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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
EPA Is Not Recovering
All Its Costs of the
Lead-Based Paint Fees
Program
Report No. 13-P-0163
February 20, 2013
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about the EPA OIG.

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Report Contributors:	Paul Curtis
Arthur Budelier
Sheree James
Guillermo Mejia
Abbreviations
CFO
Chief Financial Officer
CFO Act
Chief Financial Officers Act of 1990
CG&E
Contracts, Grants, and Expenses
EPA
U.S. Environmental Protection Agency
FY
Fiscal year
GAO
U.S. Government Accountability Office
IFMS
Integrated Financial Management System
IOAA
Independent Offices Appropriation Act
OCFO
Office of the Chief Financial Officer
OCSPP
Office of Chemical Safety and Pollution Prevention
OECA
Office of Enforcement and Compliance Assurance
OFS
Office of Financial Services
OIG
Office of Inspector General
OMB
Office of Management and Budget
OPPT
Office of Pollution Prevention and Toxics
RRP
Renovation, Repair, and Painting
SFFAS
Statement of Federal Financial Accounting Standards
TSCA
Toxic Substances Control Act
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIG Hotline@epa.gov	write: EPA Inspector General Hotline
phone: 1-888-546-8740	1200 Pennsylvania Avenue, NW
fax:	202-566-2599	Mailcode 2431T
online:
http://www.epa.gov/oiq/hotline.htm
Washington, DC 20460

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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
13-P-0163
February 20, 2013
Why We Did This Review
We performed this review to
evaluate the U.S. Environmental
Protection Agency's (EPA's)
assessment and collection of
accreditation and certification fees
for its lead-based paint program.
Our objectives were to determine
whether EPA is recovering its
costs of administering the lead-
based paint program, and whether
EPA has effective internal controls
over the assessment and
collection of fees.
The Toxic Substances Control Act
(TSCA) directs EPA to address
the general public's risk of
exposure to lead-based paint
hazards. EPA's Office of Pollution
Prevention and Toxics (OPPT)
administers the national training
and certification systems for lead
abatement and renovation
activities. TSCA authorizes EPA to
establish fees to recover the costs
of administering and enforcing the
standards and requirements
applicable to lead-based paint
training programs and contractors.
This report addresses the
following EPA Goal or
Cross-Cutting Strategy
• Strengthening EPA's workforce
and capabilities.
For further information,
contact our Office of Congressional
and Public Affairs at (202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2013/
20130220-13-P-0163.pdf
EPA Is Not Recovering All Its Costs of the
Lead-Based Paint Fees Program
What We Found
EPA is not recovering all its costs of administering the lead-based paint program.
Our analysis, based on the Agency's rough cost estimates, showed unrecovered
costs of $16.4 million for fiscal years (FY) 2010 through 2014 combined.
Although collections exceeded costs by $8.9 million in FY 2010, for FYs 2011
through 2014 costs exceeded collections by $25.3 million, thus the net difference
of $16.4 million. In a 2009 final rule, EPA established a fee schedule under the
authority of TSCA to recover the program costs incurred over a 5-year
certification cycle. However, EPA is not recovering all its costs because:
•	Renovation, Repair, and Painting firm participation is lower than projected.
•	EPA has not conducted a biennial cost review to determine its actual costs
and decide whether it needs to adjust fees to reflect changes in costs.
•	The fees structure does not take into account all indirect costs needed to
recover the full cost of administering the lead-based paint program.
By not recovering all of its program costs, the federal government did not collect
funds that otherwise could have been available to offset the federal budget
deficit. A fees rule update could result in additional revenue of up to
$16.4 million per 5-year cycle.
EPA's internal controls over the assessment and collection of fees are generally
effective.
Recommendations and Planned Agency Corrective Actions
We recommend that the Assistant Administrator for Chemical Safety and
Pollution Prevention update the March 2009 fees rule to reflect the amount of
fees necessary to recover the program costs, and apply indirect cost rates to all
applicable direct costs to obtain the full cost of the program (the Chief Financial
Officer has agreed to develop the indirect cost rates). We also recommend that
the Chief Financial Officer conduct biennial cost reviews of the lead-based paint
fee collections and the full cost of operating the program to determine whether
EPA is recovering its costs, and determine the appropriate Agency indirect cost
rates to be used for EPA's user fee programs.
EPA agreed with all our recommendations. EPA said it will update the 2009 fees
rule, modify cost analysis procedures as appropriate, conduct biennial cost
reviews, and develop appropriate indirect cost rates for user fee programs. The
two recommendations to the Assistant Administrator for Chemical Safety and
Pollution Prevention are unresolved pending receipt of estimated completion
dates.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
February 20, 2013
MEMORANDUM
SUBJECT: EPA Is Not Recovering All Its Costs of the Lead-Based Paint Fees Program
Report No. 13-P-0163
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the
problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 60 calendar days. You should include a corrective actions plan for agreed-upon
actions, including milestone dates. Your response will be posted on the OIG's public website,
along with our memorandum commenting on your response. Your response should be provided
as an Adobe PDF file that complies with the accessibility requirements of Section 508 of the
Rehabilitation Act of 1973, as amended. The final response should not contain data that you do
not want to be released to the public; if your response contains such data, you should identify the
data for redaction or removal. We have no objections to the further release of this report to the
public. We will post this report to our website at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or
Paul Curtis, Product Line Director for Financial Statement Audits, at (202) 566-2523 or
curtis.paul@epa.gov.
FROM: Arthur A. Elkins, Jr.
TO:
Jim Jones
Acting Assistant Administrator for Chemical Safety and Pollution Prevention
Barbara J. Bennett
Chief Financial Officer

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EPA Is Not Recovering All Its Costs
of the Lead-Based Paint Fees Program
13-P-0163
Table of C
Chapters
1	Introduction		1
Purpose		1
Background		1
Scope and Methodology		4
2	EPA's Lead-Based Paint Program Is Not Recovering All Its Costs		5
Program Costs Exceed Fee Collections		5
RRP Firm Participation Is Lower Than Projected		8
EPA Has Not Conducted a Biennial Cost Review		9
Fees Structure Does Not Take Into Account All Indirect Costs
Needed for Full Cost Recovery		9
Internal Controls Over Fee Assessments and Collections Were
Generally Effective		10
Conclusion		11
Preliminary Agency Actions		11
Recommendations		12
Agency Comments and OIG Evaluation		12
Status of Recommendations and Potential Monetary Benefits		14
Appendices
A Details on Scope and Methodology	 15
B Lead-Based Paint Program Cost Estimates	 17
C Agency Response to Draft Report	 18
D Distribution	 26

