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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Financial Management
Fiscal Years 2014 and 2013
Financial Statements for the
Pesticides Reregistration
and Expedited Processing
Fund
Report No. 16-F-0322
September 22, 2016
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Report Contributors: Paul Curtis
Robert Smith
Robert Hairston
Sheree James
Sabrina Jones
Mairim Lopez
Claire McWilliams
Guillermo Mejia
Cynthia Poteat
Lynda Taylor
Abbreviations
EPA U.S. Environmental Protection Agency
FIFRA Federal Insecticide, Fungicide, and Rodenticide Act
FMFIA Federal Managers' Financial Integrity Act
FY Fiscal Year
OIG Office of Inspector General
OMB Office of Management and Budget
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September 22, 2016
* • U.S. Environmental Protection Agency 16-F-0322
w "z Office of Inspector General
mZ I
At a Glance
Why We Did This Review
The Food Quality Protection
Act requires that we perform an
annual audit of the financial
statements for the Pesticides
Reregistration and Expedited
Processing Fund, known as the
FIFRA (Federal Insecticide,
Fungicide, and Rodenticide
Act) Fund.
The U.S. Environmental
Protection Agency (EPA) is
responsible for reassessing the
safety of older pesticide
registrations against modern
health and environmental
testing standards. To expedite
this reregistration process,
Congress authorized the EPA
to collect fees from pesticide
manufacturers. The fees are
deposited into the FIFRA Fund.
Each year, the agency
prepares financial statements
that present financial
information about the fund,
along with information about
the EPA's progress in
reregistering pesticides.
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
visit www.epa.gov/oiq.
Listing of OIG reports.
Fiscal Years 2014 and 2013 Financial
Statements for the Pesticides Reregistration
and Expedited Processing Fund
Due to the material
weakness in internal
controls noted, the agency
cannot provide reasonable
assurance that financial
data provided for the
FIFRA Fund accurately
reflect the agency's
financial activities and
balances.
Disclaimer of Opinion
We rendered a disclaimer of opinion on the
FIFRA Fund financial statements for fiscal year
(FY) 2014, meaning that we were unable to
obtain sufficient evidence to determine if they
were fairly presented and free of material
misstatement. We had previously rendered an
unmodified, or clean, opinion on the EPA's FIFRA
Fund financial statements for FY 2013, meaning
they were fairly presented and free of material
misstatement.
Internal Control Material Weakness Noted
We noted a material weakness in that the EPA cannot adequately support
$34 million of its FY 2014 FIFRA Fund costs. The EPA's Office of Pesticide
Programs receives its funding both from fees paid by pesticide manufacturers
and from amounts appropriated by the Congress. In FY 2014, the EPA allocated
its pesticide funding to use appropriated amounts, which would expire, and
retained funding received from fees. Therefore, significant payroll amounts paid
from appropriations were not charged directly to the FIFRA Fund or other
pesticide programs. This resulted in the loss of the audit trail for reporting
separate costs and liabilities for the FIFRA Fund and other pesticide programs.
Compliance With Applicable Laws and Regulations
In FY 2014, the EPA chose to significantly exceed the statutory target set out in
FIFRA. FIFRA requires the EPA to collect pesticide maintenance fees, to the
extent practicable, of $27.8 million for each of FYs 2013 through 2017. In
FY 2014, the EPA chose to collect $28.6 million, $800,000 over the established
target.
Agency Comments and Office of Inspector General Evaluation
The agency agreed with each of our findings and our recommendation. In
October 2015, the Office of Chemical Safety and Pollution Prevention eliminated
the practice of averaging to offset over- or-under-collection of maintenance fees
from previous years, and plans to set the per-product maintenance fee at an
amount that is designed to collect the target amount of fees authorized by
Congress. The recommendation will remain open until we can confirm FY 2016
maintenance fee collections.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
September 22, 2016
MEMORANDUM
SUBJECT: Fiscal Years 2014 and 2013 Financial Statements for the
Pesticides Reregi strati on and Expedited Processing Fund
Report No. 16-F-0322
FROM: Paul C. Curtis, Director f
Financial Statement Audits
TO: Jim Jones, Assistant Administrator
Office of Chemical Safety and Pollution Prevention
David Bloom, Deputy Chief Financial Officer
Office of the Chief Financial Officer
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). The project number for this audit was OA-FY15-0053.
This report contains findings that describe the problems the OIG has identified and corrective actions the
OIG recommends. This report represents the opinion of the OIG and does not necessarily represent the
final EPA position. Final determinations on matters in this report will be made by EPA managers in
accordance with established audit resolution procedures.
The offices with primary jurisdiction over the issues discussed in this report are the Office of Pesticide
Programs within the Office of Chemical Safety and Pollution Prevention, and the Office of the
Controller within the Office of the Chief Financial Officer.
Action Required
You completed corrective actions for the one recommendation in this report. As a result, you are not
required to provide a written response to this report. However, if you submit a response, it will be posted
on the OIG'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.
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We will post this report to our website at www.epa.gov/oig.
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Fiscal Years 2014 and 2013 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
16-F-0322
Table of C
Inspector General's Report on the Fiscal Years 2014 and 2013
Financial Statements for the Pesticides Reregistration and
Expedited Processing Fund
Report on the Financial Statements 1
Evaluation of Internal Controls 3
Tests of Compliance With Laws and Regulations 5
Management's Discussion and Analysis Section of the Financial Statements 5
Prior Audit Coverage 5
Agency Comments and Office of Inspector General Evaluation 6
Attachments
1 Material Weakness 7
EPA Cannot Adequately Support FIFRA Fund Costs 8
2 Compliance With Laws and Regulations 10
EPA Chose to Significantly Exceed Pesticide Maintenance Fee
Collection Target 11
3 Status of Recommendations and Potential Monetary Benefits 12
Appendices
A Fiscal Years 2014 and 2013 Pesticides Reregistration and
Expedited Processing Fund Financial Statements
B Agency's Response to Draft Report
C Distribution
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Inspector General's Report on the
Fiscal Years 2014 and 2013 Financial Statements
for the Pesticides Reregistration and
Expedited Processing Fund
The Administrator
U.S. Environmental Protection Agency
Report on the Financial Statements
We have audited the accompanying financial statements of the Pesticides
Reregistration and Expedited Processing Fund, known as the FIFRA (Federal
Insecticide, Fungicide and Rodenticide Act) Fund, which comprise the balance
sheet as of September 30, 2014, and September 30, 2013, and the related
statements of net cost, changes in net position, and 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
14-02, 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
16-F-0322
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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.
Basis for Disclaimer of Opinion
The U.S. Environmental Protection Agency (EPA) cannot adequately support
payroll liabilities on the (FIFRA Fund's) Balance Sheet as of September 30, 2014;
and Income/Expense from other appropriations on the statements of the FIFRA
Fund's Net Costs and Changes in Net Position of $33,652,000, which represents
approximately 60 percent of FIFRA Fund costs for the year ended September 30,
2014.
