U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Fiscal Years 2012 and 2011
(Restated) Financial
Statements for the
Pesticide Registration Fund
Report No. 14-1-0042
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
Suggestions for Audits or Evaluations
To make suggestions for audits or evaluations,
contact us through one of the following methods:
email:	OIG WEBCOMMENTS@epa.gov
phone:	1-202-566-2391
fax:	1-202-566-2599
online:	http://www.epa.g0v/0ig/c0ntact.html#Full Info
write: EPA Inspector General
1200 Pennsylvania Avenue, NW
Mailcode 241OT
Washington, DC 20460
Hotline
To report fraud, waste or abuse, contact
us through one of the following methods:
email:	OIG Hotline@epa.gov
phone:	1-888-546-8740
fax:	1-202-566-2599
online:	http://www.epa.gov/oig/hotline.htm
write: EPA Inspector General Hotline
1200 Pennsylvania Avenue, NW
Mailcode 2431T
Washington, DC 20460

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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
14-1-0042
December 17, 2013
Why We Did This Review
The Pesticide Registration
Improvement Act requires that we
perform an annual audit of the
Pesticide Registration Fund
(known as the PRIA Fund)
financial statements.
To expedite the registration of
certain pesticides, Congress
authorized the U.S.
Environmental Protection Agency
(EPA) to assess and collect
pesticide registration fees. The
fees collected are deposited into
the PRIA Fund. The agency is
required to prepare financial
statements that present financial
information about the PRIA Fund.
PRIA also requires the
establishment of decision time
review periods for pesticide
registration actions, and requires
the Office of Inspector General to
perform an analysis of the
agency's compliance with those
review periods.
This report addresses the
following EPA theme:
• Embracing EPA as a high
performing 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 -0042.pdf
Fiscal Years 2012 and 2011 (Restated) Financial Statements
for the Pesticide Registration Fund
EPA Receives an Unqualified
We rendered an unqualified, or clean, opinion on the EPA's Pesticide
Registration 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.
•	EPA materially overstated the expenses from other
appropriations that support the PRIA 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 PRIA Fund activities. This overstatement resulted in a material
overstatement of the total costs of the PRIA Fund by $14.1 million in FY
2012 and $1.7 million in FY 2011.
•	EPA materially understated the PRIA 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 PRIA 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 PRIA was
$500,000, while the FY 2012 payroll liabilities covered by budgetary
resources was zero.
Compliance with Decision Time Review Periods
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 that support the PRIA fund and carefully review and
comment on the draft and final versions of the PRIA financial statements prior
to their submission to the Office of Inspector General. The agency will also
closely monitor the payroll amounts.
The agency
corrected material
misstatements due
to weaknesses in
internal controls we
identified.

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< rJK-7 5	UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| W\/C/ ®	WASHINGTON, D.C. 20460
PRCrt*"
OFFICE OF
INSPECTOR GENERAL
December 17, 2013
MEMORANDUM
SUBJECT: Fiscal Years 2012 and 2011 (Restated) Financial Statements for the
Pesticide Registration Fund
Report No. 14-1-0042
FROM: Paul C. Curtis	r '
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 Registration 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 eyermann.richard@epa.gov;
or Paul Curtis, Director, Financial Statement Audits, at (202)566-2523 or Curtis.Paul@epa.gov