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Chapter 1
Introduction
Purpose
We performed this review to evaluate the U.S. Environmental Protection
Agency's (EPA's) assessment and collection of accreditation and certification
fees for its lead-based paint program. With the Administration's current focus on
reducing the federal budget deficit, we wanted to determine whether EPA was
charging sufficient fees to recover its costs. The objectives of our review were to
determine whether EPA:
•	Is recovering its cost of administering and enforcing the standards and
requirements applicable to lead-based paint training programs and
contractors.
•	Has effective internal controls over the assessment and collection of lead
fees.
Background
Title IV of the Toxic Substances Control Act (TSCA) directs EPA to regulate the
training and certification of lead-based paint activities. These activities include
the Lead-Based Paint Activities Program (Abatement) and the Renovation,
Repair, and Painting (RRP) program. The Abatement program, which became
effective in March 2000, requires all lead-based paint activities to be conducted
according to work practice standards. The RRP program, which became fully
effective in April 2010, requires RRP activities that disturb lead-based paint to be
conducted using lead-safe work practices. The Abatement and RRP programs
both require training providers to be accredited and individuals and firms
conducting lead-based paint activities or renovations in target housing and child-
occupied facilities to be trained and certified.
EPA's Office of Pollution Prevention and Toxics (OPPT), within the Office of
Chemical Safety and Pollution Prevention (OCSPP), administers the national
training and certification systems for lead abatement and renovation activities.
OPPT also performs outreach activities to increase contractor awareness of the
RRP program requirements and consumer awareness of the hazards of lead paint.
EPA's Office of Enforcement and Compliance Assurance (OECA) enforces the
lead-based paint program under TSCA.
The Abatement and RRP programs allow states, tribes, and territories to become
authorized to administer and enforce the program in place of EPA. Currently,
EPA has authorized 39 states, the District of Columbia, Puerto Rico, and 3 tribes
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for the Abatement program, and 12 states for the RRP program. EPA administers
the Abatement program in 11 non-authorized states and the RRP program in
38 non-authorized states, the District of Columbia, and all territories and tribes.
EPA charges fees in the non-authorized states, territories, and tribes for training
programs seeking accreditation, renovation firms seeking certification, and
individuals or firms engaged in lead-based paint activities seeking certification.
EPA does not charge fees in authorized states.
Statutory Authorities and Guidance
EPA collects fees for the lead-based paint programs under the authority of the
following statutes:
•	The Independent Offices Appropriation Act (10AA) of 1952 authorizes
federal agencies to charge fees for the services they provide. The 10AA
requires that each charge be fair and be based on the costs to the
government, the value of the service to the recipient, the public policy or
interest served, and other relevant facts. The 10AA states that each
service provided by a federal agency should be self-sustaining to the
extent possible.
•	TSCA Section 402 (15 U.S. Code § 2682) authorizes EPA to collect
accreditation and certification fees to cover the costs of administering and
enforcing the lead-based paint activities training and certification
program.
•	The Chief Financial Officers Act of 1990 (CFO Act) requires the Chief
Financial Officer (CFO) to review, on a biennial basis, the fees imposed
by the Agency for services and things of value it provides. The CFO shall
make recommendations on revising those charges to reflect costs incurred
by it in providing those services and things of value.
The following federal policies and standards provide guidance for implementing
EPA's lead fee user charges:
•	Office of Management and Budget (OMB) Circular A-25, User Charges,
dated July 8, 1993, implements the 10AA. It provides for charges for
government goods and services that convey special benefits to recipients
beyond those accruing to the general public. It also establishes that user
charges should be set at a level sufficient to recover the full cost of
providing the service, resource, or property. It requires the Agency to
review the user charges for Agency programs biennially. Biennial reviews
will include assurance that existing charges are adjusted to reflect
unanticipated changes in costs or market values. Agencies should discuss
the results of the biennial review of user fees and any resultant proposals
in the CFO's Annual Report required by the CFO Act.
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•	The Statement of Federal Financial Accounting Standards (SFFAS) No. 4,
Managerial Cost Accounting Standards and Concepts, dated July 31,
1995, states that full cost should be considered as a primary basis for
setting fees for government goods and services. The full cost of an output
is the total amount of resources used to produce the output, including
direct and indirect costs. Indirect costs are costs that are jointly or
commonly used to produce two or more types of outputs but are not
specifically identifiable with any of the outputs. Typical examples of
indirect costs include general administrative services; general research and
technical support; security; rent; employee health and recreation facilities;
and operating and maintenance costs for buildings, equipment, and
utilities.
EPA issued the following final rules related to the Abatement and RRP program
fees:
•	EPA's final rule of June 9, 1999, Lead; Fees for Accreditation of Training
Programs and Certification of Lead-Based Paint Activities Contractors,
establishes fees for the Abatement program. EPA's February 26, 1999,
report, Economic Analysis of the Final TSCA Section 402(a)(3) Lead-
Based Paint Accreditation and Certification Fee Rule, supports the 1999
final rule.
•	EPA's final rule of April 22, 2008, Lead; Renovation, Repair, and
Painting Program, addresses lead-based paint hazards created by
renovation, repair, and painting activities that disturb lead-based paint in
target housing and child-occupied facilities. The rule establishes RRP
requirements for training renovators, other renovation workers, and dust
sampling technicians; for certifying renovators, dust sampling technicians,
and renovation firms; for accrediting providers of renovation and dust
sampling technician training; for renovation work practices; and for
recordkeeping. EPA prepared a March 2008 report, Economic Analysis for
the TSCA Lead Renovation, Repair, and Painting Program Final Rule for
Target Housing and Child-Occupied Facilities. The report presents an
economic analysis of alternative regulatory options for the final rule. The
economic analysis estimated the universe of affected entities for the April
2008 final rule.
•	EPA's final rule of March 20, 2009, Lead; Fees for Accreditation of
Training Programs and Certification of Lead-Based Paint Activities and
Renovation Contractors, revised the existing fees for EPA's Abatement
regulations and establishes fees for the RRP rule. The rule requires that
EPA establish and implement a fee schedule to recover for the U.S.
Treasury the Agency's costs of administering and enforcing the standards
and requirements applicable to lead-based paint training programs and
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contractors. EPA prepared a January 27, 2009, report, Economic Analysis
for the TSCA Section 402 Lead-Based Paint Program Accreditation and
Certification Fee Rule, to support the fees schedule. The economic
analysis estimated the costs of the Abatement and RRP programs and the
number of accreditation and certification applicants, and developed the
fees schedule.
EPA deposits lead fees collected into the Environmental Services Special Fund in
the U.S. Treasury. The receipts in the special fund are to remain available for
appropriation to carry out the Agency's activities for which the fees were
collected. However, Congress has not appropriated the special fund receipts.
Congress has been appropriating general funds, without specifying the
Environmental Services Special Fund, to the Environmental Program &
Management and State and Tribal Assistance Grants appropriations to finance the
lead Abatement and RRP programs. The special fund balance grew to
$303 million, including $43 million from lead fees, at the end of fiscal year
(FY) 2011. Although Congress has not appropriated the special fund to finance
the environmental programs that generated the receipts, the fund remains
available for appropriation and offsets the federal budget deficit.
Scope and Methodology
We conducted this review in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the review
to obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our review objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions
based on our review objectives. We conducted our review from December 2011
through July 2012. Appendix A contains details on our scope and methodology.
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Chapter 2
EPA's Lead-Based Paint Program
Is Not Recovering All Its Costs
EPA is not recovering all its costs of administering the lead-based paint program.
Our analysis, based on the Agency's rough cost estimates, showed unrecovered
costs of $16.4 million for FYs 2010 through 2014 combined. Although collections
exceeded costs by $8.9 million in FY 2010, for FYs 2011 through 2014 costs
exceeded collections by $25.3 million, thus the net difference of $16.4 million.
TSCA Section 402 (15 U.S. Code § 2682) authorizes the EPA Administrator to
establish fees to cover the costs of administering and enforcing the standards and
regulations of the program. In a 2009 final rule, EPA established a fee schedule
designed to recover the program costs incurred over a 5-year certification cycle.
However, EPA is not recovering all its costs because:
•	RRP firm participation is lower than projected.
•	EPA has not conducted a biennial cost review to determine its actual costs
and decide whether it needs to adjust fees to reflect changes in costs.
•	The fees structure does not take into account all applicable indirect costs
and therefore does not provide for recovering the full cost of administering
the program.
By not recovering all of its costs of the program, the federal government did not
collect funds that otherwise could have been available to offset the federal budget
deficit. A fees rule update could result in potential additional revenue of up to
$16.4 million per 5-year cycle.
Program Costs Exceed Fee Collections
Although EPA is collecting the fees authorized in the 2009 final rule, it is not
recovering all its costs of administering the program. EPA's economic analysis
for the 2009 rule formed the basis for the fee structure in the final rule. The
economic analysis supports the fees development for the Abatement and RRP
programs. The economic analysis projected the program activity and costs for a
5-year cycle to correspond with the RRP program requirement for renovation
firms to re-certify every 5 years. Because the RRP program was new, EPA
estimated the number of RRP applications from firms and training providers to be
much greater in the first year than in the 4 subsequent years of the 5-year cycle.
EPA designed its fee structure to recover the anticipated program costs at the
estimated activity levels for the 5-year cycle. Table 1 illustrates the economic
analysis 5-year cost estimates for the Abatement and RRP programs.
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Table 1: Summary of estimated Abatement and RRP costs ($ in millions)