In fiscal year (FY) 2014, the EPA allocated its pesticides appropriated funding to
pay for payroll costs. By paying significant payroll amounts from appropriations
versus from fees collected by the FIFRA Fund, the EPA lost the audit trail to
properly support how much of the FIFRA Fund payroll expenses were paid for by
appropriations. We were unable to satisfy ourselves by other audit procedures
concerning the adequacy of the amounts allocated, consistency of application, or
reasonableness of the payroll expenses between the FIFRA Fund and the EPA's
other pesticide programs, including payroll accruals, as of and for the year ended
September 30, 2014. As a result, we were unable to determine whether any
adjustments were necessary relating to payroll and related accounts,
income/expense from other appropriations, and payroll liabilities.
Disclaimer of Opinion - FY 2014
Because of the matter described in the Basis for Disclaimer of Opinion section
above, we have not been able to obtain sufficient, appropriate audit evidence to
provide a basis for an audit opinion. Accordingly, we do not express an opinion
on the FIFRA Fund's financial statements, and the related accompanying notes as
of and for the year ended September 30, 2014.
Unmodified Opinion - FY 2013
Our previous opinion on the FIFRA Fund's 2013 financial statements, dated
July 10, 2015, expressed an unmodified opinion. In our opinion, the FIFRA
Fund's financial statements, including the accompanying notes, presented fairly,
in all material respects, the assets, liabilities, net position, changes in net position,
and statement of budgetary resources as of and for the year ending September 30,
16-F-0322
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2013, in conformity with accounting principles generally accepted in the United
States of America.
Evaluation of Internal Controls
As defined by OMB, internal control, as it relates to the financial statements, is a
process, effected by the agency's management and other personnel, which 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 applicable laws, regulations and governmentwide
policies—Transactions are executed in accordance with laws governing
the use of budget authority, governmentwide policies, laws identified by
OMB, and other laws and regulations that could have a direct and 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 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 14-02,
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, 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, such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will
16-F-0322
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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 a certain matter discussed
below involving the internal control and its operation that we consider to be
material. This issue is summarized below and detailed in Attachment 1.
Material Weakness
The EPA cannot adequately support $34 million of its FY 2014 FIFRA Fund costs.
OMB policy states that basic financial statements include a Balance Sheet and
Statement of Net Costs, and that the statement of net costs should include the net
costs of operations. The EPA's Office of Pesticide Programs receives its funding
both from fees paid by pesticide manufacturers and from amounts appropriated by
Congress. In FY 2014, the EPA allocated its pesticide funding to use appropriated
amounts, which would expire, and retained funding received from fees. Therefore,
significant payroll amounts paid from appropriations were not charged directly to
the FIFRA Fund or other pesticide programs. This resulted in the loss of the audit
trail for reporting separate costs and liabilities for the FIFRA Fund and other
pesticide programs. The EPA developed an allocation methodology to distribute
costs funded by EPA appropriations back to the FIFRA Fund, but the methodology
is based upon inconsistent charging of payroll costs between the FIFRA Fund and
EPA appropriations. Because the EPA cannot adequately support total FY 2014
FIFRA Fund costs and liabilities, and because we were unable to determine by
other audit procedures the adequacy of amounts allocated, consistency of
application, or reasonableness of net costs and liabilities, we disclaimed an opinion
on the FIFRA Fund's FY 2014 financial statements. We consider the EPA's
inability to support the FIFRA Fund payroll costs a material weakness.
Comparison of EPA's FMFIA Report With Our Evaluation of
Internal Controls
OMB Bulletin 14-02, Audit Requirements for Federal Financial Statements,
requires us to compare material weaknesses disclosed during the audit with those
material weaknesses reported in the agency's FMFIA report that relate to the
financial statements, and identify material weaknesses disclosed by the audit that
were not reported in the agency's FMFIA report.
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 financial statements will not be prevented or detected
and corrected on a timely basis. The agency did not report any material weakness
for FY 2014 impacting the FIFRA Fund; however, we identified a material
weakness with the agency's financial statement preparation process. Details
concerning this material weakness are in Attachment 1. We previously reported
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related issues in prior years. Those issues are listed in our prior audit coverage
section.
Tests of Compliance With Laws and Regulations
As part of obtaining a reasonable assurance as to whether the agency's financial
statements are free of material misstatement, we tested compliance with those
laws and regulations that could either materially affect the FIFRA Fund financial
statements or that we considered significant to the audit. The objective of our
audit, including our tests of compliance with applicable laws and regulations,
was not to provide an opinion on overall compliance with such provisions.
Accordingly, we do not express such an opinion. We did not identify any
noncompliance that would result in a material misstatement to the audited
financial statements. We did notice one noncompliance with collection of fees.
In FY 2014, the EPA chose to significantly exceed the statutory target set out in
FIFRA. FIFRA requires the EPA to collect pesticide maintenance fees, to the
extent practicable, of $27.8 million for each of FYs 2013 through 2017. In
FY 2014, the EPA collected $28.6 million, $800,000 over the established target.
Management's Discussion and Analysis Section of the
Financial Statements
Our audit work related to the information presented in the Management's
Discussion and Analysis of the pesticide program included comparing the
overview information with information in the EPA's principal financial
statements for consistency. We did not identify any material inconsistencies
between the information presented in the two documents.
Prior Audit Coverage
During previous financial statement audits, we reported the following significant
deficiencies:
• EPA materially overstated the expenses from other appropriations that
support the FIFRA Fund. This occurred because the agency did not have
an effective system to accurately accumulate and report costs incurred by
other appropriations in support of FIFRA Fund activities.
• EPA materially understated the FIFRA Fund payroll liabilities covered by
budgetary resources, as well as related payroll expense included in gross
costs. The agency's practice of transferring employees and expenses and
liabilities from the FIFRA Fund to the Environmental Programs and
Management Fund for cash flow reasons led to the understatement.
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• The EPA could not initially produce accurate, timely and complete
financial statements for the FIFRA Fund. The agency was not preparing a
complete set of financial statements for FY 2013 because of its view that
such statements were not required. This delayed the preparation of the first
complete set of FY 2013 FIFRA Fund financial statements until July 2014.
Because material errors in those statements and subsequent versions
delayed the audit, we considered this to be a material weakness.
We previously reported the agency has taken action to correct these significant
deficiencies. However, we found continuing issues with payroll during our
FY 2014 audit that we believe are related to the findings previously reported. Our
findings on payroll issues are presented as a material weakness in this report and is
the reason for the disclaimer of opinion for the FY 2014 statements.
Agency Comments and Office of Inspector General Evaluation
The agency agreed with our findings and our recommendation. The agency
agreed that it cannot adequately support total FY 2014 FIFRA Fund costs and
liabilities, but believes that the PeoplePlus payroll cost allocation enhancement
will allow for the creation of an audit trail to capture costs incurred by the
FIFRA Fund and by other appropriations that support FIFRA-related activities.
The agency plans to go live with the new enhancement by October 2017.
