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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
L/.S. Chemical Safety Board
CSB Complied With
Improper Payment
Legislation Requirements
for Fiscal Year 2016
Report No. 17-P-0123 March 9, 2017
CSB Payments
FY 2016
expense
payments
$10.3 mil
Improper
payments
$12,000
(0.1% of total)
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Report Contributors:
Michael D. Davis
Marcia R. Hirt-Reigeluth
Randy Holthaus
Abbreviations
CSB U.S. Chemical Safety and Hazard Investigation Board
EPA U.S. Environmental Protection Agency
FY Fiscal year
IBC Department of the Interior's Interior Business Center
IPERA Improper Payments Elimination and Recovery Act of 2010
IPERIA Improper Payments Elimination and Recovery Improvement Act of 2012
IPIA Improper Payments Information Act of 2002
OIG Office of Inspector General
OMB Office of Management and Budget
PAR Performance and Accountability Report
Cover image: OIG-created chart illustrating approximate CSB-provided expenses and
improper payment amount for fiscal year 2016.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
March 9, 2017
The Honorable Vanessa Allen Sutherland
Chairperson and Member
U.S. Chemical Safety and Hazard Investigation Board
1750 Pennsylvania Avenue NW, Suite 910
Washington, D.C. 20006
Dear Ms. Sutherland:
This is our report on the audit of the U.S. Chemical Safety and Hazard Investigation Board's (CSB's)
compliance with improper payment acts in fiscal year 2016. This report contains no findings. This report
represents the opinion of the Office of Inspector General and does not necessarily represent the final
CSB position.
The Improper Payments Elimination and Recovery Act of 2010 and Office of Management and Budget
guidance require the Inspector General to distribute this report to the following individuals and
organizations, to whom we will provide the report under a separate transmittal:
• Office of Management and Budget.
• Senate Committee on Homeland Security and Government Affairs.
• House Committee on Oversight and Government Reform.
• U.S. Comptroller General.
Because this report contains no recommendations, you are not required to respond to this report.
We will post this report to our website at www.epa.gov/oig.
Sincerely,
Arthur A. Elkins Jr.
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CSB Complied With Improper Payment
Legislation Requirements for Fiscal Year 2016
17-P-0123
Table of C
Purpose 1
Background 1
Scope and Methodology 2
Results of Audit 3
CSB Complied With Requirement to Publish a PAR 3
CSB Conducted a Risk Assessment 4
CSB Not Required to Publish Estimates, Report on Agency Actions,
and Publish Annual Reduction Targets 4
CSB Determined It Is Not Cost-Effective to Conduct a Payment
Recapture Audit 5
CSB Response 6
Appendix
A Distribution
7
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Purpose
Our audit objective was to determine the U.S. Chemical Safety and Hazard
Investigation Board's (CSB's) compliance with improper payments legislation
during fiscal year (FY) 2016.
Background
CSB is an independent federal agency charged with investigating industrial
chemical incidents and hazards. Headquartered in Washington, D.C., the agency's
board members are appointed by the President and confirmed by the U.S. Senate.
CSB is authorized by the Clean Air Act Amendments of 1990 and became
operational in 1998.
The Improper Payments Information Act of 2002 (IPIA) required federal agencies
to provide for estimates and a report of improper payments. The Improper
Payments Elimination and Recovery Act of 2010 (IPERA) specified agency and
Inspector General responsibilities. The Improper Payments Elimination and
Recovery Improvement Act of 2012 (IPERIA) intensified efforts to identify,
prevent and recover payment error, waste, fraud and abuse within federal
spending.
Office of Management and Budget (OMB) Memorandum M-15-02, issued
October 20, 2014, modified OMB Circular No. A-123, Appendix C,
Requirements for Effective Estimation and Remediation of Improper Payments,
so as to create a more unified, comprehensive and less burdensome set of
requirements for assessment of improper payments. The guidance outlines the
requirements from improper payments legislation, including the three acts noted
in the paragraph above. The memorandum, in Part I, Section A(2), 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 made to eligible recipients....
An improper payment also includes any payment that was made to
an ineligible recipient or for an ineligible good or service, or
payments for goods or services not received.... [W]hen 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.