Year 1
FY 2010
Year 2
FY 2011
Year 3
FY 2012
Year 4
FY 2013
Year 5
FY 2014
Total
Abatement
$1.2
$1.2
$1.2
$1.2
$1.2
$6.0
RRP
61.5
22.2
22.1
22.0
21.9
149.7
Total
$62.7
$23.4
$23.3
$23.2
$23.1
$155.7
Source: EPA's Economic Analysis for the TSCA Section 402 Lead-Based Paint Program
Accreditation and Certification Fee Rule, dated January 27, 2009, Executive Summary,
tables ES-4 and ES-8.
EPA had not conducted a formal cost study to determine its actual program costs.
At our request, OPPT, with assistance from OECA, developed a rough estimate of
its actual costs for FYs 2010 and 2011 based on spending and labor use. OPPT
stated that the estimated amounts were tentative because EPA prepared them
quickly without performing a thorough cost analysis. Although tentative, the
rough estimate was the most useful program cost information available at the time
to help determine whether EPA is recovering its program costs. EPA's cost
estimate, including Office of Inspector General (OIG) calculations for indirect
costs, was $19.2 million for FY 2010 and $20.3 million for FY 2011. Appendix B
contains details of the cost estimate. EPA's lead fee collections recorded in the
Integrated Financial Management System (IFMS), the Agency's accounting
system, totaled $22.0 million for FY 2010 and $9.1 million for FY 2011.
Therefore, EPA's initial rough cost estimate indicated that EPA did not recover
$8.5 million of its costs for the 2 years combined, as illustrated in table 2.
Table 2: Summary of fee collections and estimated program costs ($ in millions)

FY 2010
FY 2011
Total
Fee collections
$22.0
$9.1
$31.1
Estimated costs
19.2
20.3
39.6
Excess fees / (unrecovered costs)
$2.8
$(11.2)
$(8.5)
Source: OIG analysis of EPA data. (The numbers in the table may not add up due to rounding.)
EPA's January 2009 economic analysis projected the level of Abatement and
RRP applications and program costs to remain about the same for the final 4 years
of the 5-year cycle. EPA expects to achieve some future cost reductions through
improvements in the program's database and applications processing, and some
cost increases in program enforcement. However, EPA did not project the amount
of expected future cost reductions. If the fee collections and overall costs
experienced in the second year remain at approximately the same levels in the
final 3 years of the cycle, the estimated unrecovered costs for the 5-year cycle
would be $42 million, as illustrated in table 3. We present the amounts in table 3
to provide a perspective on the potential magnitude of the unrecovered costs. The
amounts are based on estimates and projections, and actual results may vary.
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Table 3: Estimated unrecovered costs for the 5-year cycle ($ in millions)

FY
FY
FY
FY
FY


2010
2011
2012
2013
2014
Total
Fee collections
$22.0
$9.1
$9.1
$9.1
$9.1
$58.4
Program costs
19.2
20.3
20.3
20.3
20.3
100.4
Total
$2.8
$(11.2)
$(11.2)
$(11.2)
$(11.2)
$(42.0)
Source: OIG analysis of EPA data.
OCSPP was concerned that OIG based its findings on the preliminary data from
OPPT's rough cost estimate. According to OCSPP, the preliminary rough cost
estimate was not an authoritative and complete statement of program costs.
Therefore, OCSPP conducted a second, more refined cost estimate to provide a
more accurate picture of the lead program costs. OCSPP presented its revised
estimate for the 5-year cycle to OIG on October 3, 2012, as an attachment to
EPA's response to OIG's draft report (Appendix C). The revised cost estimate
showed unrecovered costs of $16.4 million for FYs 2010 through 2014 combined,
as illustrated in table 4. The fee collections are the actual amounts for FY 2010
and FY 2011. OCSPP derived the 2012 amounts from the Agency's FY 2012
operating plan and 2013 amounts from the President's FY 2013 Budget. OCSPP
estimated the 2014 amounts from the FY 2013 figures.
Table 4: Revised estimated unrecovered costs for the 5-year cycle ($ in millions)