In October 2015, the Office of Chemical Safety and Pollution Prevention
eliminated the practice of "averaging" to offset over- or under-collections of
maintenance fees. The office plans to set the per-product maintenance fee at an
amount that is designed to collect the target amount of fees authorized by
Congress. The recommendation will remain open until we can confirm FY 2016
maintenance fee collections.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
September 19, 2016
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Attachment 1
Material Weakness
Table of Contents
1 - EPA Cannot Adequately Support FIFRA Fund Costs 8
16-F-0322 7
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1 - EPA Cannot Adequately Support FIFRA Fund Costs
The EPA cannot adequately support $34 million of its FY 2014 FIFRA Fund costs. OMB policy
states that basic financial statements include a Balance Sheet and Statement of Net Costs, and that the
statement of net costs should include the net costs of operations. The EPA's Office of Pesticide
Programs receives its funding both from fees paid by pesticide manufacturers and from amounts
appropriated by Congress. In FY 2014, the EPA allocated its pesticide funding to use appropriated
amounts, which would expire, and retained funding received from fees. Therefore, significant payroll
amounts paid from appropriations were not charged directly to the FIFRA Fund or other pesticide
programs. This resulted in the loss of the audit trail for reporting separate costs and liabilities for the
FIFRA Fund and other pesticide programs. The EPA developed an allocation methodology to
distribute costs funded by EPA appropriations back to the FIFRA Fund, but the methodology is based
upon inconsistent charging of payroll costs between the FIFRA Fund and EPA appropriations.
Because the EPA cannot adequately support total FY 2014 FIFRA Fund costs and liabilities, and
because we were unable to determine by other audit procedures the adequacy of amounts allocated,
consistency of application, or reasonableness of net costs and liabilities, we disclaimed an opinion on
the FIFRA Fund's FY 2014 financial statements. We consider the EPA's inability to support FIFRA
Fund payroll costs a material weakness.
FIFRA requires that, for the FIFRA program, a set of financial statements be prepared to provide
an annual accounting of expenditures and collections. OMB Circular A-136 requires that these
statements include a Statement of Net Costs, under which net costs of operations are reported.
The FIFRA's Funds costs of operations are supported by several sources: maintenance fees,
registration and reregi strati on fees, and EPA appropriations. For FY 2014, the EPA reported total
FIFRA Fund costs of $56.5 million, with about $34 million being supported by EPA
appropriations.
In FY 2014, the EPA allocated its pesticide funding to use appropriated amounts that would
expire, and to retain funding received from fees. Therefore, significant payroll amounts were
paid from appropriations and not charged directly to the FIFRA Fund. This resulted in the loss of
the audit trail for reporting separate FIFRA Fund costs. The EPA adopted an allocation
methodology to determine the amount of appropriated dollars used to support the FIFRA Fund
and the EPA's other pesticide programs. However, this methodology is based upon inconsistent
and arbitrary charging of the Office of Pesticide Programs' payroll costs between the FIFRA
Fund and the EPA's other pesticide programs. The inconsistent and arbitrary charging makes the
allocation base unreliable, and the methodology cannot be used to support $34 million in FIFRA
Fund operations costs. We consider the inability of the EPA to support FY 2014 FIFRA Fund
costs to be a material weakness.
We did not determine payroll costs overall for the EPA's pesticide programs to be inaccurate.
Our findings are limited to the specific allocation of appropriated amounts to cover payroll costs
of the EPA's pesticide programs and accounting for those costs at the program level. At the
program level (specifically, for FIFRA funds), the agency could not provide adequate support,
and we could not audit the payroll costs for those funds paid for by appropriated amounts to
opine on the adequacy of such amounts.
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The EPA is aware that it needs to improve its accounting system to better account for FIFRA Fund
costs. In FY 2015, the EPA indicated it made modifications to its accounting system, which
purportedly will address this material weakness. Therefore, we make no recommendations at this
time.
Agency Comments and Office of Inspector General Evaluation
The agency agreed with this finding and believes that the PeoplePlus payroll cost allocation
enhancement will allow for the creation of an audit trail to capture costs incurred by the
FIFRA Fund and other appropriations that support FIFRA-related activities. The agency plans
to go live with this new enhancement by October 2017. The Office of the Chief Financial
Officer plans to develop webinars and provide face-to-face training for all Office of Pesticide
Programs employees. The first phase is expected to consist of a methodology to track direct
costs related to FIFRA activities. The second phase is expected to consist of a methodology to
accumulate indirect costs. The third phase is expected to consist of reporting actual hours
worked on FIFRA-related activities, including direct and indirect costs. The fourth phase is
expected to consist of producing the financial statements.
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Attachment 2
Compliance With Laws and Regulations
Table of Contents
2 - EPA Chose to Significantly Exceed Pesticide Maintenance Fee Collection Target 11
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2 - EPA Chose to Significantly Exceed Pesticide Maintenance Fee
Collection Target
In FY 2014, the EPA chose to significantly exceed the statutory target set out by FIFRA. FIFRA
requires the EPA to collect pesticide maintenance fees, to the extent practicable, of $27.8 million
for each of FYs 2013 through 2017. In FY 2014, the EPA chose to collect $28.6 million,
$800,000 over the established target.
FIFRA, Section 4, Subsection(i)(l)(c), states, "The amount of each fee ... shall be adjusted by
the Administrator to a level that will result in the collection under this paragraph of, to the extent
practicable, an aggregate amount of $27,800,000 for each of fiscal years 2013 through 2017."
In FY 2013, the EPA collected approximately $27 million in pesticide maintenance fees—
$800,000 less than FIFRA's maintenance fee target. For FY 2014, the Office of Pesticide
Programs increased its pesticide registration maintenance fees to collect $28.6 million to cover
the shortfall of $800,000 from FY 2013. The Office of Pesticide Programs stated: "We believe
the intent of Congress when promulgating FIFRA, Section 4, Subsection (i)(l)(c) was to allow
for the averaging of maintenance fee collections over the 5 year period...." However, the Office
of Pesticide Programs did not provide legal or legislative support for the position that Congress
intended to allow for the averaging of maintenance fees. While FIFRA allows for an aggregate
amount of $27.8 million for each of FYs 2013 through 2017, we did not find anything in FIFRA
that allows the EPA to choose to collect an amount of fees that significantly exceeds the
$27.8 million target, or to collect an average amount of $27.8 million across fiscal years.
Recommendation
We recommend the Assistant Administrator for Chemical Safety and Pollution Prevention:
1. Adjust the annual pesticides maintenance fees to ensure the fees collected do not exceed
the statutory target for each fiscal year.
Agency Comments and Office of Inspector General Evaluation
The Office of Chemical Safety and Pollution Prevention agrees with this recommendation and
has already completed appropriate corrective actions. In October 2015, the office eliminated the
practice of "averaging" to offset over- or under-collection of maintenance fees from previous
years. The office has set the per-product maintenance fee at an amount that is designed to collect
the target amount of fees authorized by Congress. The recommendation will remain open until
we can confirm FY 2016 maintenance fee collections.
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Attachment 3
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
No.
Subject
Status1
Action Official
Planned
Completion
Date
Adjust the annual pesticides maintenance fees to
ensure the fees collected do not exceed the
statutory target for each fiscal year.
Assistant Administrator
for Chemical Safety and
Pollution Prevention
10/1/15
Claimed
Amount
Ag reed-To
Amount
1 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.
" The recommendation will remain "open" until we can confirm FY 2016 maintenance fee collections.
