U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Fiscal Years 2012 and 2011
(Restated) Financial
Statements for the
Pesticides Reregistration and
Expedited Processing Fund
Report No. 14-1-0041
December 17, 2013
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Report Contributors: Paul Curtis
Robert Smith
Kelly Bonnette
Edgar Dumeng
Sabrina Jones
Carol Kwok
Mairim Lopez
Claire McWilliams
Guillermo Mejia
Demetrios Papakonstantinou
Myka Sparrow
Lynda Taylor
Abbreviations
EPA
U.S. Environmental Protection Agency
EPM
Environmental Programs and Management
FIFRA
Federal Insecticide, Fungicide, and Rodenticide Act
FMFIA
Federal Managers' Financial Integrity Act
FY
Fiscal Year
OCFO
Office of the Chief Financial Officer
OIG
Office of Inspector General
OMB
Office of Management and Budget
OPP
Office of Pesticide Programs
PRIA
Pesticide Registration Improvement Act
Hotline
Suggestions for Audits or Evaluations
To report fraud, waste or abuse, contact
To make suggestions for audits or evaluations,
us through one of the following methods:
contact us through one of the following methods:
email: OIG Hotline@.epa.qov
email:
OIG WEBCOMMENTSO.eDa.aov
phone: 1-888-546-8740
phone:
1-202-566-2391
fax: 1-202-566-2599
fax:
1-202-566-2599
online: httD://www.eDa.aov/oia/hotline.htm
online:
httD://www.eDa.aov/oia/contact.html#Full Info
write: EPA Inspector General Hotline
write:
EPA Inspector General
1200 Pennsylvania Avenue, NW
1200 Pennsylvania Avenue, NW
Mailcode 2431T
Mailcode 2410T
Washington, DC 20460
Washington, DC 20460
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*. U.S. Environmental Protection Agency 14-1-0041
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At a Glance
Why We Did This Review
The Food Quality Protection
Act requires that we perform an
annual audit of the Pesticide
Reregistration and Expedited
Processing Fund (known as the
FIFRA Fund) financial
statements.
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 theme:
Embracing EPA as a high
performance organization.
For further information,
contact our public affairs office
at (202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2014/
20131217-14-1-0041.pdf
Fiscal Years 2012 and 2011 (Restated) Financial Statements for
the Pesticides Reregistration and Expedited Processing Fund
EPA Receives an Unqualified Opinion
We rendered an unqualified, or clean, opinion on the EPA's Pesticides
Reregistration and Expedited Processing Fund financial statements for fiscal
years (FYs) 2012 and 2011 (restated), meaning they are fairly presented and free
of material misstatement.
Internal Control Material Weaknesses Noted
We noted two material weaknesses in internal controls.
The agency
corrected material
misstatements due to
weaknesses in
internal controls we
identified.
EPA materially overstated the expenses from other
appropriations that support the FIFRA fund. This
occurred because the agency does not have an
effective system to accurately accumulate and
report costs incurred by other appropriations in
support of FIFRA Fund activities. This overstatement resulted in a material
overstatement of the total costs of the FIFRA Fund by $19.6 million in
FY 2012 and $4.8 million in FY 2011.
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 related expenses
and liabilities from FIFRA to the Environmental Programs and Management
Fund for cash flow reasons led to the understatement. The FY 2011 payroll
liabilities covered by budgetary resources for FIFRA was $1,713,000, while
the FY 2012 payroll liabilities covered by budgetary resources was zero.
Compliance With Applicable Laws and Regulations
The agency was in compliance with applicable laws and regulations.
Recommendations and Planned Agency Corrective Actions
The agency agreed with our findings and our recommendations. The agency
corrected the financial statements to reflect the proper expenses paid by other
appropriations and to reflect the proper payroll liability amounts. The agency will
also develop a process to ensure accurate allocations of expenses from other
appropriations and carefully review and comment on the draft and final versions
of the FIFRA financial statements prior to their submission to the Office of
Inspector General. The agency will also closely monitor the payroll liability
amounts.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
December 17, 2013
MEMORANDUM
SUBJECT: Fiscal Years 2012 and 2011 (Restated) Financial Statements for the
Pesticides Reregi strati on and Expedited Processing Fund
Report No. 14-1-0041
FROM: Paul C. Curtis
Director, Financial Statement Audits
TO: Jim Jones, Assistant Administrator
Office of Chemical Safety and Pollution Prevention
Maryann Froehlich, Acting Chief Financial Officer
Attached is our report on the U.S. Environmental Protection Agency's (EPA's) fiscal years 2012 and
2011 (restated) financial statements for the Pesticides Reregi strati on and Expedited Processing Fund,
conducted by the EPA Office of Inspector General (OIG). This audit report represents the opinion of the
OIG, and the findings in this report do not necessarily represent the final EPA position. EPA managers,
in accordance with established EPA audit resolution procedures, will make final determinations on the
findings in this audit report. Accordingly, the findings described in this audit report are not binding upon
EPA in any enforcement proceeding brought by EPA or the Department of Justice. This report will be
available at http://www.epa.gov/oig.
In accordance with EPA Manual 2750, we are closing this report on issuance in our tracking system.
You should track progress of your corrective actions in the Management Audit Tracking System.
If you or your staff have any questions regarding this report, please contact Richard Eyermann,
Acting Assistant Inspector General for Audit, at (202) 566-0565 or evermann.richard@epa.gov;
or Paul Curtis, Director, Financial Statement Audits, at (202) 566-2523 or Curtis.Paul@epa.gov.
^tDSrX
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Fiscal Years 2012 and 2011 (Restated) Financial Statements
for the Pesticides Reregistration and Expedited Processing Fund
14-1-0041
Table of Contents
Inspector General's Report on the Fiscal Years 2012 and 2011
(Restated) Financial Statements for the Pesticides Reregistration
and Expedited Processing Fund
Opinion on the FIFRA Fund Financial Statements 1
Evaluation of Internal Controls 2
Test of Compliance With Laws and Regulations 4
Management's Discussion and Analysis Section of the Financial Statements 4
Prior Audit Coverage 4
Agency Comments and OIG Evaluation 5
Attachments
1. Material Weaknesses 6
EPA Materially Overstated Expenses From
Other Appropriations That Support Fl FRA 7
EPA Understated FIFRA Payroll Liabilities
Covered by Budgetary Resources 9
2. Status of Recommendations and Potential Monetary Benefits 11
Appendices
A Fiscal Year 2012 and 2011 (Restated) FIFRA Financial Statements
B Agency's Response to Draft Report
C Distribution
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Inspector General's Report on the Fiscal Years 2012
and 2011 (Restated) Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
The Administrator
U.S. Environmental Protection Agency
We have audited the Pesticides Reregistration and Expedited Processing Fund
(known as the FIFRA Fund) balance sheet as of September 30, 2012 and 2011
(restated), and the related statements of net cost, changes in net position, and
budgetary resources for the years then ended. These financial statements are the
responsibility of U.S. Environmental Protection Agency (EPA) management.