FY
FY
FY
FY
FY


2010
2011
2012
2013
2014
Total
Fee collections
$22.0
$8.7
$4.1
$4.7
$4.9
$44.3
Program costs
13.1
14.3
10.9
11.2
11.2
60.6
Total
$8.9
$(5.6)
$(6.8)
$(6.5)
$(6.3)
$(16.4)
Source: OIG analysis of EPA data. (The numbers in the table may not add up due to rounding.)
Although EPA's revised estimate reduced the unrecovered costs for the 5-year
cycle from $42 million to $16.4 million, our findings did not change. EPA's lead-
based paint program is not recovering all its costs. The significant variance in
calculated program costs between the two estimates underscores the need for EPA
to conduct a biennial cost review to determine its actual costs.
EPA is not recovering all of its costs of administering the lead-based paint
program because:
•	RRP firm participation is lower than projected.
•	EPA has not conducted a biennial cost review to determine its actual costs
and decide whether it needs to adjust fees to reflect changes in costs.
•	The fees structure does not take into account all applicable indirect costs
and therefore does not provide for recovering the full cost of administering
the lead-based paint program.
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RRP Firm Participation Is Lower Than Projected
The RRP program applies to renovation activities in target housing and child-
occupied facilities. Under the RRP final rule of April 22, 2008, firms that are
subject to the regulations need to obtain EPA certification, and training providers
must obtain accreditation for their RRP courses. EPA's economic analysis for the
2008 rule estimated the universe of affected entities for the final rule. EPA based
the estimate on the number of renovations estimated to occur in rental target
housing and child-occupied facilities. EPA's economic analysis estimated the
number of renovation firms as well as the number of training providers that would
be needed to perform renovation jobs and train the needed workforce in years
1 through 5 of the program.
EPA's economic analysis overestimated the level of firm participation in the
program and the number of RRP applications. EPA's 2009 economic analysis
estimated the number of RRP applications from firms seeking certification to be
approximately 212,000 for the first year, 72,000 for the second through the fourth
year, and 71,000 for the fifth year of the 5-year cycle. Since the program became
fully effective April 22, 2010, EPA considered the first full year to run through
April 2011 and the second year through April 2012. EPA certified approximately
87,000 firms the first full year and 13,000 the second year. The total number of
firms certified for the first 2 years of the 5-year cycle was about 35 percent of the
estimated total, as illustrated in table 5.
Table 5: Summary of estimated and actual firm certifications