OMB Memorandum M-15-02, Part II, Section A, requires Inspectors General to
determine whether the agency complies with the improper payments legislation
and submit its results to Congress. The report should also clearly state the
agency's compliance status and indicate which of the six requirements the agency
17-P-0123
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did or did not comply with. Pursuant to OMB Memorandum M-15-02, Part II,
Section A(3), an agency is compliant if it has:
a) Published an AFR [Agency Financial Report] or PAR
[Performance and Accountability Report]1 for the most recent
fiscal year and posted that report and any accompanying
materials required by OMB on the agency website;
b) Conducted a program specific risk assessment for each
program or activity ... (if required);
c) Published improper payment estimates for all programs and
activities identified as susceptible to significant improper
payments under its risk assessment (if required);
d) Published programmatic corrective action plans in the ... PAR
(if required);
e) Published, and is meeting, annual reduction targets for each
program assessed to be at risk and estimated for improper
payments (if required and applicable); and
f) Reported a gross improper payment rate of less than 10 percent
for each program and activity for which an improper payment
estimate was obtained and published in the ... PAR.
The memorandum notes that if an agency does not meet one or more of these
requirements, the agency is not compliant with the improper payment legislation.
OMB Memorandum M-15-02, Part II, Section A(4), states that Inspectors General
may evaluate the accuracy and completeness of agency reporting, and agency
performance in reducing and recapturing improper payments. As part of its report,
the Inspector General may include its evaluation of agency efforts to prevent and
reduce improper payments, and any recommendations for actions to further
improve the agency's or program's performance in reducing improper payments,
including corrective actions and internal controls.
OMB Memorandum M-15-02, Part I, Section D, implements the requirements of
IPERA Section 2(h) that requires each agency to conduct payment recapture
audits for each program and activity of the agency that expends $1 million or
more annually, if conducting such audits would be cost-effective.
Scope and Methodology
We conducted this audit from December 2016 to February 2017 in accordance
with generally accepted government auditing standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis
for our findings and conclusions based on our audit objectives. We believe that
1 CSB FY 2016 PAR, published November 15, 2016.
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the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
To determine whether CSB is compliant with improper payment legislation
requirements, we reviewed CSB's FY 2016 PAR, improper payments and
supporting documentation. To determine whether CSB's internal controls for
improper payments were adequate, we relied on CSB management assurances,
prior years' IPERIA reports, the FY 2016 CSB Financial Statement, and CSB's
resolution of several FY 2016 identified management challenges and the one
internal control weakness. We exchanged emails with CSB personnel about CSB
actions in several areas. We also reviewed CSB's interagency agreements with the
U.S. Department of the Treasury's Bureau of the Fiscal Service for financial
services and the U.S. Department of the Interior's Interior Business Center (IBC)
for human resources functions.
Results of Audit
CSB was compliant with reporting requirements of improper payments legislation
during FY 2016. As required, CSB published and posted its PAR on its website. We
determined that CSB conducted a risk assessment and did not identify any programs
and activities susceptible to significant improper payments. CSB was not required to
publish and report improper payment estimates, publish programmatic corrective action
plans, or set reduction targets based on the risk for its programs. Additionally, CSB
determined that it was not cost-effective to conduct a recapture audit.
CSB Complied With Requirement to Publish a PAR
OMB Memorandum M-15-02, Part II, Section A(3)(a), requires that an agency
publish a PAR for the most recent fiscal year and post that report and any
accompanying materials required by OMB on the agency website. The PAR, as
described by OMB Circular A-l 1, Preparation, Submission, and Execution of the
Budget, Section 200.21, is an annual report of agency performance. The report
contains the agency's audited financial statements and detailed information on
efforts to achieve goals during the past fiscal year.
In its FY 2016 PAR, page 15, which CSB posted on its website on November 15,
2016, CSB stated:
The CSB has not identified any significant risk with improper
payments. However, we recognize the importance of maintaining
adequate internal controls to ensure proper payments, and our
commitment to the continuous improvement in the overall
disbursement management process remains strong. In FY 2016,
the CSB continued our agreement with the Bureau of the Fiscal
Service (BFS) to process financial transactions, make administrative
17-P-0123
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payments, and prepare various financial reports. This agreement
promotes the accuracy of our financial records and payments.
Based on our audit, we determined that CSB was compliant with this requirement.
CSB Conducted a Risk Assessment
OMB Memorandum M-15-02, Part II, Section A(3)(b), states that an agency has
to conduct a program-specific risk assessment for each program or activity that
conforms with IPIA, if required. IPIA requires each agency to review all
programs and activities that it administers and identify all such programs and
activities that may be susceptible to significant improper payments. OMB
Memorandum M-15-02, Part I, Section A(9)(a), defines "significant improper
payments" as gross annual improper payments in the program exceeding (1) both
1.5 percent of program outlays and $10 million of all program or activity
payments made during the fiscal year reported, or (2) $100 million, regardless of
the percentage of total program outlays.
