U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
U.S. Chemical Safety and
Hazard Investigation Board
Complied With
Reporting Requirements of
the Improper Payments
Elimination and Recovery Act
Report No. 13-P-0177
March 12, 2013
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Report Contributors:
Marcia Hirt-Reigeluth
Gloria Taylor-Upshaw
Michael Davis
Abbreviations
BPD Bureau of the Public Debt
CSB U.S. Chemical Safety and Hazard Investigation Board
FY Fiscal year
IPERA Improper Payments Elimination and Recovery Act
IPIA Improper Payments Information Act
OIG Office of Inspector General
OMB Office of Management and Budget
PAR Performance and Accountability Report
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 13-P-0177
2 \ Dffiro nf Incnortnr ^onoral March 12, 2013
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Office of Inspector General
At a Glance
Why We Did This Review
The Office of Management and
Budget's (OMB's) guidance for
implementation of the 2010
Improper Payments Elimination
and Recovery Act (IPERA)
specified responsibilities of
agencies and inspectors
general. Agencies are required
to report on improper payments,
and inspectors general are
required to determine whether
the agency complies with
IPERA. As the inspector general
for the U.S. Chemical Safety
and Hazard Investigation Board
(CSB), the U.S. Environmental
Protection Agency Office of
Inspector General undertook this
review of CSB's compliance with
IPERA.
This report addresses the
following CSB Goal:
Preserve the public trust by
maintaining and improving
organizational excellence.
U.S. Chemical Safety and Hazard Investigation Board
Complied With Reporting Requirements of the
Improper Payments Elimination and Recovery Act
What We Found
CSB is fully compliant with the reporting requirements of IPERA, which require
all agencies to periodically review all programs and activities that may be
susceptible to significant improper payments. As required, CSB has published
its fiscal year 2012 Performance and Accountability Report on its website, and
we have determined that CSB programs do not meet the minimum risk
assessment threshold that would require the CSB to perform a risk assessment.
OMB Memorandum M-11-16, Part I B, requires agencies to make a
determination on cost effectiveness of performing recovery audits on those
activities that expend $1 million or more annually. In February 2012, CSB
performed an analysis, as stipulated in the OMB memorandum, and found that it
would not be cost effective to perform recovery audits.
In evaluating the accuracy and completeness of CSB's reporting and
performance in preventing, reducing, and recapturing improper payments, we
determined that CSB should improve its review of the Bureau of the Public
Debt's (BPD's) testing results of CSB's improper payments. BPD provides
reimbursable administrative and information technology services to government
agencies through its Administrative Resource Center. In addition, BPD helps
government agencies reduce the number of improper payments issued. CSB
considers improper payments a low-risk item and relies on BPD to ensure
payments are correct. BPD has a performance metric of less than 1 percent for
improper payments for all of its customer agencies, which is stated in its
interagency agreement with CSB. Although the amount may be minimal, CSB
should have knowledge of BPD's analysis for improper payments and whether
these improper payments are correctly handled by BPD.
Recommendation and Planned Corrective Action
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/
20130312-13-P-0177.pdf
We recommended that the CSB Chairperson receive and review the results of
BPD's testing for CSB improper payments on, at a minimum, a semiannual
basis. CSB concurred with our recommendation and stated that BPD will be
providing its testing results to CSB every 6 months, although the actual start
date for when this will commence has not been provided. Until CSB establishes
a date to begin review of BPD's testing for CSB improper payments, the
recommendation remains unresolved. We evaluated CSB's intended planned
action for this recommendation and concluded that the planned action should
correct the concern identified.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
March 12, 2013
The Honorable Rafael Moure-Eraso, Ph.D.
Chairperson and Chief Executive Officer
U.S. Chemical Safety and Hazard Investigation Board
2175 K Street, NW, Suite 400
Washington, D.C. 20037-1809
Dear Dr. Moure-Eraso:
This is our report on the U.S Chemical Safety and Hazard Investigation Board's (CSB's)
compliance with reporting requirements of the Improper Payments Elimination and Recovery
Act. This report represents the final position of the Office of Inspector General (OIG) on the
subject reported. It contains a finding that describes the issues the OIG has identified and the
corrective action the OIG recommends. This report represents the opinion of the OIG and does
not necessarily represent the final CSB position. CSB managers will make the final
determinations on matters in this report.
The Improper Payments Elimination and Recovery Act and Office of Management and Budget
guidance require the OIG to distribute this report to the following individuals and organizations:
The Senate Homeland Security and Government Affairs Committee.
The House Committee on Oversight and Governmental Reform.
The Comptroller General.
The Controller of the Office of Management and Budget.
We are providing the report to these individuals and organizations under a separate transmittal.
In responding to the draft report, the Board provided its intended corrective action for addressing
the recommendation but did not provide a milestone for completion. Therefore, a response to the
final report is needed within 60 days. We will post this report to our website at
http://www.epa.gov/oig.
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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
Michael Davis, Director, at (513) 487-2363 or davis.michaeld@epa.gov.
Sincerely,
f( fi,,ft i - ¦
Arthur A. Elkins Jr.