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Fiscal Years 2012 and 2011 (Restated) Financial Statements
for the Pesticide Registration Fund
14-1-0042
Table of C
Inspector General's Report on the Fiscal Years 2012 and 2011
(Restated) Financial Statements for the Pesticide Registration Fund
Opinion on the PRIA 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 PRIA		7
EPA Understated PRIA Payroll Liabilities
Covered by Budgetary Resources		9
2.	Status of Recommendations and Potential Monetary Benefits		11
Appendices
A Fiscal Year 2012 and 2011 (Restated) PRIA 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 Pesticide Registration Fund
The Administrator
U.S. Environmental Protection Agency
We have audited the Pesticide Registration Fund (known as the PRIA 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 PRIA Fund financial statements for fiscal year (FY)
2011 due to material errors in the computation of expenses from other
appropriations that support PRIA Fund activities. There errors resulted in an
overstatement of these expenses by $14.1 million in FY 2012 and $1.7 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 PRIA 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 PRIA Fund activities and other related accounts, our
report on the PRIA 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 PRIA 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 PRIA 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 Pesticide Registration Improvement Act (PRIA) 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 or 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 PRIA. EPA materially overstated the expenses from other
appropriations that support the PRIA 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 PRIA Fund activities. This
overstatement of the expenses from other appropriations resulted in a material
overstatement of the total costs of the PRIA Fund by $14.1 million in
FY 2012 and $1.7 million in FY 2011. This overstatement could impact the
opinion on the financial statements and reliance on reported PRIA financial
information.
EPA Understated PRIA Payroll Liabilities Covered by Budgetary
Resources. EPA materially understated the PRIA 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 PRIA 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 PRIA was
$500,000, 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 PRIA 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 PRIA Fund; however, we identified a material
weakness with the agency's reporting payroll and benefit payable. Details
concerning these material weaknesses are in attachment 1.
Tests of Compliance With Laws and Regulations
In accordance with PRIA, the Administrator is required to publish a schedule of
decision time review periods for pesticide registration actions and corresponding
registration fees in the Federal Register. Decision time review periods are
specified time limits for the agency to grant or deny pesticide registrations.
PRIA also requires the Office of Inspector General (OIG) to perform an analysis
of the agency's compliance with decision time review periods. The agency was in
compliance with the statutory decision timeframes.
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 PRIA 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
Our audit work related to the information presented in the Management's
Discussion and Analysis of the pesticide program included comparing the
overview information with information in the EPA's principal financial
statements for consistency. We did not identify any material inconsistencies
between the information presented in the two documents.
Prior Audit Coverage
During previous financial statement audits, we reported the following significant
deficiencies. EPA materially understated the PRIA 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 PRIA to the
EPM Fund for cash flow reasons led to the understatement. The agency did not
record accounts receivable for a PRIA fee until the payments were 18 months
overdue. The finance center was unable to record an allowance because there was
no accounting model for a PRIA allowance for doubtful accounts.
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The agency has taken action to correct the deficiencies by correcting the FY 2011
payroll and benefits payable amounts in the PRIA Fund financial statements. The
agency has established general ledger posting models in Compass for PRIA
allowances and possible write-offs as well as policies and procedures that identify
when receivables should be recorded for nonpayment of PRIA fees.
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 PRIA	
2	- EPA Understated PRIA Payroll Liabilities
Covered by Budgetary Resources	
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1 - EPA Materially Overstated Expenses From
Other Appropriations That Support PRIA
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 PRIA 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 PRIA Fund
activities. This overstatement of the expenses from other appropriations resulted in a material
overstatement of the total costs of the PRIA Fund by $14.1 million in FY 2012 and $1.7 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.
PRIA 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 PRIA Fund financial statements showed that all of OPP's FYs 2012 and 2011
EPM expenses were being charged to either PRIA or the Pesticides Reregi strati on and
Expedited Processing Fund (known as the FIFRA 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 PRIA Fund. The improper
charging of OPP's EPM expenses to PRIA resulted in the total costs of the PRIA program being
overstated by $14.1 million in FY 2012 and $1.7 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 PRIA Fund and to make corresponding adjustments
to the other related accounts.
Historically, the OCFO has been producing the PRIA 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 PRIA Fund activities. While OPP does know
what expenses from other appropriations support PRIA 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 PRIA 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 PRIA Fund financial statements, it does not
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have extensive knowledge of OPP business operations. Until we identified the error in the
FYs 2012 and 2011 expenses from other appropriations that support PRIA, OPP had not
reviewed the draft FY 2012 PRIA Fund financial statements. If OPP had carefully reviewed the
draft financial statements prior to its submission to the OIG, this material error may have been
avoided.
Recommendations
We recommend that the Office of the Chief Financial Officer:
1.	Correct the PRIA 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 PRIA
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 PRIA 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 PRIA 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 PRIA 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 PRIA Payroll Liabilities
Covered by Budgetary Resources
In its draft financial statements for FY 2012, EPA materially understated the PRIA 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 PRIA to the EPM Fund for cash flow reasons led to the understatement. The FY 2011
payroll liabilities covered by budgetary resources for PRIA was $500,000, 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 PRIA 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 No. 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 PRIA to EPM at the end of FY 2012 pay period 13.
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, 58 employees were assigned PRIA 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 PRIA to EPM in FY 2000. When
PRIA resources are low, the agency transfers employees from PRIA to EPM to keep PRIA
obligations and disbursements within budgetary and cash limits. As PRIA fees are collected,
employees are moved back to the PRIA appropriation. EPA disclosed this ongoing practice in
prior PRIA 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, PRIA
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 PRIA to
EPM contributed to the understatement of the PRIA payroll liabilities in the draft FY 2012
financial statements. However, the OCFO should have realized that the transfer of employees
from PRIA 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 PRIA financial statements to reflect the proper payroll liability amounts.
5.	Closely monitor the payroll liability amounts for PRIA at year-end.
Agency Response and OIG Evaluation
The agency agreed with our findings and recommendation, and has completed corrective actions
on recommendation 4. OCFO corrected the PRIA 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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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Planned
Completion
Action Official	Date
10
10
Correct the PRIA financial statements to reflect the
proper expenses paid by other appropriations.
Ask OPP to carefully review and comment on the
draft and final versions of the PRIA Fund financial
statements prior to their submission to the OIG.
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 PRIA
Fund.
Correct the PRIA financial statements to reflect the
proper payroll liability amounts.
Closely monitor the payroll liability amounts for
PRIA 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
Claimed
Amount
Ag reed-To
Amount
09/24/13
03/28/14
Office of Chemical Safely 12/31/14
and Pollution Prevention
02/26/13
09/30/14
1 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 progres
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Appendix A
FYs 2012 and 2011 (RESTATED) PESTICIDE
REGISTRATION FUND (PRIA)
FINANCIAL STATEMENTS
^ PRO"^
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
14-1-0042	EPA's FY 2012 Annual PRIA Financial Statements