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Appendix A
Fiscal Years 2014 and 2013 Pesticides Reregistration and
Expedited Processing Fund
Financial Statements
(4)
^ PROffc0
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of Financial Management
16-F-0322
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TABLE OF CONTENTS
Management's Discussion and Analysis 1
Principal Financial Statements 7
1
16-F-0322
EPA's FY 2014 Annual FIFRA Financial Statements
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Management's Discussion and Analysis
2 EPA's FY 2014 Annual FIFRA Financial Statements
16-F-0322
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Under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Federal Food,
Drug, and Cosmetic Act (FFDCA), as amended by the Food Quality Protection Act (FQPA) of
1996, the EPA's Pesticide Program registers new pesticides and re-evaluates existing pesticides
to ensure that they can be used safely and that levels of residue in food and animal feed are safe
(there is a reasonable certainty of no harm). The agency must also conclude that, when used in
accordance with labeling and common practices, the product will not generally cause
unreasonable adverse effects on the environment.
In accordance with FIFRA and FFDCA, the pesticide program administers the Pesticides
Reregi strati on and Expedited Processing Fund (FIFRA Fund). As of 1996, fees for reregi strati on
are deposited to the FIFRA account, which is available to the EPA without further appropriation.
Under the FFDCA, EPA sets "tolerances," or maximum residue levels. If a pesticide is intended
to be used in a manner that may result in residues in food or animal feed, the applicant must
petition EPA for establishment of a tolerance (or exemption from a tolerance). Tolerances are
set at levels that ensure a reasonable certainty of no harm from the potential pesticide residues in
food combined with other non-occupational exposure.
The passage of the Food Quality Protection Act (FQPA) in 1996 provided for additional fees to
support reregi strati on activities and required tolerances to be reassessed as part of the
reregi strati on program. Effective January 1997, all fees related to tolerance activities were
deposited in the FIFRA Fund. With passage of the Pesticide Registration Improvement Act
(PRIA 1) of 2003 and amendments in 2007 and 2012, no additional tolerance petition fees are to
be deposited to the FIFRA Fund through FY 2017.
The Pesticide Re-registration and Registration Review Programs
EPA is responsible for re-evaluating the safety of existing pesticides. Since the original pesticide
legislation of 1947, scientific analysis techniques have grown much more precise and
sophisticated and health and environmental standards have become more stringent. With the
1988 amendments to FIFRA (FIFRA '88), Congress mandated the accelerated reregi strati on of
all products registered prior to November 1, 1984. The statute required completion of
Reregi strati on Eligibility Decisions (REDs) and tolerance reassessment for all food-use active
ingredients by 2006. Non-food-use active ingredient REDs were to be complete by October 3,
2008.
All REDs for the active ingredients have been completed. A RED is a decision by the Agency
defining whether products containing the pesticide active ingredient are eligible or ineligible for
reregi strati on. Following the issuance of the RED, the registrant must comply with the RED by
submitting product-specific data and revised labels for each product containing that active
ingredient, or cancel the product registration. Based on its review of the data, if the product has
met all the requirements, the EPA then reregisters the product.
3
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EPA's FY 2014 Annual FIFRA Financial Statements
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The FQPA introduced a new program called registration review to replace EPA's pesticide
reregi strati on and tolerance reassessment programs as those programs were completed. Unlike
earlier review programs, registration review applies to all registered pesticides. EPA reviews
each registered pesticide every 15 years to determine whether it still meets the FIFRA standard
for registration. In this way, the Agency ensures that all registered pesticides do not pose
unreasonable risks to human health or the environment when used as directed on product
labeling.
Congress authorized the collection of maintenance fees from manufacturers to supplement
appropriated funds to support reregi strati on and registration review programs. Maintenance fees
were structured under PRIA 3 to generate approximately $27.8 million per year for five years
(FY' 13 - FY' 17). Maintenance fees are assessed on a product-by-product basis with caps on the
maximum number of products for which any single company would have to pay fees, as well as
fee reductions for qualified small businesses. Registrations for minor use registrations and
public health pesticides are also eligible for waivers and/or refunds of maintenance fees. Fees
are deposited into the FIFRA Revolving Fund. By statute, excess monies in the FIFRA Fund
may be invested. Between 11.1% and 12.5% of collected maintenance fees each year are used to
support inert ingredient clearances as well as expedited processing of fast track amendments.
Approximately $800,000 of collected maintenance fees each year are used to enhance specified
IT systems.
FQPA also reauthorized collection of maintenance fees through 2001 to complete the review of
older pesticides to ensure they meet current standards (increasing annual fees from $14 million to
$16 million per year through 2000) and required all tolerances (over 9,700) to be reassessed by
2006. The 2002 appropriations bill extended maintenance fees to $17 million for another year,
and the 2003 appropriations extended them to $21.5 million for that year. Passage of PRIA 1 in
FY 2004 extended maintenance fees through FY 2008 (with annual fees totaling $26 million in
FY 2004; $27 million in FY 2005-2006; $21 million in FY 2007; and $15 million in FY 2008).
Passage of the Pesticide Registration Improvement Renewal Act (PRIA 2) in October 2007
extended maintenance fees through FY 2012 ($22 million each FY). PRIA 2 provided for
maintenance fees to offset the costs of registration review beginning in FY 2008.
Enforcement and Compliance Assurance Program Description
The Pesticide Enforcement and Compliance Assurance Program focuses on pesticide product
and user compliance. These include problems relating to pesticide worker safety, certification
and training of applicators, ineffective antimicrobial products, food safety, adverse effects, risks
of pesticides to endangered species, pesticide containers and containment facilities, and e-
commerce and misuse. The enforcement and compliance assurance program provides
compliance assistance to the regulated community through its National Agriculture Compliance
Assistance Center, seminars, guidance documents, brochures, and other forms of communication
to ensure knowledge of and compliance with environmental laws.
EPA's grant support to state and tribal pesticide programs emphasizes its commitment to
maintaining a strong compliance and enforcement presence. Agency FIFRA Cooperative
Agreement priorities for FY 2015 - FY 2017 include the enforcement of worker protection
standards and pesticide applicator certification requirements; compliance monitoring and
enforcement activities related to the pesticide container and containment rules, the revised soil
4 EPA's FY 2014 Annual FIFRA Financial Statements
16-F-0322
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fumigant labels, compliance of supplemental distributor products, contract manufacturing and
program performance reporting. Core program activities include inspections of producing
establishments; dealers/distributors/retailers; e-commerce; imports and exports, and pesticide
misuse. Additionally, through Cooperative Agreements we support inspector training and
training for state and tribal senior managers, scientists, and supervisors.
Highlights and Accomplishments
Tolerance Performance Measures
As mandated by PRIA 3, no Tolerance fees were collected and deposited to the FIFRA Fund in
FY 2014.
Measure: Tolerance re-evaluations.
Results: The tolerance reassessment program was completed in FY 2007. EPA completed
9,721 tolerance reassessment decisions, addressing 100% of the 9,721 tolerances that required
reassessment. Therefore, no further tolerance reassessment decisions were needed or completed
in FY 2014.