Our responsibility is to express an opinion on these financial statements based
upon our audit.
We conducted our audit in accordance with the generally accepted auditing
standards; the standards applicable to financial statements contained in
Government Auditing Standards, issued by the Comptroller General of the
United States; and Office of Management and Budget (OMB) Bulletin No. 07-04,
Audit Requirements for Federal Financial Statements, as Amended. These
standards require that we plan and perform the audit to obtain reasonable
assurance as to whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The agency has restated the FIFRA Fund financial statements for fiscal
year (FY) 2011 due to material errors in the computation of expenses from other
appropriations that support FIFRA Fund activities. There errors resulted in an
overstatement of these expenses by $19.6 million in FY 2012 and $4.8 million in
FY 2011. The agency has restated the FY 2011 financial statements to reflect the
decrease of the expenses from other appropriations that support the FIFRA Fund
and made corresponding adjustments to the other related accounts. Due to
material errors found in the computation of the expenses from other
appropriations that support FIFRA Fund activities and other related accounts, our
report on the FIFRA Fund FY 2011 financial statements, issued on June 6, 2012,
is not to be relied upon. That report is replaced by this report on the restated
FY 2011 FIFRA Fund financial statements. We report the internal control
deficiency that resulted in the material errors as a material weakness in the
Internal Control section of this report.
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In our opinion, the financial statements, including the accompanying notes,
present fairly, in all material respects, the assets, liabilities, net position, changes
in net position and budgetary resources of the FIFRA Fund, as of and for the years
ending September 30, 2012 and 2011, as restated, 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, 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 acquisitions, 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.
In planning and performing our audit, we considered the EPA's internal control
over the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) financial
reporting by obtaining an understanding of the agency's internal controls,
determining whether internal controls had been placed in operation, assessing
control risk and performing tests of controls. We did this as a basis for designing
our auditing procedures for the purpose of expressing an opinion on the financial
statements and to comply with OMB audit guidance, not to express an opinion on
internal control. Accordingly, we do not express an opinion on internal control
over financial reporting nor on management's assertion on internal controls
included in Management's Discussion and Analysis. We limited our internal
control testing to those controls necessary to achieve the objectives described in
OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements,
as Amended. We did not test all internal controls relevant to operating objectives
as broadly defined by the Federal Managers' Financial Integrity Act (FMFIA) of
1982, such as those controls relevant to ensuring efficient operations.
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 controls that is less severe than a
material weakness, yet important enough to merit attention by those charged with
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governance. A material weakness is a deficiency, or combination of deficiencies,
in internal controls, 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 basis. Because of inherent limitations in internal
controls, misstatements, losses or noncompliance may nevertheless occur and not
be detected. We noted two matters involving the internal controls and their
operations that we considered to be a material weakness.
Material Weaknesses
Material weaknesses noted are summarized below and detailed in attachment 1.
EPA Materially Overstated the Expenses From Other Appropriations
That Support FIFRA. EPA materially overstated the expenses from other
appropriations that support the FIFRA fund. This occurred because the agency
does not have an effective system to accurately accumulate and report costs
incurred by other appropriations in support of FIFRA Fund activities. This
overstatement of the expenses from other appropriations resulted in a material
overstatement of the total costs of the FIFRA Fund by $19.6 million in
FY 2012 and $4.8 million in FY 2011. This overstatement could impact the
opinion on the financial statements and reliance on reported FIFRA financial
information.
EPA Understated FIFRA Payroll Liabilities Covered by Budgetary
Resources. 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 related
expenses and liabilities from FIFRA to the Environmental Programs and
Management (EPM) Fund for cash flow reasons led to the understatement.
The FY 2011 payroll liabilities covered by budgetary resources for FIFRA
was $1,713,000, while the FY 2012 payroll liabilities covered by budgetary
resources was zero. Such understatements could impact the opinion on the
financial statements and reliance on reported FIFRA financial information.
Comparison of EPA's FMFIA Report and With Our Evaluation of
Internal Controls
OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements,
as Amended, 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
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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 2012 impacting the
FIFRA Fund; however, we identified material weaknesses with the agency's
reporting of the expenses from other appropriations that support FIFRA and
FIFRA payroll and benefit payable. Details concerning these material weaknesses
are in attachment 1.
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 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
noncompliances that would result in a material misstatement to the audited
financial statements.
Management's Discussion and Analysis Section of the
Financial Statements
We reviewed samples of reregi strati on, amendment and cancellation actions
completed in FY 2012 claimed in FIFRA Performance Measure 2 in the
Management's Discussion and Analysis and found all actions sampled were
supported. We also reviewed documentation for the cumulative status of
reregi strati on actions in Performance Measure 2 and found that the reported
cumulative status appears reasonable. There were no claimed FY 2012
accomplishments for the other performance measures shown in the Management's
Discussion and Analysis.
Prior Audit Coverage
During previous financial statement audits, we reported a significant deficiency.
EPA materially understated the FIFRA payroll and benefits payable, and related
payroll expenses included in gross costs, in FY 2011. The agency's practice of
transferring employees and expenses and liabilities from FIFRA to the EPM Fund
for cash flow reasons led to the understatement. The agency has taken action to
correct the deficiency by correcting the FY 2011 payroll and benefits payable
amounts in the FIFRA Fund financial statements.