We reviewed and analyzed CSB's FY 2016 risk assessment and determination that
it does not have any programs susceptible to significant risk of improper payments.
We concluded that CSB is compliant with the requirement to conduct a program-
specific risk assessment. CSB identified 25 improper payments, totaling $12,101. We
found that CSB's FY 2016 expense payments totaled $10,309,501, as shown in
Table 1.
Table 1: CSB payments
Activity
Amount
Percentage
FY 2016 expense payments
$10,309,501
93.72%
Interagency and unobligated balance
690,499
6.28%
Total
$11,000,000
100.00%
Source: Office of Inspector General (OIG) analysis of CSB data.
CSB Not Required to Publish Estimates, Report on Agency Actions,
and Publish Annual Reduction Targets
OMB Memorandum M-15-02, Part II, Section A(3)(c), states that agencies have
to publish improper payment estimates for all programs and activities identified as
susceptible to significant improper payments under its risk assessment, if
required. CSB did not have significant improper payments identified and,
therefore, is not required to publish improper payment estimates. CSB did not
meet the threshold of $10 million of all program or activity payments made
during the fiscal year reported and 1.5 percent of program outlays. As a result,
CSB was not required to report improper payment rates for any of its programs
and activities. OMB Memorandum M-15-02, Part I, Section A(9), Step 3(b),
states that when compiling plans to reduce improper payments, agencies are to set
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and publish reduction targets for future improper payment levels and a timeline
within which the targets will be reached. CSB was not required to implement a
programmatic corrective action plan or set and publish reduction targets.
CSB Determined It Is Not Cost-Effective to Conduct a Payment
Recapture Audit
OMB Memorandum M-15-02, Part I, Section D, implements the requirements of
Section 2(h) of IPERA. Agencies are required to conduct recapture audits with
respect to each program and activity of the agency that expends $1 million or
more annually, if conducting such audits would be cost-effective. OMB
Memorandum M-15-02, Part I, Section D(l)(b), defines a payment recapture audit
(also known as a recovery audit) as ".. .a review and analysis of an agency's or
program's accounting and financial records, supporting documentation, and other
pertinent information supporting its payments, that is specifically designed to
identify overpayments." A payment recapture audit program is defined in OMB
Memorandum M-15-02, Part I, Section D(l)(c), as "an agency's overall plan for
risk analysis and the performance of payment recapture audits and recovery
activities."
According to OMB Memorandum M-15-02, Part I, Section D(l)(d), a cost-
effective payment recapture audit "is one in which the benefits (i.e., recaptured
amounts) exceed the costs (e.g., staff time and resources, or payments to an audit
contractor) associated with implementing and overseeing the program." Agencies
may consider the following criteria from OMB Memorandum M-15-02, Part I,
Section D(5)(a) and (b), in determining whether a payment recapture audit is cost-
effective:
• The likelihood that identified overpayments will be recaptured.
• The likelihood that the expected recoveries will be greater than the costs
incurred to identify and recover the overpayments.
In February 2012, CSB provided us with an analysis to determine the cost-
effectiveness of performing a recapture audit on all activities with annual outlays
in excess of $1 million. CSB updated its analysis by inputting the FY 2016 data
into the FY 2012 calculations model and concluded that a recapture audit program
would not be cost-effective because its costs are likely to be higher than any
amounts recovered. CSB provided this analysis to the OIG but not to OMB, as
there was no change from the prior year's analysis.
OMB Memorandum M-15-02, Part I, Section D(6), states that if an agency
determines a payment recapture audit would not be cost-effective, agencies must
notify OMB and the agency's Inspector General of its decision. In FY 2016, the
OIG and CSB confirmed with OMB personnel that CSB is not required to repeat
and resubmit the cost-effectiveness analysis to OMB and the agency Inspector
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General unless circumstances change within the program that might make a
payment recapture audit cost-effective.
CSB Response
CSB agreed with our report and did not provide written comments.
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Appendix A
Distribution
Chairperson and Member, U.S. Chemical Safety and Hazard Investigation Board
Board Members, U.S. Chemical Safety and Hazard Investigation Board
Director of Administration and Audit Liaison, U.S. Chemical Safety and Hazard
Investigation Board
General Counsel, U.S. Chemical Safety and Hazard Investigation Board
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