Year 1
Year 2
Total
Estimated certifications
212,000
72,000
284,000
Actual certifications
87,000
13,000
100,000
Percent of estimate realized
41%
18%
35%
Source: OIG analysis of EPA data.
Based on the expected applications, EPA estimated the program costs and related
fee collections to be $61.5 million for the first year and approximately $22 million
for each of the subsequent 4 years (table 1). The actual fee collections of
$22.0 million for FY 2010 and $9.1 million for FY 2011 (table 2) were less than
anticipated due to a lower-than-expected level of firm participation.
EPA stated that when it conducted its economic analysis for the 2008 RRP final
rule economic conditions were more favorable than when the RRP program began
in 2010. Consequently, the demand for certified firms is less than EPA anticipated
when it developed the rule. EPA said it is pursuing efforts to increase certification
of renovation firms. OPPT has developed a prioritized list of outreach activities
based on target audiences (contractors, consumers, and the health care sector).
OPPT and OECA are implementing activities in FY 2012 to increase
(1)	contractor awareness and compliance with the RRP rule requirements,
(2)	consumer demand for certified firms, and (3) enforcement of the RRP rule.
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EPA Has Not Conducted a Biennial Cost Review
EPA has not conducted a formal cost study to determine its actual lead-based
paint program costs and decide whether it needs to adjust the fees to reflect
changes in the costs. The CFO Act and OMB Circular A-25 require the Agency to
review the user charges for Agency programs biennially. Agencies should discuss
the results of the biennial review of user fees and any resultant proposals in the
CFO's Annual Report required by the CFO Act. EPA stated that it conducts an
economic analysis to support setting fees per the notice-and-comment rulemaking.
It also manages its costs for administering and enforcing the Abatement and RRP
programs to ensure that annual costs are limited to the funds appropriated
annually by Congress. However, these activities do not identify the actual
program costs incurred.
OPPT stated that it estimated its costs for the 2009 economic analysis but had not
performed a biennial cost review. OPPT stated that while the Agency's cost
accounting system can distinguish certain types of costs (i.e., Superfund Program
and the Working Capital Fund), EPA has not implemented an approach to track
the lead user fee program costs. Therefore, EPA would have to conduct a manual
cost study to determine the allocable program costs.
EPA does not have internal guidance for conducting a biennial cost review. A
systematic approach to reviewing user fee program costs would help EPA conduct
biennial cost studies. Without performing the biennial cost studies prescribed by
the CFO Act and OMB guidance, EPA does not have the cost data necessary to
determine whether it should update the fees rule.
EPA discussed the results of its user fees biennial review in the FY 2011 Agency
Financial Report, as required by OMB Circular A-25. The report concluded that
EPA's user fees are in compliance with statutory authority, but the report did not
discuss user fee cost reviews. In a discussion with the OIG, EPA's Office of the
Chief Financial Officer (OCFO) stated that it will conduct biennial cost reviews
for EPA's user fee programs. For the next biennial user fees report, OCFO said it
will have EPA's user fee programs include detail on their cost reviews.
Fees Structure Does Not Take Into Account All Indirect Costs Needed
for Full Cost Recovery
When EPA prepared an economic analysis to estimate the program costs and
develop a fee structure, it did not include all applicable indirect costs. The 2009
economic analysis applied indirect costs to direct labor but not to other direct
costs, such as contract costs. OMB Circular A-25 requires the Agency to recover
the full cost of providing a service, including indirect costs. By not including all
applicable indirect costs in its economic analysis, EPA developed a fee structure
that did not recover the full cost of the program.
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EPA's 2009 economic analysis determined the fringe benefits and indirect costs
applicable to direct labor by applying a multiplier of 1.6 times the direct labor.
EPA staff stated that the multiplier accounted for both labor benefits and indirect
costs. The application of a 1.6 multiplier was consistent with EPA's February
1999 economic analysis for the June 1999 lead-based paint accreditation and
certification fee rule. However, EPA did not have supporting calculations for the
multiplier. We believe that an indirect cost rate based on Agency cost calculations
would be a more reliable multiplier for applying indirect costs to direct costs.
EPA has not developed indirect cost rates specifically for its user fee programs.
However, OCFO develops annual indirect cost rates for interagency agreements.
OCFO annually develops interagency agreement indirect cost rates for several
headquarters program offices and each region. OCFO posts the annual rates on
EPA's Office of Grants and Debarment Intranet website. Because the interagency
agreement indirect cost rates are based on OCFO's annual calculations, we
consider them to be the most reliable rates available for use by user fee programs.
OPPT's original cost estimates for FYs 2010 and 2011 include direct costs
incurred by OPPT for administering the lead Abatement and RRP programs and
OECA for performing enforcement activity. To determine full cost estimates, we
applied the interagency agreement indirect cost rates to the cost estimates. We
applied OCSPP's indirect cost rates of 8.63 percent for FY 2010 and
10.24 percent for 2011 to OPPT's direct costs, and OECA rates of 6.39 percent
for FY 2010 and 7.61 percent for FY 2011 to OECA's direct costs. Applying the
indirect cost rates added $3.2 million to cost estimates for the 2 years combined.
We included the $3.2 million indirect costs in our calculations of unrecovered
costs for FY 2010 and FY 2011 combined and the 5-year cycle. OCSPP's revised
cost estimate applied the appropriate indirect costs rates to direct costs and
included $2.2 million indirect costs. OCFO should determine whether the
interagency agreement rates are general purpose rates and, therefore, are
appropriate for use by user fee programs, or whether it should develop new rates
specifically for the user fee programs. Applying appropriate indirect cost rates to
direct costs will help EPA recover the full cost of the program.
Internal Controls Over Fee Assessments and Collections Were
Generally Effective
We found EPA's internal controls over the assessment and collection of fees to be
generally effective. However, we identified a minor internal control issue related to
untimely recording of collections. OMB and the U.S. Government Accountability
Office (GAO) require federal agencies to establish and maintain internal controls.
Internal controls are an integral component of an organization's management that
provide reasonable assurance that the organization achieves effectiveness and
efficiency of operations, reliability of financial reporting, and compliance with
applicable laws and regulations. Although EPA's internal controls were generally
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effective, the minor internal control issue we found compromised EPA's ability to
ensure that management's directives are followed and assets are safeguarded.
EPA's Office of Financial Services (OFS) did not consistently record lead
accreditation and certification fee collections timely. We tested 45 collection
items and found that 27 (60 percent) were recorded more than 3 working days
after receiving notice that the U.S. Treasury received the collection. OFS recorded
the collections, totaling $21,320, between 5 and 21 days after receiving notice of
the collection. EPA's Resource Management Directive System 2540-03, Cash
Management Collections and Deposits, requires the Agency to record collections
in the financial system within 3 working days of receiving notice of the collection.
GAO's Standards for Internal Control in the Federal Government states that
transactions should be promptly recorded to maintain their relevance and value to
management in controlling operations and making decisions.
OFS staff stated that during the period of October 2010 through February 2011
OFS experienced a shortage in resources due to an unexpected illness of one of
the staff members, which impacted the timeliness of recording collections in
IFMS. Recording fee collections untimely increases the risk of inaccurate
information in the Agency's accounting system. Because the untimely recording
was temporary and OFS has procedures to record collections timely, we are not
making a recommendation.
Conclusion
EPA is not recovering all its costs of administering the lead-based paint program.
EPA should prepare a more accurate estimate of program participation and
program costs, apply appropriate indirect costs to obtain full cost recovery, and
update the 2009 fees rule to reflect the amount of fees necessary to recover the
program costs. By not recovering all of its costs, the federal government did not
collect funds that otherwise could have been available to offset the federal budget
deficit. The President's Budget Message for FY 2012 states that reducing the
long-term federal deficit must be a priority. The federal government is looking for
ways to save money and cut unnecessary costs. We believe that EPA could help
the federal government in this endeavor by collecting more lead fees to recover
more of its costs. A fees rule update could result in potential additional revenue of
up to $16.4 million per 5-year cycle based on estimated revenue and program
costs for the current cycle. A biennial cost review could provide a more precise
determination of potential additional revenue.
Preliminary Agency Actions
In response to our prior audit report, EPA Should Update Its Fees Rule to Recover
