inflation Increase)
December 2008
February 2004
February 2004
February 2004
February 2004
December 2008
December 1996
December 1996
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
February 2004
December 1996
December 1996
February 2004
February 2004
December 2008
February 2004
February 2004
February 2004
December 2008
February 2004
Date of Current
(i.e., Latest)
Adjustment
November 2013
December 2008
December 2008
December 2008
December 2008
November 2013
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
December 2008
November 2013
December 2008
December 2008
December 2008
November 2013
December 2008
Current Penalty
Level
($ Amount)
$1,150,000
$3,750
$37,500
$32,500
$7,500
$75,000
$16,000
$16,000
$37,500
$37,500
$37,500
$37,500
$7,500
$7,500
$37,500
$16,000
$16,000
$37,500
$37,500
$320,000
$7,500
$3,750
$37,500
$320,000
$37,500
243
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Penalty
(Name of
Penalty)
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Civil
Authority
(Statute)
COMPREHENSIVE
ENVIRONMENTAL
RESPONSE,
COMPENSATION,
AND LIABILITY ACT
(CERCLA), 42 U.S.C.
9604(e)(5)(B)
CERCLA, 42 U.S.C.
9606(¥)[1)
CERCLA, 42 U.S.C.
9609(a](l]
CERCLA, 42 U.S.C.
9609(b]
CERCLA, 42 U.S.C.
9609(b]
CERCLA, 42 U.S.C.
9609(c]
CERCLA, 42 U.S.C.
9609(c]
EMERGENCY
PLANNING AND
COMMUNITY RIGHT-
TO-KNOW ACT
(EPCRA), 42 U.S.C.
11045(a)
EPCRA, 42 U.S.C.
11045(b)(l)(A)
EPCRA, 42 U.S.C.
11045(b)(2)
EPCRA, 42 U.S.C.
11045(b)(2)
EPCRA, 42 U.S.C.
11045(b)(3)
EPCRA, 42 U.S.C.
11045(b)(3)
EPCRA, 42 U.S.C.
11045(c)(l)
EPCRA, 42 U.S.C.
11045(c)(2)
EPCRA, 42 U.S.C.
11045(d)(l)
MERCURY-
CONTAINING AND
RECHARGEABLE
BATTERY
MANAGEMENT ACT
(BATTERY ACT), 42
U.S.C. 14304(a)(l)
BATTERY ACT, 42
U.S.C. 14304(g)
Date of Previous
Adjustment (i.e.,
Inflation Increase)
February 2004
February 2004
February 2004
February 2004
December 2008
February 2004
December 2008
February 2004
February 2004
February 2004
December 2008
February 2004
December 2008
February 2004
December 1996
February 2004
February 2004
February 2004
Date of Current
(i.e., Latest)
Adjustment
December 2008
December 2008
December 2008
December 2008
November 2013
December 2008
November 2013
December 2008
December 2008
December 2008
November 2013
December 2008
November 2013
December 2008
December 2008
December 2008
December 2008
December 2008
Current Penalty
Level
($ Amount)
$37,500
$37,500
$37,500
$37,500
$117,500
$37,500
$117,500
$37,500
$37,500
$37,500
$117,500
$37,500
$117,500
$37,500
$16,000
$37,500
$16,000
$16,000
244
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APPENDIX A
PUBLIC ACCESS
245
-------
EPA invites the public to access its website at www.epa.gov to obtain the latest environmental news,
browse agency topics, learn about environmental conditions in their communities, obtain information on
interest groups, research laws and regulations, search specific program areas, or access EPA's historical
database.
American Recovery and Reinvestment Act of 2009: www.epa.gov/recovery
• EPA newsroom: www.epa.gov/newsroom
News releases: www.epa.gov/newsroom/news-releases
Regional newsrooms: www2.epa.gov/newsroom/news-releases#regions
• Laws, regulations, guidance and dockets: www2.epa.gov/laws-regulations
Major environmental laws: www2.epa.gov/laws-regulations/laws-and-executive-orders
EPA's Federal Register website: www.epa.gov/fedrgstr
• Where you live: www.epa.gov/epahome/whereyoulive.htm
Search your community: www.epa.gov/epahome/commsearch.htm
EPA regional offices: www.epa.gov/epahome/regions.htm
Information sources: www.epa.gov/epahome/resource.htm
Hotlines and clearinghouses: www.epa.gov/epahome/hotline.htm
Publications: www.epa.gov/epahome/publications.htm
Education resources: www.epa.gov/students/
Office of Environmental Education: www.epa.gov/education
About EPA: www.epa.gov/aboutepa
EPA organizational structure: www.epa.gov/aboutepa/epa-organizational-structure
EPA programs with a geographic focus: www.epa.gov/epahome/places.htm
Partnerships: www.epa.gov/partners
Central Data Exchange: www.epa.gov/cdx
Business Guide to Climate Change Partnerships:
www.epa.gov/partners/Biz guide to epa climate partnerships.pdf
EPA for business and nonprofits: www.epa.gov/home/epa-businesses-and-non-profits
Small Business Gateway: www.epa.gov/osbp/
Grants, fellowships, and environmental financing: www.epa.gov/epahome/grants.htm
Budget and performance: www.epa.gov/planandbudget
Careers: www.epa.gov/careers/
EZ Hire: www.epa.gov/ezhire
EPA en Espanol: espanol.epa.gov
EPA TX: ^fUnR; www.epa.gov/chinese
EPA TX: mW-fiR; www.epa.gov/chinese/simple/
EPA tie'ng Viet: www.epa.gov/vietnamese
EPA t!"^0!: www.epa.gov/korean
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APPENDIX B
ACRONYMS AND ABBREVIATIONS
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APR Agency Financial Report
AICPA American Institute of Certified Public Accountants
AP Administration Priority
APG Agency Priority Goal
APR Annual Performance Report
ASAP Automated Standard Application for Payments
B&F building and facilities
BFS Bureau of Fiscal Services
CAA Clean Air Act
CAP Cross-Agency Priority