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Management's Discussion and Analysis
14-1-0042
EPA's FY 2012 Annual PRIA 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.
With passage of the Pesticide Registration Improvement Act (PRIA) of 2003, the
pesticide program now administers the Pesticide Registration Fund. PRIA authorizes the
collection of new fees for pesticide registrations. Registration service fees are deposited into the
Registration Fund and made available for obligation to the extent provided in appropriation Acts,
and are available without fiscal year limitation.
Pesticide Registration
Under the authority of FIFRA and the Federal Food, Drug, and Cosmetic Act (FFDCA)
as amended by the Food Quality Protection Act (FQPA), no person or State can distribute or sell
any pesticide that is not registered with the Agency. The pesticide registration program works to
decrease the risk to the public from pesticide use through the regulatory review of new
pesticides. In 2004, Congress passed PRIA 1, with deadlines for completion of certain
registration actions. As part of the registration program, EPA expedites the registration of
reduced-risk pesticide uses, which are generally presumed to pose lower risks to consumers,
workers, groundwater, and/or wildlife. These accelerated pesticide reviews provide an incentive
for industry to develop, register, and use lower risk pesticides. Additionally, the availability of
these reduced-risk pesticides provides alternatives to older, potentially more harmful products
currently on the market.
Biological agents are potential weapons that could be exploited by terrorists against the
United States. EPA's pesticides antimicrobial program is working to help address this threat.
Antimicrobials play an important role in public health and safety. EPA is conducting
comprehensive scientific assessments and developing test protocols to determine the safety and
efficacy of products used against chemical and biological weapons of mass destruction, and
registering products as necessary. EPA is also developing a timeline for prioritizing and
implementing the tests. In addition, the Section 18 program provides emergency exemption to
any part of FIFRA. This authority is typically used by States on an emergency basis. EPA has
recently used this authority to help with homeland security. Section 18 exemptions have been
authorized to help with anthrax and soybean rust.
PRIA established registration service fees for certain antimicrobials, biopesticides and
conventional pesticides registration actions. The category of action, the amount of the
registration service fee, and the corresponding decision review periods by year are prescribed in
the statute. The goal is to create a more predictable evaluation process for affected pesticide
decisions, and couple the collection of individual fees with specific decision review periods. The
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legislation also promotes shorter decision review periods for reduced-risk applications. PRIA 1
became effective on March 23, 2004, and the collection of registration fees were authorized
through FY 2008. PRIA 1 was reauthorized with passage of the Pesticide Registration
Improvement Renewal Act (commonly referred to as PRIA 2) on October 9, 2007. PRIA 2
became effective retroactive to October 1, 2007, and the collection of registration fees were
authorized through FY 2012. PRIA 2 was reauthorized with the passage of the Pesticide
Registration Improvement Extension Act (referred to as PRIA 3) on September 28, 2012 and
became effective 2 days later on October 1, 2012.
In order for a pending or a new application covered by PRIA to be deemed complete and
subject to the decision review periods, a registrant is required to pay the applicable fee or receive
a waiver from the fees. For most applications, the decision review period starts 21 days after
submission of the application - provided that the fee has been paid, fee waiver granted or in the
case of a 75% or 50% fee waiver under PRIA 3, the fee has been paid and waiver granted. The
legislation provides fee waivers for certain categories of small businesses, and minor uses1.
Exemption from the requirement to pay a registration service fee is continued under PRIA 3 for
applications solely associated with IR-4 petitions2. Applications from federal and state agencies
are also exempt from registration service fees. If the registrant requests a waiver or reduction of
the fee, the decision review period will begin when the Agency grants such request or in the case
of small business fee waivers, no more than 60 days after receipt of the waiver application. If it
is determined that a fee is required and thus the waiver is not granted, the decision review period
starts after the fee is collected.
Applications received prior to October 1, 2007 were covered by PRIA 1. Applications