More Motor Vehicle and Engine Compliance Program Costs (Report No.
1 l-P-0701, dated September 23, 2011), OCFO agreed to issue guidance to EPA's
user fee programs for conducting biennial reviews. Therefore, we make no
recommendation for OCFO to issue user fee guidance.
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OPPT plans to update the fees rule in conjunction with other regulatory changes
in the lead program, e.g., rules underway to address renovation activities in other
buildings. Accomplishing that initiative should provide additional recurring
annual revenue in future years.
During our field work, EPA addressed the level of program participation by planning
outreach activities in FY 2012 to increase certification of renovation firms.
Recommendations
We recommend that the Assistant Administrator for Chemical Safety and
Pollution Prevention:
1.	Update the March 20, 2009, fees rule to reflect the amount of fees
necessary for the program to recover the costs of implementing and
enforcing the program.
2.	Modify its lead-based paint program cost analysis procedures to apply
indirect cost rates to all applicable direct costs in order to obtain the full
costs of the program. (The CFO will develop the indirect cost rates.)
We recommend that the Chief Financial Officer:
3.	Conduct biennial cost reviews of the lead-based paint program fee
collections and the full cost of operating the program to determine whether
EPA is recovering its costs.
4.	Determine the appropriate Agency indirect cost rates to be used for EPA's
user fee programs.
Agency Comments and OIG Evaluation
EPA agreed with the recommendations and provided its intended corrective
actions. EPA provided estimated completion dates for recommendations 3 and 4.
Recommendations 1 and 2 are unresolved pending receipt of the estimated
completion dates.
EPA was concerned that the OIG based its findings on the preliminary data from
OPPT's rough cost estimate. The preliminary data was not an authoritative and
complete statement of program costs. Therefore, EPA conducted a more refined
cost analysis. It presented a projected shortfall over 5 years that was significantly
lower than the shortfall in the initial rough cost estimate. At EPA's request, we
included the results of EPA's second cost analysis in this report. The second cost
analysis did not change the conditions we had previously identified, and we did
not change our findings and conclusions.
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EPA stated that it would need to conduct a much more accurate cost study after
implementing the program for a full 5-year certification cycle. We agree that EPA
needs a more accurate cost study. However, EPA should obtain a cost study every
other year by conducting biennial cost reviews. EPA agrees and plans to conduct
a biennial cost review of the lead-based paint program in FY 2013.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
12 Update the March 20, 2009, fees rule to reflect the
amount of fees necessary for the program to
recover the costs of implementing and enforcing
the program.
12 Modify its lead-based paint program cost analysis
procedures to apply indirect cost rates to all
applicable direct costs in order to obtain the full
costs of the program. (The CFO will develop the
indirect cost rates.)
12 Conduct biennial cost reviews of the lead-based
paint program to determine whether EPA is
recovering its costs.
12 Determine the appropriate Agency indirect cost
rates to be used for EPA's user fee programs.
Assistant Administrator for
Chemical Safety and
Pollution Prevention
Assistant Administrator for
Chemical Safety and
Pollution Prevention
Chief Financial Officer
Chief Financial Officer
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
$42,0002
$16,400
11/15/13
9/30/133
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 progress
2	The potential monetary benefit represents the cost savings from a fees rule update for a subsequent 5-year certification cycle, based on the estimated and
projected unrecovered program costs for the current 5-year cycle ending September 30, 2014. We based the claimed amount on OCSPP's original cost estimate
and the agreed-to amount on the second cost estimate.
3
EPA originally provided a planned completion date of December 31, 2012, in its response to the draft report and subsequently updated it to September 30, 2013.
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Appendix A
Details on Scope and Methodology
We reviewed EPA's processes for the assessment and collection of lead accreditation and
certification fees. To gain an understanding of the processes, we:
•	Reviewed the applicable laws, regulations, fees rules and supporting economic analyses,
and program information
•	Reviewed program operating procedures
•	Interviewed OPPT, OCFO, and OECA personnel
•	Examined the federal lead-based paint program database
We obtained fee collections and roughly estimated program operating costs for FYs 2010 and
2011 and determined whether the collections were sufficient to recover all program operating
costs. We examined EPA's economic analyses and their projections of program activity and
related program costs.
We tested FY 2011 fee transactions to determine whether EPA assessed the proper fee amount,
collected the fee before issuing an accreditation or certification, and recorded the collection
timely. We determined whether EPA approved and paid the proper refund amounts. We used the
monetary unit method of statistical sampling to test 45 fee collections totaling $53,420,
5 fee credit transactions totaling $76,900, and 10 refund transactions totaling $2,085. The fee
collections universe included 32,686 transactions totaling $9,837,066, and the refunds universe
included 3,079 transactions totaling $776,653. We used random sampling to test 45 accreditation
and certification applications out of 29,779 applications in FY 2011 to search for accreditations
and certifications issued with no corresponding fee collection.
We assessed the internal controls related to assessing, collecting, and refunding fees. We gained
an understanding of the internal controls through interviews with OPPT and OCFO personnel,
and examination of fees database information and the related supporting documents. We
reviewed EPA's OCSPP and OCFO FY 2011 management integrity assurance letters for
reported internal control weaknesses.
We did not assess the reliability of data in OCSPP's information systems because their use did
not materially affect our findings, conclusions, or recommendations. We verified fee collection,
refund, and certification data by examining supporting documentation and accessing financial
information in IFMS. We did not review the internal controls over IFMS from which we
obtained financial data, but relied on the review conducted during the audit of EPA's FY 2011
financial statements.
Prior Reports Reviewed
We reviewed the prior EPA OIG and GAO reports listed in table A-l. The EPA OIG report had
findings and recommendations related to fee collections and recovery of program costs. The
three GAO reports contained information relevant to our review. The GAO reports included a
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survey of federal agency fee reviews, a study of how user fee design characteristics influenced
the effectiveness of user fees, and a response to a congressional request about user fee reviews.
We used the information and issues disclosed in the EPA OIG and GAO reports to help identify
issues as we conducted our review.
Table A-1: Prior reports reviewed
Report Title
Report No.
Date
2012 Annual Report: Opportunities to Reduce
Duplication, Overlap and Fragmentation, Achieve
Savings, and Enhance Revenue
GAO-12-342SP
February 28, 2012
EPA Should Update Its Fees Rule to Recover More
Motor Vehicle and Engine Compliance Program Costs
11-P-0701
September 23, 2011
Federal User Fees: A Design Guide
GAO-08-386SP
May 29, 2008
Federal User Fees: Some Agencies Do Not Comply with
Review Requirements
GAO-GGD-98-161
June 30, 1998
Source: OIG analysis.
Report No. GAO-12-342SP presented cost savings or revenue enhancement opportunities,
including GAO's 2011 survey of federal agency fee reviews. The survey responses indicated
that for most fees, agencies (1) had not discussed fee review results in annual reports, and
(2) had not reviewed the fees and were inconsistent in their ability to provide fee review
documentation.
Report No. 1 l-P-0701 disclosed that an EPA program was not collecting enough fees to
recover all reasonable program costs. EPA had not conducted a formal cost study since 2004
to determine its actual program costs, and had not updated the fees rule to recover more
costs. EPA agreed with the report's recommendations and plans to update the fees rule and
conduct biennial reviews.
Report No. GAO-08-386SP reported on a study of how user fee design characteristics may
influence the effectiveness of user fees. GAO examined how the four key design and
implementation characteristics of user fees—how fees are set, collected, used, and
reviewed—may affect the economic efficiency, equity, revenue adequacy, and administrative
burden of cost-based fees. The principles outlined in the design guide present a framework
for user fee design.
Report No. GAO/GGD-98-161 was a response to a congressional request to review agencies'
adherence to the user fee review and reporting requirements in the CFO Act and OMB
Circular A-25. The report disclosed that 6 of the 24 CFO agencies reviewed all of their
reported user fees at least every 2 years as required by OMB Circular A-25 during FYs 1993
through 1997, 3 reviewed all of their reported fees at least once, 11 reviewed some of their
reported fees, and 4 did not review any of their reported fees during this period. The agencies
provided various reasons for not reviewing fees, including insufficient cost data and because
some of the fees set by legislation could not be changed without new legislation.
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Appendix B
Lead-Based Paint Program Cost Estimates
Table B-1: EPA's Initial Cost Estimates for FYs 2010 and 2011

