x^fcD ST/ij.
U.S. Environmental Protection Agency	13-P-0373
i?	ro	Hffiro of Incnortor f^onoral	September 5, 2013
w'
*1 prO^
•	u.o. cnviiuMiiiciiidi nuieuu
	 \ Office of Inspector General
SKI
At a Glance
Why We Did This Review
The U.S. Environmental
Protection Agency Office of
Inspector General conducted
an audit of the Renewable Fuel
Standard program as a result of
millions of dollars of
fraudulently generated
Renewable Identification
Numbers. We sought to
determine whether the EPA
has assessed program risks
and designed necessary
controls in the RFS program.
RFS program regulations
require that independent third
parties complete certain
reporting requirements.
According to the EPA, the RFS
program lays the foundation for
achieving significant reductions
in greenhouse gas emissions
from the use of renewable
fuels. The EPA's Office of Air
and Radiation listed RFS
program implementation as a
priority in fiscal year 2013.
This report addresses the
following EPA Goals or
Cross-Cutting Strategies:
•	Taking action on climate
change and improving air
quality.
•	Enforcing environmental
laws.
For further information, contact
our Office of Congressional and
Public Affairs at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2013/
20130905-13-P-0373.pdf
The EPA Should Improve Monitoring of Controls
in the Renewable Fuel Standard Program
What We Found
The EPA has worked with external RFS program stakeholders to develop
additional controls to reduce fraud in the program. The EPA has assessed risks
and implemented a number of control activities in the RFS program through
regulations. The main control activities we identified include independent third-
party engineering reviews, the EPA Moderated Transaction System, and attest
engagements. However, the agency does not meet the control standard for
monitoring some of these control activities. The EPA does not track submission
of third-party engineering reviews or annual attest engagements because the
agency lacks an electronic monitoring system for these reports. Until the EPA
tracks submitted materials, the agency cannot be sure that program participants
comply with applicable regulations, which affects program integrity and could
lead to additional fraud cases. The EPA recently implemented electronic
reporting requirements for attest engagements and has stated that it intends to
implement electronic reporting for engineering reviews by the end of this year.
We could not determine whether overlap existed in parties completing third-party
engineering reviews and attest engagements. Program regulations require that
independent third parties complete third-party engineering reviews and attest
engagements. Additionally, the EPA's quality assurance program proposed in a
new rule would require that independent third parties complete voluntary quality
assurance plans to validate RIN generation. Current and proposed regulations do
not preclude the same third party from completing multiple requirements as well
as other reporting responsibilities for renewable fuel producers or importers,
allowing for possible overlap. The EPA does not track and monitor
independence, including whether the same party completes multiple reporting
requirements for a renewable fuel producer or importer. If the same third party
completes multiple reporting requirements, the party could potentially review its
own work, which could result in a conflict of interest.
Recommendations and Planned Corrective Actions
We recommend that the Office of Air and Radiation modify existing electronic
systems to track the submission of reporting requirements to ensure that all
participants comply with applicable RFS program regulations. To assist with
tracking, we recommend requiring electronic submittal of all reporting
requirements for the RFS program, particularly third-party engineering reviews
and attest engagements. We also recommend that the office determine whether
potential conflicts of interest exist from allowing the same third party to complete
multiple reporting requirements and monitor potential conflicts for any negative
impacts to program integrity, and revise regulations as appropriate to include
specificity on independence requirements. The Office of Air and Radiation agreed
with our recommendations and is taking steps to address them.

-------