Reregistration (FIFRA) Financial Perspective
During FY 2014, the Agency's obligations charged against the FIFRA Fund for the cost of the
reregistration programs and other authorized pesticide programs were $23.7 million and 125.0
work-years. Of this amount, OPP obligated $17.9 million for PC&B.
Appropriated funds are used in addition to FIFRA revolving funds. In FY 2014, the Enacted
Operating Plan included approximately $33.6 million in appropriated funds for reregistration
program activities. The unobligated balance in the Fund at the end of FY 2014 was $10.5
million.
The Fund has two types of receipts: fee collections and interest earned on investments. Of the
$28.6 million in FY 2014 receipts, more than 99.9% were fee collections.
Reregistration Program (FIFRA) Performance Measures
The following measures support the program's strategic goals of Healthy Communities and
Ecosystems as contained in the FY 2013 President's budget.
Measure 1: Number of Reregistration Eligibility Documents (REDs) completed.
Results: All Reregistration Eligibility Decisions (REDs) were completed by the end of FY 2008.
Of the 613 chemical cases (representing approximately 1,150 pesticide active ingredients) that
initially were subject to reregistration, 384 cases have completed REDs. An additional 229
reregistration cases were voluntarily canceled before EPA invested significant resources in
developing REDs. All 613 reregistration cases (100%) completed the reregistration eligibility
decision making process by the end of FY 2008.
5 EPA's FY 2014 Annual FIFRA Financial Statements
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Measure 2: Number of products reregistered, canceled, or amended. Over 20,000
products are or eventually will be subject to product reregistration. Many products,
however, contain more than one active ingredient. Since products are reassessed
separately for each active ingredient, EPA will conduct approximately 38,000 product
reviews.
Results: In FY 2014, 65products were reregistered; 166products were amended; 61 products
were cancelled; and 4products were suspended. Currently, a universe of24,584products is
undergoing or has completed product reregistration. The status of those products at the end of
FY 2014 was as follows: EPA had completed decisions for 19,216 products (specifically, 5,081
products had been reregistered; 3,229 product registrations had been amended; 10,866products
were cancelled; and 40products were suspended); and 5,368 products had actions/decisions
pending. The Agency's goal in FY 2015 is to complete 600product reregistration actions.
Measure 3: Progress in Reducing the Number of Unreviewed, Required Reregistration
Studies.
Results: EPA completed the last REDs for conventional pesticides in 2008, so all studies
necessary to make reregistration eligibility decisions have been reviewed. REDs are complete
for antimicrobial pesticides as well, but the program continues to issue post-RED DCIs and thus
will have studies to review.
Measure 4: Number and Type of DCIs Issued to Support Product Reregistration by Active
Ingredient.
Results: Regarding Data Call-In notices (DCIs) under FIFRA section 3(c)(2)(B) to support
product reregistration for pesticide active ingredients included in REDs, EPA completed the last
remaining REDs and reported DCI information for the conventional pesticide REDs in FY 2008.
In FY 2014, the program issued 2 post-RED DCIs for antimicrobial pesticide active ingredients.
The Agency's goal in FY 2015 is to issue 64 additional post-RED DCIs for antimicrobial
pesticides.
Measure 5: Future Schedule for Reregistrations.
The last REDs were completed in FY 2008; therefore, there are no remaining candidates for
future decisions.
6
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EPA's FY 2014 Annual FIFRA Financial Statements
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PRINCIPAL
FINANCIAL STATEMENTS
7 EPA's FY 2014 Annual FIFRA Financial Statements
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Principal Financial Statements
Financial Statements
Balance Sheet 9
Statement of Net Cost 10
Statement of Changes in Net Position 11
Statement of Budgetary Resources 12
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies 13
Note 2. Fund Balance with Treasury 16
Note 3. General Property, Plant and Equipment 16
Note 4. Other Liabilities 16
Note 5. Payroll and Benefits Payable, non-Federal 16
Note 6. Income and Expenses from Other Appropriations 17
Note 7. Exchange Revenues, Statement of Net Cost 19
Note 8. Intragovernmental Costs and Revenue 19
Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing) 20
8
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EPA's FY 2014 Annual FIFRA Financial Statements
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United States Environmental Protection Agency
IIIRA
Balance Sheet
As of September 30, 2014 and 2013
(Dollars in Thousands)
FY 2014 FY 2013
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
$ 16,480
11,791
Total Intragovernmental
16,480
11,791
Property, Plant & Equipment, Net (Note 3)
408
459
Total Assets
16,888
12,250
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
70
10
Other (Note 4)
271
363
Total Intragovernmental
341
373
Accounts Payable & Accrued Liabilities
323
407
Payroll & Benefits Payable (Note 5)
2,762
4,066
Other (Note 4)
20,109
14,787
T otal Liabilities
23,535
19,633
NET POSITION
Cumulative Results of Operations
(6,647)
(7,383)
Total Net Position
(6,647)
(7,383)
Total Liabilities and Net Position $ 16,888 12,250
9
16-F-0322
The accompanying notes are an integral part of these financial statements.
EPA's FY 2014 Annual FIFRA Financial Statements
-------
United States Environmental Protection Agency
IIIRA
Statement of Net Cost
For the Fiscal Years Ending September 30,2014 and 2013
(Dollars in Thousands)
COSTS FY 2014 FY 2013
Gross Costs (Note 8)
$ 22,836
22,585
Expenses from Other Appropriations (Note 6)
33,652
17,999
T otal Costs
56,488
40,584
Less:
Earned Revenue (Note 8)
23,306
21,767
NET COST OF OPERATIONS (Note 8)
$ 33,182
18,817
10
16-F-0322
The accompanying notes are an integral part of these financial statements.
EPA's FY 2014 Annual FIFRA Financial Statements
-------
United States Environmental Protection Agency
IIIRA
Statement of Changes in Net Position
For the Fiscal Years Ending September 30, 2014 and 2013
(Dollars in Thousands)
FY 2014
CUMULATIVE RESULTS OF OPERATIONS:
NET POSITION - BEGINNING OF PERIOD (7,383)
Beginning Balances, as Adjusted $ (7,383)
BUDGETARY FINANCING SOURCES:
Nonexchange Revenue - Securities Investment 2
Income from Appropriations (Note 6) 33,652
Total Budgetary Financing Sources 33,654
OTHER FINANCING SOURCES (NON-EXCHANGE)
Imputed Financing Sources 264
Total Other Financing Sources 264
Net Cost of Operations (33,182)
Net Change 736
CUMULATIVE RESULTS OF OPERATIONS $ (6,647)
11
16-F-0322
The accompanying notes are an integral part of these financial statements.