FY 2010
FY 2011
OCSPP


Personnel Compensation and Benefits
$9,048,500
$8,587,900
Travel
143,200
83,200
Contracts, Grants, and Expenses (CG&E) - regional offices
497,000
495,000
CG&E - State and Tribal Assistance Grants and contracts
4,647,700
5,864,900
Subtotal
$14,336,400
$15,031,000
OCSPP Indirect Cost Rate
8.63%
10.24%
OCSPP Indirect Costs
$1,237,231
$1,539,174
Working Capital Fund
376,000
441,800
OCSPP Full Costs
$15,949,631
$17,011,974



OECA


Personnel Compensation and Benefits
$1,834,000
$1,828,000
CG&E - regional offices
1,200,000
1,200,000
Subtotal
3,034,000
3,028,000
OECA Indirect Cost Rate
6.39%
7.61%
OECA Indirect Costs
193,873
230,431
Working Capital Fund
61,000
61,000
OECA Full Costs
$3,288,873
$3,319,431



OCSPP and OECA Full Costs (total direct and indirect costs)
$19,238,504
$20,331,405
Source: OIG analysis of EPA data.
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Appendix C
Agency Response to Draft Report
(Received October 3, 2012)
MEMORANDUM
SUBJECT: Response to OIG Draft Report No. OA-FY12-0107
FROM: James J. Jones
Acting Assistant Administrator
Barbara J. Bennett
Chief Financial Officer
TO:	Arthur A. Elkins, Jr.
Inspector General
Thank you for the opportunity to respond to the findings and recommendations in the Office of
Inspector General's (OIG's) Draft Report entitled "EPA Is Not Recovering All Its Costs of the
Lead-Based Paint Fees Program" (August 30, 2012).
This memorandum summarizes the Office of Chemical Safety and Pollution Prevention
(OCSPP) and the Office of the Chief Financial Officer's (OCFO) response to the OIG's findings,
along with our position on each of the Draft Report's recommendations. For those report
recommendations with which the agency agrees, we have provided either high-level intended
corrective actions and estimated completion dates, or reasons why we are unable to provide high-
level intended corrective actions and estimated completion dates at this time. For those report
findings and recommendations with which the agency does not agree, we have explained our
position.
Overall Position:
The cost data upon which the OIG has based its findings and recommendations was provided by
OCSPP with the understanding that it was to be used as part of preliminary research only, and
was hence not an authoritative and complete statement of program costs. Accordingly, OCSPP
has significant concerns about the use of this preliminary data to make the findings presented in
the Draft Report. OCSPP expressed this concern to OIG during discussions of its preliminary
findings on April 10, 2012, and also informed OIG that OCSPP would be undertaking an effort
to gather refined data for the OIG's use in its report.
OCSPP is providing this refined cost data to the OIG as an attachment to this memorandum. As
this refined cost data provides a much more accurate picture of the lead program costs for FY10
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through FY14, it is our hope that the OIG will carefully consider the revised cost data in
finalizing its report.
Discussion of Findings:
Finding 1. Program Costs Exceed Fee Collections:
The OIG's analysis to support this finding consists of a comparison between estimated fee
collections and program costs for the Lead-based Paint Program for the years FY2010 to
FY2014. The Draft Report acknowledges that "EPA had not conducted a formal cost study to
determine its actual program costs" and that at the request of the OIG the program office
"developed a rough estimate" of these costs for FY2010 and FY2011 "quickly without
performing a thorough cost analysis." Despite these significant reservations expressed about the
accuracy of the underlying data, the Draft Report nevertheless relies on this data to extrapolate
program costs for FY 2012 to FY2014, and concludes with numerical specificity that there is a
shortfall in unrecovered program costs for the Lead-based Paint Program for the five-year period
in question.
OCSPP cautions against attaching a specific dollar number to the "shortfall in unrecovered
program costs" without conducting a comprehensive cost analysis, because it conveys a false
sense of precision about the data underlying that conclusion. OCSPP believes it is inadvisable to
predict five years of program cost and revenue based on preliminary and limited data, and it is
misleading to project a specific dollar amount of shortfall using preliminary data. A much more
accurate cost study would need to be conducted after implementing the Lead-based Paint
Program for a full five-year certification cycle.
Furthermore, OCSPP finds the Draft Report's extrapolation of costs from two years of data (FY
2010 and FY2011) to a five-year time frame particularly problematic because it fails to make any
adjustments or even to discuss the complexity and cyclical nature of the Lead-based Paint
Program. As discussed extensively with the OIG, taking this approach to extrapolating costs does
not account for the efficiencies and cost reductions that OCSPP expects to accrue as the RRP
program matures through the first five-year certification cycle. As a certification program
matures, the program becomes more efficient in processing and reviewing applications, thereby
reducing labor costs. This likely outcome is evident from the reduction of fees collected
associated with the abatement portion of the Lead-based Paint Program that EPA realized in the
1999 Fee Rule. Likewise, as has been experienced with the abatement program, as states and
tribes become authorized to operate a lead program in lieu of the EPA program, program costs
will commensurately decrease. The Lead-based Paint Program has made certain investments in
the first two years of the program in IT and other infrastructure that increase efficiency, which
will in turn decrease labor costs and, hence, overall program cost.
Due to OCSPP's significant concern with data underlying the Draft Report's conclusions,
OCSPP has conducted an in-depth analysis of fee-related program activities (see Appendix A).
Briefly, OCSPP compiled a list of Lead Program activities and identified those which are fee-
related and those which are not. OCSPP then gathered information from HQ and all ten Regional
Office Lead Program components in order to provide more refined Lead Program cost estimates.
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OCSPP's refined analysis indicates actual program costs for FY10 and FY11 were $13.1 million
and $14.2 million, respectively. This is in contrast to the preliminary estimates of $19.2 and
$20.3 million, respectively, which were cited in the OIG's Draft Report. In addition, rather than
simply using FY11 costs for FY12-14 as the OIG did, OSCPP has provided a cost estimate for
FY12 that is based on actual costs for 9 months of this fiscal year ($10.9 million) and an FY13
cost estimate that is based on the President's Budget ($11.2 million). With this actual data
available, OCSPP only had to project FY14 costs, which was done using FY13 costs ($11.2
million). Details on OCSPP's refined cost estimates are provided in Appendix A.
In summary, OCSPP's refined cost estimates are based on more realistic data rather than
simplified assumptions, and include refined data for FY10 and FY11, an FY12 estimate based on
actual data for 9 months of the fiscal year, FY13 data from the President's Budget, and projected
data for FY 14. Based on this refined analysis, OCSPP determined that the Lead-based Paint
Program recovered its program costs in the first two years, and the projected shortfall over five
years is significantly lower than the rough estimates OIG used to make its findings in the Draft
Report.
Finding 2. RRP Firm Participation is Lower Than Projected
The Draft Report states that "EPA's economic analysis overestimated the level of firm
participation in the program and the number of RRP applications." This language implies that
EPA somehow erred in estimating the number of firms needing certification. An economic
analysis is developed to support rulemaking, and is therefore a projection based on the facts
available at the time. The estimates of Lead-based Paint Program participation were made to
support the rule-making and underwent the usual Agency, OMB and public review processes
without any major comment as to the projections of firm participation. The successful
completion of this process and the lack of comments on these estimates indicates that, at the
time, they were reasonable, and that there was no error in EPA's approach or conclusions.
However, EPA's projections were made prior to the severe economic downturn experienced in
the U.S., which likely caused, if not strongly contributed to, the number of firms actually
participating in the RRP program to be at the lower end of the projected range. Nevertheless,
EPA's economic analysis for the Lead-based Paint Program included a sensitivity analysis to
account for variance in economic conditions. A review of the data indicates that the actual
participation has fallen within the range estimated within that sensitivity analysis, further
supporting that the projections were appropriate for their purpose.
Finding 3. EPA Has Not Conducted a Biennial Cost Review
OCFO concurs in this finding.
Finding 4. Fees Structure Does Not Take Into Account All Indirect Costs Needed for Full
Cost Recovery
The Draft Report states that "When EPA prepared an economic analysis to estimate the program
costs and develop a fee structure, it did not include all applicable indirect costs." As OCSPP
explained in discussions with the OIG, the economic analysis for the 2009 Fees Rule is an
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estimate of future costs for use by decision-makers (along with other information including
program participation rate forecasts and effects of fees on small businesses) in considering
regulatory options. OCSPP believes a much more accurate estimate could be conducted after
implementing the RRP aspect of the lead program for a five-year certification cycle and after
having performed biennial reviews following guidance provided by the OCFO.
Finding 5. Internal Controls Over Fee Assessments and Collection Were Generally Effective
OCFO concurs in this finding.
Discussion of Recommendations:
Recommendation 1. Update the March 20, 2009, fees rule to reflect the amount of fees
necessary for the program to recover the costs of implementing and enforcing the program.
Concur. OCSPP will proceed with updating the 2009 Fees Rule following completion of at least
one 5-year cycle of the RRP accreditation and certification program, if warranted, based on
findings from at least two consecutive biennial reviews that the Lead Program costs continue to
exceed the amount fees collected.
•	OCSPP is unable to provide an estimated completion date at this time.
Recommendation 2. Modify its lead-based paint program cost analysis procedures to apply
indirect cost rates to all applicable direct costs in order to obtain the full costs of the program.
(The CFO will develop the indirect cost rates.)
Concur. Upon clarification of applicable indirect cost rates by OCFO, OCSPP will modify cost
analysis procedures as appropriate.
•	OCSPP is unable to provide an estimated completion date at this time.
Recommendation 3. Conduct biennial cost reviews of the lead-based paint fee collection and
full cost of operating the program to determine whether EPA is recovering costs.
Concur. In accordance with Office of Management and Budget Circular A-25, User Charges and
the Chief Financial Officer's Act of 1990, the Office of the Chief Financial Officer will conduct
a review of the Lead-Based paint fee collections and the full cost of operating the program to
determine whether EPA is recovering its costs. This will be performed in accordance with the
next biennial cost review scheduled for FY 2013.
•	Estimated completion date: November 15, 2013
Recommendation 4. Determine the appropriate Agency indirect cost rates to be used for EPA's
user fee programs.
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Concur. OCFO will develop the appropriate indirect cost rate for the EPA user fee programs
including the lead-based paint program.
• Estimated completion date: December 31, 2012
Conclusion:
Thank you for the opportunity to comment on this Draft Report. If you have questions, please
feel free to contact me, or to have your staff contact Janet Weiner at (202) 564-2309.
Attachment A
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APPENDIX A
OCSPP Lead-based Paint Program Cost Estimates