received up to September 30, 2012 were covered by PRIA 23 and applications received on or
after October 1, 2012 are covered by PRIA 3. PRIA 3 contains the same audit provision as PRIA
2. PRIA 3 provides new authority to reject an application if an application fails a preliminary
technical screen; PRIA 3 increases the fee categories or types of applications covered by PRIA
from 140 to 189, and maintains set asides to support worker protection and applicator training
activities as well as IPM grants at comparable levels to PRIA 2.
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
1	Minor use pesticides are those that produce relatively little revenue for their manufacturers, for a variety of
reasons. They may be registered for a seldom seen pest, or for a crop that is not grown by a large number of
producers. However, minor crops include some high revenue fruit, vegetable, and ornamental crops.
2	The IR-4 (Interregional Research Project No.4) program is involved in making sure that
pesticides are registered for use on minor crops. IR-4 helps by conducting research on minor use
pesticides, pesticides that would not otherwise be profitable to manufacture.
3Out of approximately 8,186 completed PRIA 2 actions more than 99% were completed on or
before the PRIA 2 due date.
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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:
•	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.
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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
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.
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Highlights and Accomplishments
Registration Financial Perspective
During FY 2012, the Agency's obligations charged against the PRIA Fund for the cost of
registration were $13.1 million and 53.4 workyears. Of this amount, OPP obligated $7.4M in
PC&B.
Appropriated funds are used in addition to Registration funds. In FY 2012, the Enacted
Operating Plan included approximately $ 47.2 million in appropriated funds for registration
activities. The unobligated balance in the Fund at the end of FY 2012 was $6.8 million.
The Fund has two types of receipts: fee collections and interest earned on investments.
Of the $15.6 million in FY 2012 receipts, more than 99.9% were fee collections.
Registration Program 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.
Measure 1: Number of new active ingredients registered.
Results: In FY2012 EPA registered 35 new active ingredients, of which 21 are
biopesticides, 11 are conventional pesticides (including one new active ingredient with import
tolerance use only) and 3 are antimicrobial pesticides. This measure includes both reduced-risk
and non-reduced-risk pesticides.
Measure 2: Progress in Registering Reduced-risk Pesticides.
Results: In FY 2012, EPA registered 23 reduced-risk new active ingredients, 21 of
which were biological pesticides and 2 of which were conventional pesticides. Biological
pesticides are certain types of pesticides derivedfrom such natural materials as animals, plants,
bacteria, and certain minerals. They are usually less toxic and are typically considered safer
pesticides than the traditional conventional chemicals; therefore, the 21 biopesticides new active
ingredients are counted as reduced-risk pesticides. Conventional "reduced risk" pesticides have
one or more of the following advantages over currently registered pesticides: low impact on
human health, low toxicity to non-target organisms, low potential for groundwater
contamination, lower use rates, low pest resistance potential, and compatibility with integrated
pest management strategies.
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Measure 3: Number of New Food Uses Registered.
Results: EPA registered 161 new uses for previously registered active ingredients. Of
these new uses, 158 were for conventional pesticides, 2 were for antimicrobial pesticides, and 1
was for a biopesticide
Measure 4: Progress in Registering Reduced-risk New Uses.
Results: Included in the new uses registered are 10 reduced-risk uses, of which 7 were
associated with conventional pesticides and 3 were biopesticide new uses.
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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. Other Assets	17
Note 4. General Property, Plant and Equipment	18
Note 5. Other Liabilities	18
Note 6. Payroll and Benefits Payable	19
Note 7. Income and Expenses from Other Appropriations	20
Note 8. Exchange Revenues, Statement of Net Cost	22
Note 9. Intragovernmental Costs and Exchange Revenue	22
Note 10. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing)	23
Note 11. Restatements	24
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Environmental Protection Agency
PRIA
Balance Sheet
For the Years Ended September 30, 2012 and 2011
(Dollars in Thousands)
FY2012	FY2011
ASSETS