EPA's FY 2014 Annual FIFRA Financial Statements
-------
United States Environmental Protection Agency
IIIRA
Statement of Budgetary Resources
For the Fiscal Years Ending September 30, 2014 and 2013
(Dollars in Thousands)
BUDGETARY RESOURCES
Unobligated balance, brought forward, October 1:
Unobligated Balance Brought Forward, October 1, as adjusted
Recoveries of prior year unpaid obligations
Unobligated balance from prior year budget authority, net
Appropriations (discretionary and mandatory)
Spending Authority from offsetting collection (discretionary and mandatory)
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, net
Outlays (gross)
Recoveries of prior year unpaid obligations
Unpaid obligations, end of year (gross)
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)
Budget Authority, net (discretionary and mandatory)
Outlays, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Outlays, net (discretionary and mandatory)
Agency outlays, net (discretionary and mandatory)
$
FY 2014
FY 2013
7,639
1,703
7,639
1,703
-
7
7,639
1,710
(2,002)
28,630
27,142
34,267
28,852
23,749
21,213
3,022
6,992
7,496
647
10,518
7,639
34,267
28,852
4,151
3,077
23,749
21,213
(23,941)
(20,132)
-
(7)
3,959
4,151
4,151
3,077
3,959
4,151
26,628
27,142
(28,630)
(27,142)
(2,002)
-
23,941
20,132
(28,630)
(27,142)
(4,689)
(7,010)
(4,689)
(7,010)
12
The accompanying notes are an integral part of these financial statements.
EPA's FY 2014 Annual FIFRA Financial Statements
16-F-0322
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United States Environmental Protection Agency
FIFRA
Notes to Financial Statements
For the Fiscal Years Ending September 30, 2014 and 2013
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Reporting Entity
The U.S. Environmental Protection Agency (EPA or Agency) was created in 1970 by executive
reorganization from various components of other Federal agencies in order to better marshal and
coordinate Federal pollution control efforts. The Agency is generally organized around the media and
substances it regulates ~ air, water, land, hazardous waste, pesticides and toxic substances.
The FIFRA Revolving Fund was authorized in 1988 by amendments to the Federal Insecticide, Fungicide
and Rodenticide Act (FIFRA). The 1988 amendments mandated the accelerated re-registration of all
products registered prior to November 1, 1984. Congress authorized the collection of maintenance fees to
supplement appropriations to fund re-registration and to fund expedited processing of pesticides.
Maintenance fees are assessed on registrants of pesticide products. FIFRA also includes provisions for
the registration of new pesticides (funded in part from the PRIA or Pesticide Registration Fund),
monitoring the distribution and use of pesticides, issuing civil or criminal penalties for violations,
establishing cooperative agreements with the states, and certifying training programs for users of
restricted chemicals. Appropriated funds, with the exception of partial funding of registration from
Pesticide Registration Service Fees in the Pesticide Registration Fund, pay for these activities. The
FIFRA Revolving Fund is accounted for under Treasury symbol number 68X4310.
The FIFRA fund may charge some administrative costs directly to the fund and charge the remainder of
the administrative costs to Agency-wide appropriations. Costs funded by Agency-wide appropriations for
FY 2014 and FY 2013 were $33,652 thousand and $17,999 thousand, respectively. These amounts are
included as Income from Other Appropriations on the Statement of Changes in Net Position and as
Expenses from Other Appropriations on the Statement of Net Cost. Costs for FY 2014 reflect a change in
accounting principles to full cost, as explained in Paragraph N below.
B. Basis of Presentation
These financial statements have been prepared to report the financial position and results of operations of
the EPA for the Reregistration and Expedited Processing (FIFRA) Revolving Fund as required by the
Chief Financial Officers Act of 1990. The reports have been prepared from the books and records of the
EPA in accordance with Office of Management and Budget (OMB) Circular A-136 Financial Reporting
Requirements, and the EPA's accounting policies which are summarized in this note. These statements
are therefore different from the financial reports also prepared by the EPA pursuant to OMB directives
that are used to monitor and control the EPA's use of budgetary resources. The balances in these reports
have been updated from the EPA consolidated financial statements to reflect the use of FY 2014 and FY
2013 cost factors for calculating imputed costs for Federal civilian benefits programs, respectively. These
updates impact the Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.
13
EPA's FY 2014 Annual FIFRA Financial Statements
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C. Budgets and Budgetary Accounting
Funding of the FIFRA Revolving Fund is provided by fees collected from industry to offset costs incurred
by the EPA in carrying out these programs. Each year the EPA submits an apportionment request to
OMB based on the anticipated collections of industry fees.
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. The financial statements are prepared in accordance with GAAP for federal
entities.
Transactions are recorded on an accrual accounting basis and a budgetary basis. 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. All interfiind balances and transactions have been
eliminated.
E. Revenues and Other Financing Sources
The EPA's 2002 appropriations bill extended authority to collect maintenance fees by one year in the
amount of $17 million and the FY 2003 appropriations extended the authority to collect fees again by one
year in the amount of $21.5 million. Passage of the Pesticide Registration Improvement Act (PRIA) in
2004 extended the authority to collect maintenance fees through FY 2008 (with annual fee amounts at $26
million in FY 2004; $27 million in FY 2005-2006; $21 million in FY 2007; and $15 million in FY 2008).
Passage of the Pesticide Registration Improvement Renewal Act (commonly referred to as PRIA II) in
2007 extended the authority to collect maintenance fees through FY 2012 (with annual fee amounts set at
$22 million each year from 2008-2012). For FYs 2014 and 2013, the FIFRA Revolving Fund received
funding from maintenance fees collected on existing registered pesticide products and from interest
collected on investments in U.S. Government securities. For FYs 2014 and 2013 revenues were
recognized from fee collections to the extent that expenses are incurred during the fiscal year.
F. Funds with the Treasury
The FIFRA fund deposits receipts and processes disbursements through its operating account maintained
at the U.S. Department of Treasury. Cash funds in excess of immediate needs are invested in U.S.
Government securities.
G. Investments in U. S. Government Securities
Investments in U. S. Government securities are maintained by Treasury (Bureau of Public Debt) and are
reported at amortized cost net of unamortized discounts. Discounts are amortized over the term of the
investments and reported as interest income. FIFRA holds the investments to maturity, unless needed to
finance operations of the fund. No provision is made for unrealized gains or losses on these securities
because, in the majority of cases, they are held to maturity.
14
EPA's FY 2014 Annual FIFRA Financial Statements
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H. General Property, Plant and Equipment
General property, plant and equipment for FIFRA consists of software in development. All funds (except
for the Working Capital Fund) 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 10 years.
I. Accounts Receivable and Interest Receivable
FIFRA receivables are mainly for interest receivable on investments.
J. Liabilities
Liabilities represent the amount of monies or other resources that are 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.
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. For FIFRA, liabilities are liquidated from fee
receipts and interest earnings, since FIFRA receives no appropriation. Liabilities of the Agency, arising
from other than contracts can be abrogated by the Government acting in its sovereign capacity.
K. 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 the Balance Sheet as a component
of "Payroll and Benefits Payable."
L. Retirement Plan
There are two primary retirement systems for Federal employees. Employees hired prior to January 1,
1987, may participate in the Civil Service Retirement System (CSRS). On January 1, 1984, the Federal
Employees Retirement System (FERS) went into effect, pursuant to Public Law 99-335. Most employees
hired after December 31, 1983, are automatically covered by FERS and Social Security. Employees hired
prior to January 1, 1984, elected to either join FERS and Social Security or remain in CSRS. A primary
feature of FERS is that it offers a savings plan to which the Agency automatically contributes one percent
of pay and matches any employee contributions up to an additional four percent of pay. The Agency also
contributes the employer's matching share for Social Security.