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Agency Comments and OIG Evaluation
In a memorandum dated November 19, 2013, the agency responded to our draft
report. The agency agreed with our findings and recommendations. The agency's
complete response is included as appendix B to this report.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
December 17, 2013
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Material Weaknesses
Table of Contents
1 - EPA Materially Overstated Expenses From
Other Appropriations That Support FIFRA
2 - EPA Understated FIFRA Payroll Liabilities
Covered by Budgetary Resources
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1 - EPA Materially Overstated Expenses From
Other Appropriations That Support FIFRA
In its draft financial statements for FY 2012 and financial statements for FY 2011, the EPA
materially overstated the expenses from other appropriations that support the FIFRA Fund.
This occurred because the agency does not have an effective or efficient system to accurately
accumulate and report the costs incurred by other appropriations in support of FIFRA Fund
activities. This overstatement of the expenses from other appropriations resulted in a material
overstatement of the total costs of the FIFRA Fund by $19.6 million in FY 2012 and $4.8 million
in FY 2011
The U.S. Government Accountability Office's Standards for Internal Control in the Federal
Government require accurate and timely recording of transactions and events. The FMFIA
emphasizes the need for agencies to provide reasonable assurance that accounts are properly
recorded and accounted for to ensure reliability of financial reporting.
FIFRA activities are funded by the collection of service fees from pesticides manufacturers
which supplement the Office of Pesticide Programs' (OPP's) appropriated funds. Our audit
work on the FY 2012 FIFRA Fund financial statements showed that all of OPP's FYs 2012 and
2011 EPM expenses were being charged to either FIFRA or the Pesticide Registration Fund
(known as the PRIA Fund). It is incorrect to charge all of OPP's EPM expenses to FIFRA and
PRIA because OPP uses its EPM funds for all of its activities and not just for activities related
to FIFRA or PRIA. After we identified this error, the Office of the Chief Financial Officer
(OCFO) worked with OPP to compute the correct amount of FYs 2012 and 2011 expenses from
other appropriations that supported the FIFRA Fund. The improper charging of OPP's EPM
expenses to FIFRA resulted in the total costs of the FIFRA program being overstated by
$19.6 million in FY 2012 and $4.8 million in FY 2011. This material error caused the agency to
restate the FY 2011 financial statements to reflect the decrease of the expenses from other
appropriations that support the FIFRA Fund and to make corresponding adjustments to the other
related accounts.
Historically, the OCFO has been producing the FIFRA financial statements based solely upon
information contained in the EPA's accounting system. However, the EPA's accounting system
does not contain sufficiently detailed information to accurately identify OPP's other
appropriated expenses that relate solely to the FIFRA Fund activities. While OPP does know
what expenses from other appropriations support FIFRA activities, it has not developed an
effective and efficient method to accumulate and report these costs. The method that OPP and
OCFO recently developed to revise and correct the FYs 2012 and 2011 amount of expenses
from other appropriations that support FIFRA relies heavily on manual computations. These
manual computations are inefficient and prone to error.
Another contributing factor to the error which resulted in the material overstatement of the
expenses from other appropriations is the lack of involvement by OPP in the financial statement
preparation process. While the OCFO prepares the FIFRA Fund financial statements, it does not
have extensive knowledge of OPP business operations. Until we identified the error in the
FYs 2012 and 2011 expenses from other appropriations that support FIFRA, OPP had not
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reviewed the draft FY 2012 FIFRA Fund financial statements. If OPP had carefully reviewed
the draft financial statements prior to its submission to the Office of Inspector General (OIG),
this material error may have been avoided.
Recommendations
We recommend that the Office of the Chief Financial Officer:
1. Correct the FIFRA financial statements to reflect the proper expenses paid by other
appropriations.
2. Ask OPP to carefully review and comment on the draft and final versions of the FIFRA
Fund financial statements prior to their submission to the OIG.
We recommend that the Office of Chemical Safety and Pollution Prevention:
3 In consultation with the OCFO and other subject matter experts, develop a process that
will provide accurate and timely allocation of EPM expenses from other appropriations
that support the FIFRA Fund.
Agency Response and OIG Evaluation
The agency agreed with our findings and recommendations, and has completed corrective
actions on recommendation 1.
Agency actions on recommendation 2 are pending. OCFO will request the Office of Chemical
Safety and Pollution Prevention to carefully review and comment on the draft and final versions
of the FIFRA Fund financial statements prior to their submission to the OIG. The estimated
completion date for this corrective action is March 28, 2014.
Agency actions on recommendation 3 are pending. The Office of Chemical Safety and Pollution
Prevention, in consultation with OCFO and other subject matter experts, will develop a process
to ensure accurate allocations of expenses from other appropriations that support the FIFRA
Fund. The estimated completion date for this corrective action is December 31, 2014.
The agency's complete response is included in appendix B to this report. We agree with the
agency's proposed corrective actions and believe they adequately address the issues raised.
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2 - EPA Understated FIFRA Payroll Liabilities
Covered by Budgetary Resources
In its draft financial statements for FY 2012, the EPA materially understated the FIFRA Fund
payroll liabilities covered by budgetary resources, as well as related payroll expense included in
gross costs. OMB Circular A-13 6, Financial Reporting Requirements, and Statement of Federal
Financial Accounting Standards No. 5 require that liabilities be recognized when they are
incurred. The agency's practice of transferring employees and related expenses and liabilities
from the FIFRA to EPM Fund for cash flow reasons led to the understatement. The FY 2011
payroll liabilities covered by budgetary resources for FIFRA was $1,713,000, while the FY 2012
payroll liabilities covered by budgetary resources was zero. Such understatements could impact
the opinion on the financial statements and the reliance on reported FIFRA financial information.
This understatement is a recurring issue which needs resolution.
Statement of Federal Financial Accounting Standards No. 5 states that liabilities should be
recognized for exchange transaction, such as when a federal employee performs services in
exchange for compensation, when the services are provided. OMB Circular 136, states:
"Liabilities shall be recognized when they are incurred regardless of whether they are covered by
available budgetary resources."
OPP transferred all employees from FIFRA to EPM at the end of FY 2012 pay period 24.
EPA uses EPM for a broad range of abatement, prevention and compliance activities and
personnel compensation, benefits, travel and expenses for all programs of the agency. On
average, 125 employees were assigned to FIFRA throughout FY 2012. The transfer removed the
base upon which the payroll liabilities covered by budgetary resources are calculated. As a result,
payroll liabilities covered by budgetary resources were significantly understated.