Intragovernmental:


Fund Balance With Treasury (Note 2)
$ 12,443 $
11,241
Other (Note 3)
-
40
T otal Intragovernmental
$ 12,443 $
11,281
Accounts Receivable, Net (Note 5)
-
2
Property, Plant & Equipment, Net (Note 4)
2,753
3,188
Total Assets	$	15,196 $	14,471
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities	93	133
Other (Note 5)		74 	95
Total Intragovernmental
$ 167 $
228
Accounts Payable & Accrued Liabilities
$ 757 $
816
Payroll & Benefits Payable (Note 6)
2,022
962
Other (Note 5)
11,277
10,064
Total Liabilities	$	14,223 $	12,070
NET POSITION
Cumulative Results of Operations	973	2,401
Total Net Position	973	2,401
Total liabilities and Net Position	$ 15,196 $	14,471
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
PRIA
Statement of Net Cost
For the Years Ended September 30, 2012 and 2011
(Dollars in Thousands)
Restated
FY2012	FY2011
COSTS
Gross Costs (Note 9) $ 15,848 $ 17,672
Expenses from Other Appropriations (Note 7) 	29,726 	35,993
Total Costs $
45,574 $
53,665
Less:


Earned Revenue (Notes 8 and 9)
14,396
15,809
NET COST OF OPERATIONS (Note 9) $
31,178 $
37,856
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
PRIA
Statement of Changes in Net Position
For the Years Ended September 30, 2012 and 2011
(Dollars in Thousands)
Restated
FY 2012	FY 2011
Cumulative Results of Operations:
Net Position - Beginning of Period	2,401 4,064
Beginning Balances, as Adjusted	$ 2,401 $ 4,064
Budgetary Financing Sources:
Nonexchange Revenue - Securities Investment	1 5
Nonexchange Revenue - Other	12
Income from Other Appropriations (Note 7)	29,726 35,993
Total Budgetary Financing Sources	$ 29,739 $ 35,998
Other Financing Sources (Non-Exchange)
Imp uted F inancing Sources	11	195
Total Other Financing Sources	$ 11	$ 195
Net Cost of Operations	(31,178)	(37,856)
Net Change	(1,428)	(1,663)
Cumulative Results of Operations	$	973 $	2,401
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
PRIA
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: $
4,247 $
7,393
Unobligated balance brought forward, October 1, as adjusted
4,247
7,393
Recoveries of Prior Year Unpaid Obligations
43
-
Other changes in unobligated balance
-
(40)
Unobligated balance from prior year budget authority, net
4,290
7,353
Appropriations (discretionary and mandatory)
15,619
11,790
Spending authority from offsetting collections (discretionary and mandatory)
39
-
Total Budgetary Resources	$	19,948 $	19,143
STATUS OF BUDGETARY RESOURCES
Obligations incurred
Unobligated balance, end of year:
Apportioned
Total unobligated balance, end of period
Total Status of Budgetary Resources
$ 13,192	$ 14,896
	6,756 	4,247
	6,756 	4,247
$ 19,948	$ 19,143
CHANGE IN OBLIGATED BALANCE
Unpaid Obligations, Brought Forward, October 1 (gross)
Obligated balance, start of year (net), before adjustments
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)
6,955 $
6,955
6,955
13,192
(14,460)
(43)
5,644
5,644
7,701
7,701
7,701
14,896
(15,642)
6,955
6,955
BUDGET AUTHORITY AND OUTLAYS, NET:
Budget authority, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Budget authority, net (discretionary and mandatory)
15,658 $
	(39)
11,790
15,619 $
11,790
Outlays, gross (discretionary and mandatory)
Actual offsetting collections (discretionary and mandatory)
Outlays, net (discretionary and mandatory)
Distributed offsetting receipts
Agency outlays, net (discretionary and mandatory)
14,460
(39)
14,421
(15,622)
(1,201) $
15,642
15,642
(11,790)
3,852
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
PRIA
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 Pesticide Registration Fund (PRIA) is authorized under the Pesticide Registration
Improvement Act of 2003 (which amended the Federal Insecticide, Fungicide, and Rodenticide
Act (FIFRA)), and became effective on March 23, 2004. This Act authorizes the EPA to assess
and collect pesticide registration service fees on applications submitted to register pesticides
covered by this Act, as well as assess and collect fees to register new active ingredients not listed
in the Registration Division 2003 Work Plan of the Office of Pesticide Programs. The Pesticide
Registration Improvement Renewal Act (commonly referred to as PRIA II) extended the
authority to collect pesticide registration service fees through FY 2012. PRIA II became
effective October 1, 2007. PRIA II was reauthorized with the passage of the Pesticide
Registration Improvement Extension Act (referred to as PRIA III) on September 28, 2012 and
became effective 2 days later on October 1, 2012. The PRIA Fund is accounted for under
Treasury symbol number 68X5374.
The PRIA 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 $29,726 thousand and $35,993 thousand,
respectively. This amount was 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 for FYs 2012 and 2011.
B.	Basis of Presentation
These financial statements have been prepared to report the financial position and results of
operations of the EPA for the Pesticide Registration Fund (PRIA) as required by the Chief
Financial Officers Act of 1990 and the Pesticide Registration Improvement Act (PRIA) of 2003.
In the prior years, pesticide registration was included in the FIFRA financial statements. 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
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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.
C.	Budgets and Budgetary Accounting
Funding for PRIA is provided by fees collected from industry to offset costs incurred by 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
For FYs 2012 and 2011, PRIA received funding from fees collected from registrants requesting
pesticide registrations. 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 PRIA fund deposits receipts and processes disbursements through its operating account
maintained at the U.S. Department of the Treasury.
G.	Investments in U. S. Government Securities
Investments in U. S. government securities are maintained by Treasury and are reported at
amortized cost net of unamortized discounts. Discounts are amortized over the term of the
investments and reported as interest income. PRIA 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.
H.	General Property, Plant and Equipment
Purchases of the EPA-held personal equipment are capitalized if the equipment is valued at $25
thousand or more and has an estimated useful life of at least two years. Depreciation is taken on