With the issuance of SFFAS No. 5, "Accounting for Liabilities of the Federal Government," accounting
and reporting standards were established for liabilities relating to the federal employee benefit programs
(Retirement, Health Benefits, and Life Insurance). SFFAS No. 5 requires that the employing agencies
recognize the cost of pensions and other retirement benefits during their employees' active years of
service. SFFAS No. 5 requires that the Office of Personnel Management (OPM), as administrator of the
CSRS and FERS, the Federal Employees Health Benefits Program, and the Federal Employees Group
Life Insurance Program, provide federal agencies with the actuarial cost factors to compute the liability
for each program.
15
EPA's FY 2014 Annual FIFRA Financial Statements
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M. 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.
N. 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.
In fiscal year 2014, EPA elected to change an accounting principle and use the full cost of expenses from
other appropriations in accordance with SFFAS No. 4, "Managerial Costs Accounting Standards and
Concepts". See Note 6 for additional information.
Note 2. Fund Balance with Treasury
Note 3. General Property, Plant and Equipment
General property, plant and equipment consists of software and software in development.
As of September 30, 2014 and 2013, General Property, Plant and Equipment consist of the following:
FY 2014 FY 2013
Revolving Funds: Entity Assets
$ 16,480 11,791
FY 2014
FY 2013
Acquisition
Value
Software $ 1,107
Accumulated Net Book
Depreciation Value
(699) 408
Acquisition
Value
1,001
Accumulated Net Book
Depreciation Value
(542) 459
(542) 459
Total $ 1,107
(699) 408
1,001
16
EPA's FY 2014 Annual FIFRA Financial Statements
16-F-0322
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Note 4. Other Liabilities
For FYs 2014 and 2013, the Payroll and Benefits Payable, non-Federal, are presented on a separate line of
the Balance Sheet and in a separate footnote (see Note 5).
FY 2014
FY 2013
Other Intragovernmental Liabilities - Covered by
Budgetary Resources
Employer Contributions - Payroll
$ 271
363
Total
$ 271
363
Other Non-Federal Liabilities - Covered by
Budgetary Resources
Advances from Non-Federal Entities
$ 20,109
14,787
Total
$ 20,109
14,787
Note 5. Payroll and Benefits Payable, non-Federal
FY 2014
FY 2013
Covered by Budgetary Resources
Accrued Payroll Payable to Employees
$ 946
1,704
Withholdings Payable
360
212
Thrift Savings Plan Benefits Payable
55
79
Total
1,361
1,995
Not Covered by Budgetary Resources
Unfunded Annual Leave Liability
$ 1,401
2,071
At various periods throughout FYs 2014 and 2013, employees with their associated payroll costs were
transferred from the FIFRA fund to the Environmental Programs and Management (EPM) appropriation.
(See graph in Note 6 below showing trend of hours charged per month to the FIFRA fund for FYs 2014
and 2013.) These employees were transferred in order to keep FIFRA's obligations and disbursements
within budgetary and cash limits. When resources became available, the employees charging to FIFRA
increased in order to utilize resources as much as possible. The Agency expects that the practice of
transferring employees when FIFRA's resources are low, and restoring employees when funds become
available, will continue throughout FY 2015 and probably beyond that period.
This process has led to variations between the year-end liabilities for FYs 2014 and 2013. The liabilities
covered by budgetary resources (both intragovernmental and non-Federal) represent unpaid payroll and
benefits at year-end. At the end of FY 2014 and FY 2013, 169 employees were and 53 employees were
charging their salary and benefits to FIFRA, respectively. As of September 30, 2014 these liabilities were
$271 thousand and $1,361 thousand for employer contributions and accrued funded payroll and benefits,
as compared to FY 2013's balances of $363 thousand and $1,995 thousand, respectively.
17
EPA's FY 2014 Annual FIFRA Financial Statements
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In contrast, the unfunded annual leave liability is a longer term liability than the funded liabilities. At
various periods throughout FYs 2014 and 2013, approximately 265 and 222 employees, respectively, in
total have been under FIFRA's accountability. During the 25th pay period of FY 2014, the liability was
computed based on 53 employees charging to FIFRA in the last pay period. Both the September 30, 2014
and 2013 liability balances for unfunded annual leave were accrued to cover the employees charged to
FIFRA close to the end of the fiscal year for atotal of 1,401 thousand and $2,701 thousand, respectively.
Note 6. Income and Expenses from Other Appropriations
The Statement of Net Cost reports program costs that include the full costs of the program outputs and
consist of the direct costs and all other costs that can be directly traced, assigned on a cause and effect
basis, or reasonably allocated to program outputs.
During FYs 2014 and 2013, the EPA had two appropriations which funded a variety of programmatic and
non-programmatic activities across the Agency, subject to statutory requirements. The EPM
appropriation was created to fund personnel compensation and benefits, travel, procurement, and contract
activities. Transfers of employees from FIFRA to EPM at various times during these years (see Note 5
above) resulted in an increase in payroll expenses in EPM, and these costs financed by EPM are reflected
as an increase in the Expenses from Other Appropriations on the Statement of Net Cost. The increased
financing from EPM is reported on the Statement of Changes in Net Position as Income from Other
Appropriations.
In terms of hours charged to FIFRA each month, the transfers of employees and their associated costs,
during FYs 2014 and 2013 are shown below. Note that a decrease in hours charged to FIFRA normally
signifies an increase in EPM's payroll costs, and vice versa. In addition, Pesticide registration was
separated from FIFRA starting with FY 2004 and Pesticide has its own set of financial statements.
18
EPA's FY 2014 Annual FIFRA Financial Statements
FIFRA-Total Employee Hours by Pay Period
01 03 05 07 09 11 13 15 17 19 21 23 25 27
PAY PERIODS
Ho urs - 2014 Ho urs - 2013
16-F-0322
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EPM costs related to FIFRA are allocated based on specific EPM program codes which have been
designated for Pesticide activities. As illustrated below, there is no impact on FIFRA's Statement of
Changes in Net Position.
Income from Other Expenses from Other t Effect
Appropriations Appropriations
FY 2014 $ 33,652 33,652
FY 2013 $ 17,999 17,999
Note 7. Exchange Revenues, Statement of Net Cost
For FYs 2014 and 2013, the exchange revenues reported on the Statement of Net Cost include both
Federal and non-Federal amounts.
Note 8. Intragovernmental Costs and Exchange Revenue
FY 2014 FY 2013
COSTS:
Intragovernmental $ 6,242 5,104
With the Public 16,594 17,481
Expenses from Other Appropriations 33,652 17,999
Total Costs 56,488 40,584
REVENUE
With the Public 23,306 21,767
Total Revenue 23,306 21,767
NET COST OF OPERATIONS $ 33,182 18,817
Intragovernmental costs relate to the source of the goods or services not the classification of the related
revenue.