CBI confidential business information
CERCLA Comprehensive Environmental Response Compensation and Liability Act
CFC Cincinnati Finance Center
CFO Chief Financial Officer
CO contracting officer
COLA cost of living adjustment
CPIC Capital Planning and Investment Control
CPP Clean Power Plan
CSRS Civil Service Retirement System
CWA Clean Water Act
CWSRF Clean Water State Revolving Fund
DCAA Defense Contract Audit Agency
DCIA Debt Collection Act of 1996
DCM dichloromethane
DHS U.S. Department of Homeland Security
DMF Death Master File
DM&R deferred maintenance and repairs
DNP Do Not Pay
DOJ U.S. Department of Justice
DOT U.S. Department of Transportation
DSS Directory Service System
DSW definition of solid waste
DWSRF Drinking Water State Revolving Fund
ECHO Enforcement and Compliance History Online
EDSP Endocrine Disrupter Screening Program
EPA U.S. Environmental Protection Agency
EPM Environmental Programs and Management
FAS Fixed Assets Subsystem
FASAB Federal Accounting Standards Advisory Board
FBWT fund balance with Treasury
FECA Federal Employees Compensation Act
FERS Federal Employees Retirement System
FFMIA Federal Financial Management Improvement Act of 1996
FIFRA Federal Insecticide, Fungicide and Rodenticide Act
FISMA Federal Information Security Management Act
FMFIA Federal Managers' Financial Integrity Act of 1982
FOIA Freedom of Information Act
FTP Freeze the Footprint
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FY
fiscal year
GAAP generally accepted accounting principles
GAO Government Accountability Office
GHG greenhouse gas
GPRMA Government Performance and Results Modernization Act of 2010
GSA U.S. General Services Administration
GTAS Governmentwide Treasury Account Symbol
HA Health Advisories
IBC Interior Business Center
1C institutional control
IMO International Maritime Organization
IP improper payment
IPERA Improper Payments Elimination and Recovery Act
IPERIA Improper Payments Elimination and Recovery Improvement Act
IPIA Improper Payments Information Act
IRIS Integrated Risk Information System
IWG Interagency Working Group
LUST leaking underground storage tank
LVFC Las Vegas Finance Center
MATS Management Audit Tracking System
MSW municipal solid waste
NCEA National Center for Environmental Assessment
NEPPS National Environment Performance Partnership System
NESHAP National Emission Standards for Hazardous Air Pollutants
NMP n-methylpyrrolidone
NPDES National Pollutant Discharge Elimination System
NPL National Priorities List
NPM National Program Manager
NRC National Research Council
0AM Office of Acquisition Management
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
OECA Office of Enforcement and Compliance Assurance
OEI Office of Environmental Information
OGD Office of Grants and Debarment
DIG Office of Inspector General
OMB Office of Management and Budget
OPA Oil Pollution Act
0PM Office of Personnel Management
ORD Office of Research and Development
PAH polyaromatic hydrocarbon
PAR Performance and Accountability Report
PCB polychlorinated biphenyl
PMN Pre-Manufacturing Notice
POTW publicly owned treatment work
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PP&E Plant, Property and Equipment
PRIA Pesticides Registration Funds Act
PRFA Pollution Removal Funding Agreements
PRP Potential Responsible Party
R&D research and development
RA remedial action
RAU ready for anticipated use
RBT role-based training
RCRA Resource Conservation and Recovery Act
ROE report on the environment
RP Responsible Party
RTF Research Triangle Park
SAM System for Award Management
SARA Superfund Amendments & Reauthorization Act
SDWA Safe Drinking Water Act
SFFAS Statement of Federal Financial Accounting Standards
SMM sustainable materials management
SNUR Significant New Use Rule
SOS Schedule of Spending
SRF State Revolving Fund
SSC Superfund State Contracts
S&T Science & Technology
STAG State and Tribal Assistance Grants
T&A time and attendance
TCE trichloroethylene
TPP Transpacific Partnership
TRI Toxic Release Inventory
TSCA Toxic Substances Control Act
USSGL U.S. Standard General Ledger
UST underground storage tank
VOC volatile organic compound
WCF Working Capital Fund
WPS Worker Protection Standard
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WE WELCOME YOUR COMMENTS!
Thank you for your interest in the U.S. Environmental Protection Agency's Fiscal Year 2015 Agency
Financial Report. We welcome your comments on how we can make this report a more informative
document for our readers. Please send your comments to:
Office of the Chief Financial Officer
Office of Financial Management
Environmental Protection Agency
1200 Pennsylvania Ave., NW
Washington, D.C. 20460
ocfoinfo@epa.gov
This report is available at
http://www.epa.gov/planandbudget
Printed copies of this report are available from EPA's National Service Center for Environmental
Publications at 1-800-490-9198 or by email at nscep@bps-lmit.com.
U.S. Environmental Protection Agency
Fiscal Year 2015 Agency Financial Report
EPA-190-R-15-004
November 16,2015
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