a basic straight-line method over the specific asset's useful life, ranging from two to 15 years.
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The EPA shows property, plant and equipment at net of depreciation on its audited financial
statements.
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. Liabilities
Liabilities represent the amount of monies or other resources that are likely 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 PRIA,
liabilities are liquidated from fee receipts, since PRIA receives no appropriation. Liabilities of
the Agency arising from anything other than contracts can be abrogated by the Government
acting in its sovereign capacity.
J. 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."
K. Retirement Plan
There are two primary retirement systems for Federal employees. Employees hired prior to
January 1, 1987, may participate in the Civil Service Retirement System (CSRS). On January 1,
1984, the Federal Employees Retirement System (FERS) went into effect pursuant to Public Law
99-335. Most employees hired after December 31, 1983, are automatically covered by FERS
and Social Security. Employees hired prior to January 1, 1984, elected to either join FERS and
Social Security or remain in CSRS. A primary feature of FERS is that it offers a savings plan to
which the Agency automatically contributes one percent of pay and matches any employee
contributions up to an additional four percent of pay. The Agency also contributes the
employer's matching share for Social Security.
With the issuance of SFFAS No. 5, "Accounting for Liabilities of the Federal Government,"
accounting and reporting standards were established for liabilities relating to the federal
employee benefit programs (Retirement, Health Benefits, and Life Insurance). SFFAS No. 5
requires that the employing agencies recognize the cost of pensions and other retirement benefits
during their employees' active years of service. SFFAS No. 5 requires that the Office of
Personnel Management (OPM), as administrator of the CSRS and FERS, the Federal Employees
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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.
L. Offsetting Receipts
Beginning in FY 2007 OMB Circular A-13 6, Financial Reporting Requirements, requires that
the amount of distributed offsetting receipts reported in the Statement of Budgetary Resources
(SBR) should equal the amount recorded as offsetting receipts by the Department of the Treasury
(Treasury). Pesticide Registration Fees collected under PRIA are considered to be offsetting
receipts by Treasury.
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	$	12,443	$	11,241
Note 3. Other Assets
Other Assets consist of advances for Interagency Agreements. As of September 30, 2012 and
2011, funds advanced that will be applied to future costs as incurred were $0 and $40 thousand
respectively.
Note 4. General Property, Plant and Equipment
General property, plant and equipment consists of the EPA-Held personal property, software,
and software in development.
As of September 30, 2012 and 2011, General Property, Plant and Equipment consist of the
following:
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FY 2012
FY 2011
Acquisition Accumulated Net Book Acquisition Accumulated Net Book
Value	Depreciation Value	Value	Depreciation	Value
EPA-Held Equipment $
410 $
(305) $
105 $
410 $
(271) $
139
Software
4,458
(1,810)
2,648
4,198
(1,149)
3,049
Total $
4,868 $
(2,115) $
2,753 $
4,608 $
(1,420) $
3,188
Note 5. Other Liabilities
For FYs 2012 and 2011, 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	$	74 $	95
Total	$	74 $	95
Other Non-Federal Liabilities - Covered by
Budgetary Resources
Advances from Non-Federal Entities	$ 11,277 $	10,064
Total	$ 11,277 $ 	10,064
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Note 6. Payroll and Benefits Payable, Non-Federal:
FY 2012	FY 2011
Covered by Budgetary Resources
Accrued Payroll Payable to Employees	$ 415	$	327
Withholdings Payable	28	61
Thrift Savings Plan Benefits Payable		18_		T7
Total	$ 461	$	405
Not Covered by Budgetary Resources
Unfunded Annual Leave	$	1,561	$	557
Total	$ 1,561	$	557
At various periods throughout FYs 2012 and 2011 employees with their associated payroll costs
were transferred from PRIA to the Environmental Programs and Management (EPM)
appropriation. (See graph in Note 7 below showing trend of hours charged per month to the
PRIA fund for FYs 2012 and 2011.) These employees were transferred in order to keep PRIA's
obligations and disbursements within budgetary limits.
This process has led to variations between the year-end liabilities of FYs 2012 and 2011. The
liabilities covered by budgetary resources (both intragovernmental and non-Federal) represent
unpaid payroll and benefits at year-end. For FY 2012 Pay Period 26; no employees charged any
part of their salary and benefits to PRIA. As of September 30, 2012, the liabilities were $74
thousand and $461 thousand for employer contributions and accrued funded payroll and benefits
as compared to FY 201 l's balances of $95 thousand and $405 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 FY 2011, approximately 211 and 130
employees, respectively, in total have been under PRIA's accountability. As of September 30,
2012 and 2011 liability balances for unfunded annual leave were accrued to cover these
employees for a total of $1.5 million and $557 thousand, respectively.
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Note 7. 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 activities. Transfers of employees from PRIA to EPM at
various times during FYs 2012 and 2011 (see Note 6 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 PRIA 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
PRIA normally signifies an increase in EPM's payroll costs, and vice versa.
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PRIA - Total Employee Hours by Month
FY 2012 Total Hours
-FY 2011 Total Hours
The EPM costs related to PRIA are allocated based on specific EPM program codes which have
been designated for Pesticide registration activities. As illustrated below, there is no impact on
PRIA's Statement of Changes in Net Position.
Income From Other Expenses From Other	Net
Appropriations	Appropriations	Effect
FY 2012 $
29,726 $
29,726
$
0
Restated