EPA began the practice of moving payroll expenses from FIFRA to EPM in FY 2000. When
FIFRA resources are low, the agency transfers employees from FIFRA to EPM to keep FIFRA
obligations and disbursements within budgetary and cash limits. As FIFRA fees are collected,
employees are moved back to the FIFRA appropriation. EPA disclosed this ongoing practice in
prior FIFRA financial statement reports, and this practice is expected to continue throughout
FY 2013. Temporarily moving employees for cash flow reasons should not impact accruals as
long as those employees are continuing the same work. If the transfers become permanent,
FIFRA should recognize a benefit since another appropriation would be covering the accrued
payroll debt.
The process of moving employees and related payroll expenses and liabilities from FIFRA to
EPM contributed to the understatement of the FIFRA payroll liabilities in the draft FY 2012
financial statements. However, the OCFO should have realized that the transfer of employees
from FIFRA to EMP was only temporary and computed payroll liability amounts accordingly.
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Recommendations
We recommend that the Office of the Chief Financial Officer:
4. Correct the FIFRA financial statements to reflect the proper payroll liability amounts.
5. Closely monitor the payroll liability amounts for FIFRA at year-end.
Agency Response and OIG Evaluation
The agency agreed with our findings and recommendations, and has completed corrective
actions on recommendation 4. OCFO corrected the FIFRA financial statements to reflect the
proper payroll liability amounts.
Agency actions on recommendation 5 are pending. The estimated completion date for this
corrective action is September 30, 2014.
The agency's complete response is included in appendix B to this report.
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Attachment 2
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
1 8 Correct the FIFRA financial statements to reflect
the proper expenses paid by other appropriations.
2 8 Ask OPP to carefully review and comment on the
draft and final versions of the FIFRA Fund financial
statements prior to their submission to the OIG.
3 8 In consultation with the OCFO and other subject
matter experts, develop a process that will provide
accurate and timely allocation of EPM expenses
from other appropriations that support the FIFRA
Fund.
4 10 Correct the FIFRA financial statements to reflect
the proper payroll liability amounts.
5 10 Closely monitor the payroll liability amounts for
FIFRA at year-end.
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
09/24/13
03/28/14
Office of Chemical Safety 12/31/14
and Pollution Prevention
02/26/13
09/30/14
O = 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 A
FYs 2012 and 2011 (Restated) PESTICIDES
REREGISTRA TION and EXPEDITED PROCESSING
FUND (FIFRA) FINANCIAL STATEMENTS
(&,)
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of Financial Management
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TABLE OF CONTENTS
Management's Discussion and Analysis
Principal Financial Statements
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Management's Discussion and Analysis
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Agency's Office of Pesticide Programs (OPP) was established to administer the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) to protect public health and the
environment. The law requires the Agency to balance public health and environmental concerns
with the expected economic benefits derived from pesticides. The guiding principles of the
pesticide program are to reduce risks from pesticides in food, the workplace, and other exposure
pathways and to prevent pollution by encouraging the use of new and safer pesticides.
In accordance with FIFRA and the Federal Food, Drug, and Cosmetic Act (FFDCA), the
pesticide program administers the Revolving Fund for Certification and Other Services
(Tolerance Fund) and the Pesticides Reregi strati on and Expedited Processing Fund (FIFRA
Fund). As of 1996, fees for both tolerance and reregi strati on are deposited to the FIFRA
account, which is available to the EPA without further appropriation.
Tolerance Program Description
As part of its authority to regulate pesticides, EPA is responsible for setting "tolerances."
If the pesticide is being considered for use on a food or feed crop or as a food or feed additive,
the applicant must petition EPA for establishment of a tolerance (or exemption from a tolerance)
under authority of the FFDCA. A tolerance is the maximum legal limit of a pesticide residue on
food commodities and animal feed. Tolerances are set at levels that ensure that the public is
protected from health risks posed by eating foods that have been treated with pesticides in
accordance with label directions.
In 1954, Congress authorized the collection of fees for the establishment of tolerances for
raw agricultural commodities (Section 408 of FFDCA). Congress, however, did not authorize
the collection of fees for food additive tolerances (Section 409 of FFDCA). EPA, therefore, does
not collect fees for food additive tolerances. The Agency also does not collect fees for Agency-
initiated actions such as the revocation of tolerances for previously canceled pesticides. Fees
collected from tolerances for raw agricultural commodities were deposited to the U.S. Treasury
General Fund until 1963 when Congress established the Tolerance Fund.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregi strati on activities. Passage of the Food Quality Protection Act (FQPA) of 1996 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, the Pesticide Registration Improvement
Renewal Act in 2007, and the Pesticide Registration Improvement Extension Act of 2012, no
additional tolerance petition fees will be deposited to the FIFRA Fund through FY 2019.
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EPA's FY 2012 Annual FIFRA Financial Statements
2
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Pesticide Reregistration Program Description
As part of its authority to regulate pesticides, EPA is responsible for re-registering
existing pesticides. The FIFRA legislation, requiring the registration of pesticide products, was
originally passed in 1947. Since then, health and environmental standards have become more
stringent and scientific analysis techniques much more precise and sophisticated. In the 1988
amendments to FIFRA (FIFRA '88), Congress mandated the accelerated reregistration of all
products registered prior to November 1, 1984. The amendments established a statutory goal of
completing reregistration eligibility decisions (REDs) by 1997. The legislation allowed for
various time extensions which can extend the deadline by three years or more. The statutory
requirement for the completion of reregistration food-use (REDs) was 2006, in conjunction with
the new tolerance reassessment program. For the non-food-use active ingredient REDs, the
current legal deadline under PRIA for completion of reregistration was October 3, 2008.
Congress authorized the collection of two kinds of fees to supplement appropriated funds
to support reregistration program: an annual maintenance fee and a one-time reregistration fee.
Maintenance fees are assessed on registrants of pesticide products and were structured to collect
approximately $14 million per year initially. Reregistration fees were assessed on the
manufacturers of the active ingredients in pesticide products based on the manufacturer's share of
the market for the active ingredient. In fiscal years 1992 through 1999, approximately 14% of
the maintenance fees collected, up to $2 million each year, were used for the expedited
processing of old chemical and amended registration applications. Fees are deposited into the
FIFRA Revolving Fund. By statute, excess monies in the FIFRA Fund may be invested.