19
EPA's FY 2014 Annual FIFRA Financial Statements
16-F-0322
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Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of Financing)
FY 2014
FY 2013
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $
Less: Spending Authority from Offsetting Collections and Recoveries
Obligations, Net of Offsetting Collections
Less: Offsetting Receipts
23,749
(28,630)
(4,881)
21,213
(27,149)
(5,936)
(3)
Net Obligations
Other Resources
Imputed Financing Sources
Income from Other Appropriations
(4,881)
264
33,652
(5,939)
471
17,999
Net Other Resources Used to Finance Activities
33,916
18,470
Total Resources Used To Finance Activities
29,035
12,531
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NET COST OF OPERATIONS:
Change in Budgetary Resources Obligated
Resources that Fund Prior Periods Expenses
Offsetting Receipts Not Affecting Net Cost
Resources that Finance Asset Acquistion
Total Resources Used to Finance Items Not Part of the Net Cost of Operations
5,551
(785)
(106)
4,660
6,073
3
(52)
6,024
Total Resources Used to Finance the Net Cost of Operations
33,695
18,555
COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL
NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD:
Components Requiring or Generating Resources in Future Periods:
Increase in Annual Leave Liability
Increase in Environmental and Disposal Liability
(670)
169
(58)
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods
(670)
111
Components Not Requiring/Generating Resources:
Depreciation and Amortization
157
151
Total Components of Net Cost that Will Not Require or Generate Resources
157
151
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period
(513)
262
Net Cost of Operations $
33,182
18,817
20
16-F-0322
EPA's FY 2014 Annual FIFRA Financial Statements
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Appendix B
I
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON ~ t; 2:04^0
:i < lCL i" r,.-«L •"'•m l •
ftNH HniU< CM "KfcVi f-l! .OJJ
Ml MORANDIM
SI FiJECT: Response to Office of Inspector General Draft Report entitled "Fiscal Venn 2UN
and 2013 Financial Statements for the Pesticides Rercgistmtkm ami Expedited
' /] ~ ^
Processing Fund. "
FROM: James J. Junes. Assistant Administrator
Office of Chemical Safetv and Pollution Prevention
TO:
Arthur A. Hlkins. Jr.
InspectorGeneral
V
11k* following is the Office of Chemical Safetv and Pollution Prevention's (OCSPP) response to
Draft Report No. OA-FY 15-0053. entitled "Fiscal Years 2014 and 2013 Financial Statements for
the Pesticides Registration and Expedited Processing Fund." dated June 27. 2016.
i. Background and Discussion of Findings:
Before we discuss the Draft Report's recommendation, and our proposed corrective action,
OCSPP wishes lo express support for the OKi's findings, specifically:
• The agency cannot adequately support payroll liabilities on FIFRA's Balance Sheet as of
September 30. 2014; and Income/Expense from other appropriations on the statements of
FIFRA's Net Costs and Changes in the net Position of S33.652.000. which represents
approximately 60 percent of FIFRA costs for the >ear ended September 30. 2014;
• In FY 2014, the FPA allocated its pesticides appropriated funding to pay for payroll
costs. By paying significant payroll amounts from appropriations versus from fees
collected by FIFRA. the JiPA lost the audit trail to properly support how much FIFRA
payroll expenses were paid for by appropriations; and
• "flic agency cannot adequately support lot a I FY 2014 FIFRA costs and liabilities.
OCSPP is pleased lo report that the Agency's efforts, led by the Office of the Chief Financial
Officer (OCFO) with the support of OCSPP. ha\e already made substantial progress in
addressing the above findings,
OCSPP understands the importance of proper FIFRA cost accounting and fee rate setting. In
order to implement an effective system to track and report costs incurred by appropriations that
16-F-0322
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support FJFRA-rolated work. OCSPP" s Office of Pesticide Programs fOPP) is actively
participating in OC'I 0:s leehnica! User Group, to provide feedback and recommendations for
the PeoplePlus Knhan cement project. The PeoplePlus payroli cost allocation enhancement will
allow lor the creation of an audit trail to capture costs incurred by the HFRA fund and h> other
appropriations that support I ll'KA-related activities. This will address the material weakness
cited in the Draft Report. 1 he new enhancement will go live by October 2017.
Additionally. OCSPP/OPP has partnered with OCFO senior leaders to develop a phased-pilol
approach lor all OPP employees lo capture direct and indireet costs lor the 1 II RA program.
OCTO will develop webinars and provide faee-to-iace training for all OPP employees to ensure
the same methodology is being used enterprise-wide. The T! phase will consist of a methodology
to track direct costs related to HFKA activities. The 2f"' phase will consist of a methodology to
accumulate indirect costs. 1 he 3"! phase will consist of reporting actual hours worked on STIR A-
related activities including direct and indirect costs. The 4th phase will consist of producing the
financial statements. The results of these concerted efforts will be realized in October 2017,
II, OCSPP Response to (he OKi's Recommendation:
Recommendation: The Assistant Administrator for Chemical Safely and Pollution Prevention
should adjust the annual pesticides maintenance fees to ensure the fees collected do not exceed
the statutor> maximum tor each fiscal \ear.
OCSPP Response: OCSPP agrees with this recommendation and has already completed
appropriate corrective actions. In October 2015. OCSPP eliminated the practice of "averaging"
to offset over-or-under collections of maintenance fees from previous years. OCSPP has set the
per-produet maintenance lee at an amount thai is designed to collect I he target amount of fees
authorized by Congress.
If you have questions or require additional information, please contact Janet Werner. OCSPP's
Audit Liaison, at (202) 564-2309.
ee: Louise Wise
Oscar Morales
Bruce Berkley-
Janet Werner
Jack I lousengei
Arnold Layne
Rick Reiguin
Peter('aulkins
Del ores Barber
Jeanne Conklin
Stefan Silzcr
John O' Conner
Lorna Washington
Paul Curtis
Robert Smith
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2
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Wanda Arlington
Sheila M ay
Vickie Richardson
Som a Brooks
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3
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Appendix C
Distribution
Office of the Administrator
Chief Financial Officer
Assistant Administrator for Chemical Safety and Pollution Prevention
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intragovernmental Relations
Associate Administrator for Public Affairs
Director, Office of Pesticide Programs, Office of Chemical Safety and Pollution Prevention
Deputy Director, Office of Pesticide Programs, Office of Chemical Safety and Pollution Prevention
Senior Advisor, FIFRA Implementation, Office of Pesticide Programs,
Office of Chemical Safety and Pollution Prevention
Director, Biopesticides and Pollution Prevention Division, Office of Pesticide Programs,
Office of Chemical Safety and Pollution Prevention
Director, Pesticide Re-Evaluation Division, Office of Pesticide Programs, Office of Chemical
Safety and Pollution Prevention
Director, Registration Division, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention
Director, Antimicrobials Division, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention
Director, Information Technology and Resources Management Division, Office of Pesticide
Programs, Office of Chemical Safety and Pollution Prevention
Controller, Office of the Controller, Office of the Chief Financial Officer
Deputy Controller, Office of the Controller, Office of the Chief Financial Officer
Director, Accounting and Cost Analysis Division, Office of the Chief Financial Officer
Director, Policy, Training, and Accountability Division, Office of the Chief Financial Officer
Director, Washington Finance Center, Office of the Chief Financial
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Chemical Safety and Pollution Prevention
FIFRA Audit Coordinator, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention
16-F-0322
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