FY 2011 $
35,993 $
35,993
$
0
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Note 8. Exchange Revenues, Statement of Net Cost
For FYs 2012 and 2011, the exchange revenues reported on the Statement of Net Cost consists of
non-Federal amounts.
Note 9. Intragovernmental Costs and Exchange Revenue
Restated
FY 2012	FY 2011
COSTS:
Intragovernmental	$ 2,171	$ 2,661
With the Public	13,677	15,011
Expenses from Other Appropriations	29,726 	35,993
Total Costs	$ 45,574	$ 53,665
REVENUE:
With the Public	14,396	15,809
Total Revenue	$ 14,396 $	15,809
NET COST OF OPERATIONS	$ 31,178 $	37,856
Intragovernmental costs relate to the source of the goods or services not the classification of the
related revenue.
14-1-0042	EPA's FY 2012 Annual PRIA Financial Statements
22

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Note 10. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of

Financing)




Restated

FY 2012
FY 2011
RESOURCES USED TO FINANCE ACTIVITIES:


Budgetary Resources Obligated


Obligations Incurred !
$ 13,192 $
14,896
Less: Spending Authority from Offsetting Collections and Recoveries
(82)
-
Obligations, Net of Offsetting Collections !
$ 13,110 $
14,896
Less: Offsetting Receipts (Note 1 Section L)
(12)
(11,790)
Net Obligations
13,098
3,106
Other Resources