Waivers and/or refunds are granted for minor use pesticides, antimicrobial pesticides, and small
businesses.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregistration activities. Passage of the FQPA of 1996 implemented the following changes in the
Pesticide Reregistration Program: reauthorized collection of maintenance fees through 2001 to
complete the review of older pesticides to ensure they meet current standards (increased annual
fees from $14 million to $16 million per year for 1998, 1999, and 2000 only) and required all
tolerances (over 9,700) to be reassessed by 2006. EPA's 2002 appropriations bill extended
authority to collect maintenance fees by one year for 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 PRIA 1 in FY 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 known as PRIA 2) on October 9, 2007
extended the authority to collect maintenance fees through FY 2012 (with annual fee amounts at
$22 million each FY). PRIA 2 included the provision for use of maintenance fees to offset the
costs of registration review beginning in FY 2008.
The reregistration process is being conducted through reviews of groupings of similar
active ingredients called cases. There are five major phases of reregistration:
~ Phase 1 - Listing of Active Ingredients. EPA publishes lists of active ingredients and
asks registrants whether they intend to seek reregistration. (Completed in FY 1989)
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~ Phase 2 - Declaration of Intent and Identification of Studies. Registrants notify EPA if
they intend to reregister and identify missing studies. (Completed in FY 1990)
~ Phase 3 - Summarization of Studies. Registrants submit required existing studies.
(Completed in FY 1991)
~ Phase 4 - EPA Review and Data Call-Ins (DCIs). EPA reviews the studies, identifies and
"calls-in" missing studies by issuing a DCI. A "DCI" is a request to a pesticide registrant
for scientific data to assist the Agency in determining the pesticide's eligibility for
reregi strati on. (Completed in FY 1994)
~ Phase 5 - Reregi strati on Decisions. EPA reviews all studies and issues a Reregi strati on
Eligibility Decision (RED) for the active ingredient(s). A "RED" is a decision by the
Agency defining whether uses of a pesticide active ingredient are eligible or ineligible for
reregi strati on. The registrant complies with the RED by submitting product specific data
and new labels. EPA reregisters or cancels the product. Pesticide products are re-
registered, based on a RED, when it meets all label requirements. This normally takes 14
to 20 months after issuance of the RED.
Research Program Description
EPA's Chemical Safety for Sustainability (CSS) research program is leading the sustainable
development, use, and assessment of chemicals and materials by advancing integrated chemical
evaluation strategies and decision support tools that promote human and environmental health
and are protective of vulnerable species and populations. The research is focused on providing
integrated solutions in support of the Agency's efforts to manage chemical (including pesticides
and toxics) risks. The data, methods and tools developed will guide the prioritization and testing
process, from screening approaches through more complex testing and assessments. The
research program's major goals are: (1) to build the knowledge infrastructure to support
scientific discovery and sustainable decisions, (2) to develop and apply rapid, efficient, and
effective methods for improved chemical prioritization, screening, and testing, (3) to provide
models and tools necessary to make decisions supporting safe use across the chemical lifecycle.
Current testing and assessment approaches are resource intensive and lack data sufficient to meet
decision-making needs posed by the large and growing number of chemicals. The CSS ToxCast
Program performs cost-effective, state-of-the-art chemical screening to assess how chemicals
may affect human health. ToxCast simultaneously tests thousands of chemicals using hundreds
of high-throughput and high-content approaches. This allows the EPA to directly examine
environmental chemicals' role in human disease processes, cell systems, and pathway targets.
The ToxCast program has moved beyond the proof-of-concept phase focus on pesticide actives.
Results of Phase II of this program, which covers 1,860 chemicals, will be released and publicly
available in FY13.
In providing research on methods, models, and data to support decision-making regarding
specific individual or classes of pesticides and toxic substances that are of high priority, the
program will continue to develop:
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Predictive biomarkers, quantitative structure activity relationships, and alternative test
methods for prioritizing and screening chemicals for a number of adverse effects (e.g.,
neurotoxicity, reproductive toxicity) that will lead to a reduction in and more efficient use
of whole animals in toxicity testing; and
Approaches for applying high-throughput screening and computational models developed
under the ToxCast program to support prioritization of chemicals for further testing under
EPA's Endocrine Disruptor Screening Program.
Data and protocols on the impact of waste water treatment technologies on pesticides and
their products of transformation.
To support the development of probabilistic risk assessments to protect endangered
populations of birds, fish, other wildlife, and non-target plants from pesticides while making sure
farmers and communities have the pest control tools they need, this program has four key
research components:
Extrapolation among wildlife species and exposure scenarios of concern;
Population biology to improve population dynamics in spatially-explicit habitats;
Models for assessing the relative risk of chemical and non-chemical stressors; and
Models to define geographical regional/spatial scales for risk assessment.
Methods for characterization of population-level risks of toxic substances to aquatic life and
wildlife also are being developed as part of the Agency's long-term goal of developing
scientifically valid approaches for assessing spatially-explicit, population-level risks to wildlife
populations and non-target plants and plant communities from pesticides, toxic chemicals and
multiple stressors while advancing the development of probabilistic risk assessment.
The program anticipates that the Agency will be better positioned to perform its mission of
protecting human health and the environment as scientific information becomes digitized and
readily available, methods and models to capture the complexities of chemical exposure and
hazard in toxicity testing are developed and approaches focused on development of more
sustainable alternatives are provided to decision-makers.
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 states' and tribes' pesticide programs emphasizes its commitment
to maintaining a strong compliance and enforcement presence. Agency Cooperative Agreement
priorities for FY2008 - FY2010 include the enforcement of worker protection standards;
compliance monitoring and enforcement activities related to the newly promulgated pesticide
14-1-0041 EPA's FY 2012 Annual FIFRA Financial Statements 5
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container and containment rules, 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 the Cooperative Agreement
resources we support inspector training and training for state/tribal senior managers, scientists,
and supervisors.
Highlights and Accomplishments
Tolerance Performance Measures
As mandated by PRIA 2, no Tolerance fees were collected and deposited to the FIFRA
Fund in FY 2012.
Measure: Tolerance re-evaluations.