2-Year



5-Year
OCSPP Costs
2010
2011
Total
2012
2013
2014
Total
PC&B
$4,137,200
$3,833,600
$7,970,800
$3,368,000
$3,619,200
$3,619,200
$18,577,200
Travel
$65,500
$34,800
$100,300
$29,000
$30,700
$30,700
$190,700
CG&E - Regional Offices
$0
$0
$0
$0
$0
$0
$0
CG&E - STAG grants &







contracts
$4,647,700
$5,864,900
$10,512,600
$3,400,000
$3,331,000
$3,331,000
$20,574,600
Sub-total
$8,850,400
$9,733,300
$18,583,700
$6,797,000
$6,980,900
$6,980,900
$39,342,500
OCSPP Indirect Cost Rate
8.6%
10.2%

10.2%
10.2%
10.2%

OCSP Indirect Costs
$763,790
$996,690
$1,760,479
$696,013
$714,844
$714,844
$3,886,181
WCF
$257,100
$321,900
$579,000
$185,400
$260,300
$260,300
$1,285,000
OCSPP Full Costs - Total







direct & indirect costs
$9,871,290
$11,051,890
$20,923,179
$7,678,413
$7,956,044
$7,956,044
$44,513,681








OECA Costs







OECA costs
$3,000,000
$3,000,000
$6,000,000
$3,000,000
$3,000,000
$3,000,000
$15,000,000
OECA Indirect Cost Rate
6.4%
7.6%

7.6%
7.6%
7.6%

OECA Indirect Costs
$191,700
$228,300
$420,000
$228,300
$228,300
$228,300
$1,104,900
OECA Full Costs - Total







direct & indirect costs
$3,191,700
$3,228,300
$6,420,000
$3,228,300
$3,228,300
$3,228,300
$16,104,900








Total Costs







OCSPP & OECA Full Costs
$13,062,990
$14,280,190
$27,343,179
$10,906,713
$11,184,344
$11,184,344
$60,618,581








Fees collected
$22,010,546
$8,675,000
$30,685,546
$4,059,894
$4,665,182
$4,850,168
$44,260,790
Excess (shortage) of fees
$8,947,556
($5,605,190)
$3,342,367
($6,846,819)
($6,519,162)
($6,334,176)
($16,357,791)
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Lead Risk Reduction Program Resources, FY 2010 - FY 2014: Summary of Changes from
Preliminary (March 12, 2012) Estimates
OCSPP's preliminary estimate of costs used a simplifying assumption that all Regional FTE,
PC&B, Travel, CG&E and WCF were fee related resources. With the additional time
taken to refine our assessment, OCSPP has worked with all 10 EPA Regional Offices to
provide realistic data-based cost estimates for each of these cost categories.
Methodology:
Step 1: OCSPP-HQ queried each of the Regional Lead Program managers asking them to
provide best estimates of the proportion of their Lead Program FTE dedicated to fee-
related and non-fee related activities for Fiscal Years 2010-2012. Program activities
that should be attributed to fee-related and non-fee-related categories were provided
to the Regions as guidance for conducting the assessment to ensure that each Region
was able to distinguish among fee-related and non-fee-related activities in a
consistent manner. (See below "Lead-based Paint Abatement and RRP Program
Costs")
Step 2: The proportion of each Region's FTE that was designated as fee-related was
applied across the remaining Regional cost categories (i.e., PC&B, Travel, and
WCF), to estimate the amount of each of these cost categories that is used for fee-
related activities.
The exercise conducted with the Regional Lead Programs also verified that no Regional
EPM CG&E resources are used for fee-related activities.
OCSPP's preliminary cost estimates provided to OIG were only for FY10 and FY11, as these
were the only data available for the preliminary analysis. OCSPP's refined cost estimates
include FY12 resources derived from the Agency's FY12 operating plan and FY13
resources derived from the President's FY13 Budget. FY14 resources are estimated from
the FY13 figures. This refined information provides a much more realistic estimate of the
fee-related costs of the Lead Program for FY10-FY14.
OCSPP's preliminary fee revenues provided to OIG were only for FY10 and FY11, as these
were the only data readily available for the preliminary analysis. OCSPP's refined fee
revenue estimates include actual FY12 fee revenue through August 2012 and
extrapolated from this FY12 trend through September, 2012. The FY13 and FY14
revenue figures are estimated based on the FY12 figures. This refined information
provides a much more realistic estimate of the fee revenue for the Lead Program for
FY10-FY14.
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Lead-based Paint Abatement and RRP Program Fee- and Non-Fee-Related Activities
As specified in the Toxic Substances Control Act (TSCA), EPA must establish and
implement a fee schedule to recover to the U.S. Treasury the Agency's costs of
administering and enforcing the standards and requirements applicable to lead-based
paint training programs and contractors.
Relevant statutory language from TSCA section 402(a)(3):
Accreditation and certification fees. The Administrator (or the State in the case of an
authorized State program) shall impose a fee on - (A) persons operating training
programs accredited under this title; and (B) lead-based paint activities contractors
certified in accordance with paragraph (1). The fees shall be established at such level as
is necessary to cover the costs of administering and enforcing the standards and
regulations under this section which are applicable to such programs and contractors.
The fee shall not be imposed on any State, local government, or nonprofit training
program. The Administrator (or the State in the case of an authorized State program)
may waive the fee for lead-based paint activities contractors under subparagraph (A) for
the purpose of training their own employees.
Examples of fee-related activities:
o Review/approval of abatement or RRP training provider applications
o Review/approval of abatement individual applications
o Review/approval of abatement firm applications
o FLPP redesign activities
o Application status inquiries
Examples of non-fee-related activities:
o Oversight of State and Tribal grants to implement abatement and/or RRP programs
o Outreach to State, Tribes and Territories to discuss possible authorization for
abatement and/or RRP programs
o Outreach to the public
o Outreach to the regulated community
o Regulation development
o Interpretive guidance activities
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Appendix D
Distribution
Office of the Administrator
Assistant Administrator for Chemical Safety and Pollution Prevention
Chief Financial Officer
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Deputy Chief Financial Officer
Director, Office of Financial Management, Office of the Chief Financial Officer
Deputy Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
Deputy Director, Office of Financial Services, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Chemical Safety and Pollution Prevention
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Financial Management, Office of the Chief Financial
Officer
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