Imputed Financing Sources !
$ 11 $
195
Income from Other Appropriations (Note 7)
29,726
35,993
Net Other Resources Used to Finance Activities !
$ 29,737 $
36,188
Total Resources Used To Finance Activities !
$ 42,835 $
39,294
RESOURCES USED TO FINANCE ITEMS


NOT PART OF NET COST OF OPERATIONS


Change in Budgetary Resources Obligated !
$ 1,286 $
913
Offsetting Receipts Not Affecting Net Cost (Note 1 Section L)
12
11,790
Resources that Finance Asset Acquistion
(260)
(3,966)
Total Resources Used to Finance Items Not


Part of the Net Cost of Operations !
$ 1,038 $
8,737
Total Resources Used to Finance the Net


Cost of Operations !
$ 43,873 $
48,031
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 !
$ 1,004 $
411
Increase in Public Exchange Revenue Receivable !
$ (14,396)
(15,810)
Total Components of Net Cost of Operations that


Requires or Generates Resources in the Future !
$ (13,392) $
(15,399)
Components Not Requiring/Generating Resources:


Depreciation and Amortization
696
1,182
Expenses Not Requiring Budgetary Resources
1
4,042
Total components of Net cost of Operations that Will Not Require or Generate Resources
697
5,224
Total components of Net cost of Operations that Will Not Require


or Generate Resources in the Current Period
(12,695)
(10,175)
Net Cost of Operations
31,178
37,856
14-1-0042
EPA's FY 2012 Annual PRIA Financial Statements
23

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Note 11. 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 of Net Cost
Expenses from Other Appropriations (Note 6)
Total Costs
Net Cost of Operations (Note 9)
36,710
54,382
38,573
(717)
(717)
(717)
35,993
53,665
37,856
Statement of Changes in Net Position
Income from Other Appropriations (Note 6)
Total Budgetary Financing Sources
Net Cost of Operations (Note 9)
36,710
36,715
(38,573)
(717)
(717)
717
35,993
35,998
(37,856)
14-1-0042
EPA's FY 2012 Annual PRIA Financial Statements
24

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Appendix B
Agency's Response to Draft Report
11 9
MEMORANDUM
SUBJECT:
FROM:
Response to Office of Inspector General Draft Report No. 0A-FY13-
0030 "Fiscal Years 2012 and 2011 (Restated) Financial Statements for
the Pesticide Reregistration Fund," dated November 4, 2013
Mary arm Froehlich
Acting Chief Financial Officer
TO:
James J. Jones, Assistant Administrator
Office of Chemical Safety and Pollution
Arthur A. Elkins, Jr.
Inspector General
Thank 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. We have provided high-level intended corrective actions and
estimated completion dates to the extent we can.
AGENCY'S OVERALL POSITION
The agency concurs with the five recommendations.
AGENCY'S RESPONSE TO REPORT RECOMMENDATION
No.
Recommendation
High-Level. Intended Corrective
Action(s)
Estimated Completion by
Quarter and FY
1
Office of the Chief Financial
Officer should correct the
Pesticide Registration Fund
("PRIA") financial statements
to reflect the proper expenses
paid by other appropriations.
Concur. OCFO corrected the
financial statements to reflect the
proper expenses paid by other
appropriations.
September 24, 2013
(COMPLETED)
14-1-0042
EPA's FY 2012 Annual PRIA Financial Statements
25

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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 PRIA
Fund financial statements
prior to their submission to
the Office of Inspector
eral.
Concur. OCFO will request
OCSPP to carefully review and
comment on the draft and final
versions of the PRIA financial
statements prior to their
submission to OIG.
March 28, 2014 I
(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 PRIA 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 PRIA fund.
__
4
OCFO should correct the
PRIA financial statements
to reflect the proper payroll
liability amounts.
Concur. OCFO corrected the
PRIA financial statements to
reflect the proper payroll
liability amounts.
February 26, 2013 1
(COMPLETED)
5
OCFO should closely
monitor the payroll
liability amounts for
PRIA at year- end.
Concur.
September 30, 2014 1
1
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 Silzer
Jeanne Conklin
Richard Eyermann
Paul Curtis
Chris Osborne
Sherri Anthony
Raffael Stein
Melvin Visnick
Peter Caulkins
14-1-0042
EPA's FY 2012 Annual PRIA Financial Statements
26

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Maria Sorrell
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
Shel donna Proctor
Lorn a W ashington
14-1-0042
EPA's FY 2012 Annual PRIA 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
PRIA Audit Coordinator, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention
14-1-0042

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