Results: The tolerance reassessment program was completed in FY 2007; therefore, no
further tolerance reassessment decisions were needed or completed in FY 2012. At the end of
FY 2007, EPA had completed 9,721 tolerance reassessment decisions, addressing 100% of the
9,721 tolerances that required reassessment.
Reresistration (FIFRA) Financial Perspective
During FY 2012, the Agency's obligations charged against the FIFRA Fund for the cost
of the reregi strati on programs and other authorized pesticide programs were $20.0 million and
120.8 workyears. Of this amount, OPP obligated $16.8 million for PC&B.
Appropriated funds are used in addition to FIFRA revolving funds. In FY 2012, the
Enacted Operating Plan included approximately $ 43.8 million in appropriated funds for
reregi strati on program activities. The unobligated balance in the Fund at the end of FY 2012
was zero.
The Fund has two types of receipts: fee collections and interest earned on investments.
Of the $22.0 million in FY 2012 receipts, more than 99.9% were fee collections.
Reresistration Program (FIFRA) Performance Measures
The following measures support the program's strategic goals of Healthy Communities
and Ecosystems as contained in the FY 2012 President's budget.
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Measure 1: Number of Reregistration Eligibility Documents (REDs) completed.
Results: All Reregistration Eligibility Decisions (REDs) were completed by the end of FY
2008. No REDs were completed in FY 2012. 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. 613 reregistration
cases (100%) had completed the reregistration eligibility decision making process by the end of
FY 2008.
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 2012, 186products were reregistered; 980 products were amended; 92
products were cancelled; and 26 products were suspended. Currently, a universe of 24,583
products is undergoing or has completed product reregistration. The status of those products at
the end of FY 2012 was as follows: EPA had completed decisions for 18,208 products
(specifically, 4,929products had been reregistered; 2,593product registrations had been
amended; 10,641 products were cancelled; and 45products were suspended); and 6,375
products had actions/decisions pending. The Agency's goal in FY 2013 is to complete 1,200
product reregistration actions.
Measure 3: Progress in Reducing the Number of Unreviewed, Required
Reregistration Studies.
Results: EPA completed the last REDs in 2008, so all necessary studies to make
reregistration eligibility decisions for all active ingredients subject to reregistration have been
reviewed. At this time, the Agency does not plan to spend additional resources examining these
records.
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 those REDs in FY 2008. There is no
further activity to report for FY 2012.
Measure 5: Future Schedule for Reregistrations.
The last REDs were completed in FY 2008, therefore there are no remaining candidates
for future decisions.
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PRINCIPAL
FINANCIAL STATEMENTS
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TABLE OF CONTENTS
Financial Statements
Balance Sheet 10
Statement of Net Cost 11
Statement of Changes in Net Position 12
Statement of Budgetary Resources 13
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies 14
Note 2. Fund Balance with Treasury 17
Note 3. General Property, Plant and Equipment 17
Note 4. Other Liabilities 18
Note 5. Payroll and Benefits Payable, non-Federal 18
Note 6. Income and Expenses from Other Appropriations 19
Note 7. Exchange Revenues, Statement of Net Cost 21
Note 8. Intragovernmental Costs and Revenue 21
Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing) 22
Note 10. Restatements 23
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Environmental Protection Agency
FIFRA
Balance Sheet
As of September 30, 2012 and 2011
(Dollars in Thousands)
FY2012 FY2011
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
$ 4,778 $
3,541
T otal Intragovernmental
$ 4,778 $
3,541
Property, Plant & Equipment, Net (Note 3)
559
657
Total Assets
$ 5,337 $
4,198
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
$ 52 $
202
Other (Note 4)
92
326
Total Intragovernmental
$ 144 $
528
Accounts Payable & Accrued Liabilities
$ 277 $
270
Payroll & Benefits Payable (Note 5)
2,458
3,213
Other (Note 4)
9,494
7,052
Total Liabilities
$ 12,373 $
11,063
NET POSITION
Cumulative Results of Operations
(7,036)
(6,865)
Total Net Position
(7,036)
(6,865)
Total Liabilities and Net Position $ 5,337 $ 4,198
The accompanying notes are an integral part of these statements.
14-1-0041 EPA's FY 2012 Annual FIFRA Financial Statements
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Environmental Protection Agency
FIFRA
Statement of Net Cost
For the Years Ended September 30, 2012 and 2011 (Restated)
(Dollars in Thousands)
Restated
FY2012 FY 2011
COSTS
Gross Costs (Note 8) $ 19,824 $ 25,141
Expenses from Other Appropriations (Note 6) 24,368 28,886
Total Costs
44,192
54,027
Less:
Earned Revenue (Notes 7, 8)
19,554
22,688
NET COST OF OPERATIONS (Note 9) $
24,638 $
31,339
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
FIFRA
Statement of Changes in Net Position
For the Years Ended September 30, 2012 and 2011 (Restated)
(Dollars in Thousands)
FY 2012
Restated
FY 2011
Net Position - Beginning of Period
Beginning Balances, as Adjusted
(6,865)
$ (6,865) $
(4,761)
(4,761)
Budgetary Financing Sources:
Nonexchange Revenue - Securities Investment
Income from Other Appropriations (Note 6)
Total Budgetary Financing Sources
1
24,368
$ 24,369 $
2
28,886
28,888
Other Financing Sources (Non-Exchange)
Imputed Financing Sources
Total Other Financing Sources
SO
00 00
347
347
Net Cost of Operations
(24,638)
(31,339)
Net Change
(171)
(2,104)
Cumulative Results of Operations
$ (7,036) $
(6,865)
The accompanying notes are an integral part of these statements.
14-1-0041 EPA's FY 2012 Annual FIFRA Financial Statements 12
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Environmental Protection Agency
FIFRA
Statement of Budgetary Resources
For the Years Ended September 30, 2012 and 2011
(Dollars in Thousands)
FY2012 FY2011
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1: $ 404 $ 1,746
Unobligated balance brought forward, October 1, as adjusted 404 1,746
Recoveries of Prior Year Unpaid Obligations 9
Unobligated balance from prior year budget authority, net 413 1,746
Spending authority from offsetting collections (discretionary and mandatory) 22,011 22,704
Total Budgetary Resources $ 22,424 $ 24,450
STATUS OF BUDGETARY RESOURCES
Obligations incurred
Unobligated balance, end of year:
Apportioned
Total unobligated balance, end of period
Total Status of Budgetary Resources
$ 20,721 $ 24,046
1,703 404
1,703 404
$ 22,424 $ 24,450
CHANGE IN OBLIGATED BALANCE
Unpaid Obligations, Brought Forward, October 1 (gross)
Obligated balance, start of year (net), as adjusted
Obligations incurred
Outlays (gross)
Recoveries of prior year unpaid obligations
Obligated balance, end of period
Unpaid obligations, end of year (gross)
Obligated balance, end of period (net)
3,137
3,137
20,721
(20,771)
(9)
3,078
3,078
2,427
2,427
24,046
(23,337)
3,137
3,137
BUDGET AUTHORITY AND OUTLAYS, NET:
Budget authority, gross (discretionary and mandatory) $ 22,011 $ 22,704
Actual offsetting collections (discretionary and mandatory) (22,011) (22,704)
Budget authority, net (discretionary and mandatory) $ - $
Outlays, gross (discretionary and mandatory) $ 20,771 S 23,337
Actual offsetting collections (discretionary and mandatory) (22,011) (22,704)
Outlays, net (discretionary and mandatory) (1,240) 633
Agency outlays, net (discretionary and mandatory) $ (1,240) $ 633
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
FIFRA
Notes to Financial Statements
(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 FYs 2012 and 2011 were $24,368 thousand and $28,886 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.
B. Basis of Presentation
These financial statements have been prepared to report the financial position and results of operations of
the EPA for the Reregi strati on 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 2012 cost
factors for calculating imputed costs for Federal civilian benefits programs. These updates impact the
Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.
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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 interfund 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 2012 and 2011, 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 2012 and 2011 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.
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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
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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.
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.
Note 2. Fund Balance with Treasury
FY 2012 FY 2011
Revolving Funds: Entity Assets $ 4,778 $ 3,541
Note 3. General Property, Plant and Equipment
General property, plant and equipment consists of software and software in development.
As of September 30, 2012 and 2011, General Property, Plant and Equipment consist of the following:
FY 2012 FY2011
Acquisition Accumulated Net Book Acquisition Accumulated Net Book
Value Depreciation Value Value Depreciation Value
Software 949 (390) 559 905 (248) 657
Total $ 949 $ (390) $ 559 $ 905 $ (248) $ 657
Note 4. Other Liabilities
For FYs 2012 and 2011, the Payroll and Benefits Payable, non-Federal, are presented on a separate line
of the Balance Sheet and in a separate footnote (see Note 6).
FY 2012 FY 2011
Other Intragovernmental Liabilities - Covered by
Budgetary Resources
Employer Contributions - Payroll $ 92 $ 326
Total $ 92 $ 326
Other Non-Federal Liabilities - Covered by
Budgetary Resources
Advances from Non-Federal Entities
Total
$
$"
9,494
9,494
$
$'
7,052
7,052
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Note 5. Payroll and Benefits Payable, non-Federal
FY 2012 FY 2011
Covered by Budgetary Resources
Accrued Payroll Payable to Employees
$
502
$
1,153
Withholdings Payable
33
180
Thrift Savings Plan Benefits Payable
21
54
Total
$
556
$
1,387
Not Covered by Budgetary Resources
Unfunded Annual Leave Liability $ 1,902 $ 1,826
At various periods throughout FYs 2012 and 2011, employees with their associated payroll costs were
transferred from the FIFRA fund to the Environmental Programs and Management (EPM) appropriation.
(See graph in Note 7 below showing trend of hours charged per month to the FIFRA fund for FYs 2012
and 2011.) 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 2012 and probably beyond that period.
This process has led to variations between the year-end liabilities for FYs 2012 and 2011. The liabilities
covered by budgetary resources (both intragovernmental and non-Federal) represent unpaid payroll and
benefits at year-end. At the end of FY 2012 and FY 2011, no employees were charging their salary and
benefits to FIFRA. As of September 30, 2012 these liabilities were $92 thousand and $556 thousand for
employer contributions and accrued funded payroll and benefits, as compared to FY 201 l's balances of
$326 thousand and $1,387 thousand, respectively.
In contrast, the unfunded annual leave liability is a longer term liability than the funded liabilities. At
various periods throughout FYs 2012 and 2011, approximately 254 and 258 employees, respectively, in
total have been under FIFRA's accountability. During the last pay period of FY 2012, all FIFRA
employees had been transferred to EPM so the liability was computed based on no employees charging
to FIFRA in the last pay periods covering the timeframe from August 28, 2012 through September 30,
2012. Both the September 30, 2012 and 2011 liability balances for unfunded annual leave were accrued
to cover the employees charged to FIFRA close to the end of the fiscal year for a total of $1,902
thousand and $1,826 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 2012 and 2011, 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
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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 2012 and 2011 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.
FIFRA - Total Employee Hours by Month
/ J? ^ ^ ^ ^ ^ ^ .X
r
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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 Net
Appropriations Appropriations Effect
FY 2012 $ 24,368 $ 24,368 $ 0
Restated
FY 2011 $ 28,886 $ 28,886 $
Note 7. Exchange Revenues, Statement of Net Cost
For FYs 2012 and 2011, the exchange revenues reported on the Statement of Net Cost include both
Federal and non-Federal amounts.
Note 8. Intragovernmental Costs and Exchange Revenue
Restated
FY 2011
$ 5,822
19,319
28,886
$ 54,027
22,688
$ 22,688
$ 31,339
FY 2012
COSTS:
Intragovernmental $ 3,839
With the Public 15,985
Expenses from Other Appropriations 24,368
Total Costs $ 44,192
REVENUE:
With the Public 19,554
Total Revenue $ 19,554
NET COST OF OPERATIONS $ 24,638
Intragovernmental costs relate to the source of the goods or services not the classification of the related
revenue.
Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of Financing)
14-1-0041 EPA's FY 2012 Annual FIFRA Financial Statements 20
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Restated
FY 2012 FY 2011
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 20,721 $ 24,046
Less: Spending Authority from Offsetting Collections and Recoveries (22,020) (22,704)
Obligations, Net of Offsetting Collections $ (1,299) $ 1,342
Less: Offsetting Receipts 3_
Net Obligations $ (1,296) $ 1,342
Other Resources
Imputed Financing Sources $ 98 $ 347
Income from Other Appropriations (Note 6) 24,368 28,886
Net Other Resources Used to Finance Activities $ 24,466 $ 29,233
Total Resources Used To Finance Activities $ 23,170 $ 30,575
RESOURCES USED TO FINANCE ITEMS
NOT PART OF NET COST OF OPERATIONS
Change in Budgetary Resources Obligated $ 1,292 $ 54
Offsetting Receipts Not Affecting Net Cost (3)
Resources that Finance Asset Acquisition (45) (862)
Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ 1,244 $ (808)
Total Resources Used to Finance the Net Cost of Operations $ 24,414 $ 29,767
COMPONENTS OF 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 $ 77 $ 455
Increase in Public Exchange Revenue Receivable 3
Other 1_ 2_
Total Components of Net Cost of Operations that Require or Generate
Resources in Future Periods $ 81 $ 457
Components Not Requiring/Generating Resources
Depreciation and Amortization $ 143 $ 248
Expenses Not Requiring Budgetary Resources - 867
Total Components of Net Cost that Will Not Require or Generate Resources $ 143 $ 1,115
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period $ 224 $ 1,572
Net Cost of Operations $ 24,638 $ 31,339
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
21
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Note 10. Restatements
EPA discovered an accounting error that resulted in the material misstatement of EPA's financial
statements issued for the period FY 2011. As a consequence, EPA is correcting the errors by restating its
Statement of Net Cost and Statement of Changes in Net Position as of September 30, 2011.
The effect of the restatement is as follows:
FY 2011,
as Previously
Reported Adjustment
FY 2011, as
Restated
Statement ofNet Cost
Expenses from Other Appropriations (Note 6)
Total Costs
Net Cost of Operations (Note 9)
35,439
60,580
37,892
(6,553)
(6,553)
(6,553)
28,886
54,027
31,339
Statement of Changes in Net Position
Income from Other Appropriations (Note 6)
Total Budgetary Financing Sources
Net Cost of Operations (Note 9)
35,439
35,441
(37,892)
(6,553)
(6,553)
6,553
(31,339)
28,886
28,888
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
22
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Appendix B
Agency's Response to Draft Report
Hi
MEMORANDUM
SUBJECT:
FROM:
Response to Office of Inspector General Draft Report No. 0A-FY13-0081
"Fiscal Years 2012 and 2011 (Restated) Financial Statements for the Pesticides
Reregistration and Expedited Processing Fund, " dated November 4,2013
Mary ann Froehlich
Acting Chief Financial Officer
TO:
James J. Jones, Assistant Administrator
Office of Chemical Safety and Pollution
Arthur A. Elkins, Jr.
Inspector General
'I'hank you for the opportunity to respond to the issues and recommendations in the subject audit report.
Following is a summary of the agency's overall position, along with its position on each of the report
recommendations. W e have provided high-level intended corrective actions and estimated completion
dates to the extent we can.
AGENCY'S OVERALL POSITION
The agency concurs with the five recommendations.
AGENCY'S RESPONSE TO REPORT RECOMMENDATIONS
No.
Recommendati on
High-Level Intended Corrective
Action(s)
Estimated Completion by
Quarter and FY
I
Office of the Chief
Financial Officer should
correct the Pesticides
Reregistration and
Expendited Processing
Fund financial statements
appropriations.
Concur. OCFO corrected the
financial statements to reflect the
proper expenses paid by other
appropriations.
September 24, 2013
(COMPLETED)
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
23
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2
OCFO should ask the
Office
of Chemical Safety and
Pollution Prevention to
carefully review and
comment on the draft and
final versions of the
FIFRA Fund financial
statements prior to their
submission to the Office
of Inspector General.
Concur. OCFO will request
OCSPP to carefully review and
comment on the draft and final
versions of the FIFRA financial
statements prior to their submission to
OIG.
March 28, 2014
(annually)
3
OCSPP, in consultation
with the OCFO and other
subject matter experts,
develop a process that will
provide accurate and
timely allocation of
Environmental Programs
and Management expenses
from other appropriations
that support the FIFRA
fund.
Concur in concept. OCSPP, in
consultation with the OCFO and other
subject matter experts, will develop a
process to ensure accurate allocations
of expenses from other appropriations
that support the FIFRA fund.
December 3.1, 2014
4
OCFO should correct
the FIFRA financial
statements to reflect
the proper payroll
liability amounts
Concur. OCFO corrected the FIFRA
financial statements to reflect the
proper payroll liability amounts.
February 26, 2013
(COMPLETED)
5
OCFO should closely
monitor the payroll
liability amounts for
FIFRA at year- end.
Concur.
September 30, 2014
CONTACT INFORMATION
If you have any questions regarding this response, please contact Christopher Osborne of the Office of
Financial Management on (202) 564-5070.
cc: David Bloom
Joshua Baylson
Steven Bradbury
Marty Monell
Stefan Sitzer
Jeanne Conklin
Richard Eyermann
Paul Curtis
Chris Osborne
Sherri Anthony
Raffael Stein
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
24
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Melvin Visnick
Peter Caulkins
Maria Sorrel!
Michael Hardy
Vickie Richardson
John Street
Margaret Hiatt
Robert L. Smith
Patrice Kortuem
Art Budelier
Sheila May
Janet Weiner
Janice Kern
Meshell Jones-Peeler
Dale Miller
Sandy Dickens
Sheldonna Proctor
Lorna Washington
14-1-0041
EPA's FY 2012 Annual FIFRA Financial Statements
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Appendix C
Distribution
Office of the Administrator
Chief Financial Officer
Assistant Administrator for Chemical Safety and Pollution Prevention
Assistant Administrator for Administration and Resources Management
Deputy Chief Financial Officer
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intragovernmental Relations
Associate Administrator for External Affairs and Environmental Information
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, PRIA 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
Director, Office of Human Resources, Office of Administration and Resources Management
Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, 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, Payroll Management and Outreach Staff, Office of Financial Services, Office of the
Chief Financial Officer
Staff Director, Accountability and Control Staff, Office of Financial Services, Office of the Chief
Financial Officer
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Chemical Safety and Pollution Prevention
Audit Follow-Up Coordinator, Office of Administration and Resources Management
FIFRA Audit Coordinator, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention
14-1-0041
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