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U.S. Chemical Safety and Hazard Investigation Board
Complied With Reporting Requirements of the
Improper Payments Elimination and Recovery Act
13-P-0177
Table of C
Purpose 1
Background 1
Scope and Methodology 2
Results of Review 3
CSB Complies With IPERA 3
CSB Needs to Review Results of BPD's Testing for Improper Payments 5
Recommendation 7
CSB Response and OIG Evaluation 7
Status of Recommendations and Potential Monetary Benefits 8
Appendices
A CSB Response 9
B Distribution 11
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Purpose
The Improper Payments Elimination and Recovery Act (IPERA) became law on
July 22, 2010, amending the Improper Payments Information Act of 2002 (IPIA).1
On April 14, 2011, the Office of Management and Budget (OMB) issued
government-wide guidance for implementation.2 The guidance updated the
requirements for measuring and remediating improper payments. The OMB
guidance requires agencies to report on improper payments and requires
inspectors general to review agency reporting. The U.S. Environmental Protection
Agency's Office of Inspector General (OIG) is the inspector general for the
U.S. Chemical Safety and Hazard Investigation Board (CSB). Our objective for
this review was to determine whether CSB complies with IPERA.
Background
IPERA requires that each agency periodically review and identify all programs
and activities that may be susceptible to significant improper payments. The Act
significantly increased requirements for payment recapture efforts by expanding
the types of payments that could be reviewed. It also lowered to $1 million the
threshold of annual outlays for each program and activity for which agencies are
required to conduct recovery audits, if the agency determines that conducting such
audits would be cost effective.
IPERA defines an improper payment, in relevant part, as any payment that should
not have been made or that was made in an incorrect amount, any payment to an
ineligible recipient for an ineligible good or service, a duplicate payment, a
payment for a good or service not received, or a payment that does not account for
credit for applicable discounts. OMB Memorandum M-l 1-16 expanded the
improper payment definition to include payments without sufficient
documentation. Under OMB Memorandum M-l 1-04,3 agencies are to report on
improper payments that are:
Voluntarily returned by contractors.
Used to offset future payments.
Identified and returned to the agency through OIG efforts, such as audits,
reviews, or tips from the public.
Identified and recovered through management post payment reviews and
close-out.
1 In OMB Memorandum M-l 1-16, Issuance of Revised Parts I and II to Appendix C of OMB Circular A-l 23, issued
April 14, 2011, the term "IPIA" implies "IPIA, as amended by IPERA," but the authorizing legislation is still named
IPIA.
2 OMB April 14, 2011, Memorandum M-l 1-16, revised OMB Circular A-123 Parts I and II.
3 OMB Memorandum M-l 1-04, Increasing Efforts to Recapture Improper Payments by Intensifying and Expanding
Payment Recapture Audits, issued November 16, 2010, provides guidance on expanding the types of payments that
can be reviewed and lowering the threshold of annual outlays that requires agencies to conduct payment recapture
audit programs.
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Each fiscal year, an agency's inspector general is required to determine whether
the agency complies with IPERA. Compliance means that the agency has:
Published a Performance and Accountability Report (PAR) for the most
recent fiscal year and posted it on the agency website.
Identified programs and activities that are susceptible to significant
improper paymentsdefined as gross improper payments exceeding
2.5 percent of program outlays and $10 million of all program or activity
payments made during the fiscal year reported, or $100 millionand
conducted a specific risk assessment for each identified program.
Determined the cost effectiveness of conducting recovery audits on each
program and activity of the agency that expends $1 million or more
annually.
If an agency does not meet one or more of these requirements, it is not compliant.
The inspector general is required to evaluate (1) the accuracy and completeness of
agency reporting; and (2) agency performance in preventing, reducing, and
recapturing improper payments. The inspector general should include any
recommendations to improve the agency's performance in reducing improper
payments.
The Bureau of the Public Debt (BPD) provides reimbursable administrative and
information technology services to government agencies through its
Administrative Resource Center. In addition, BPD helps government agencies
reduce the number of improper payments issued. CSB has an interagency
agreement with the BPD. Under this agreement, the BPD processes financial
transactions, makes administrative payments, and prepares various financial
reports for the CSB.
Scope and Methodology
We conducted this compliance audit from December 2012 to February 2013 in
accordance with generally accepted government auditing standards, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
To determine whether CSB is compliant with IPERA, we reviewed CSB's
FY 2012 PAR and accompanying materials. We interviewed CSB's Director of
Financial Operations to gain an understanding of what actions CSB took to
comply with IPERA. We also reviewed CSB's interagency agreement with BPD
to obtain a better understanding of the division of financial responsibilities
between the two agencies.
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Results of Review
CSB is fully compliant with the reporting requirements of IPERA, which require
all agencies to periodically review all programs and activities that may be
susceptible to significant improper payments. As required, CSB has published its
PAR on its website, and we have determined that CSB programs do not meet the
minimum risk assessment threshold that would require CSB to perform a risk
assessment. OMB Memorandum M-l 1-16, Part IB, requires agencies to make a
determination on cost effectiveness of performing recovery audits on those
activities that expend $1 million or more annually. In February 2012, CSB
performed an analysis, as stipulated in the memorandum, and found that it would
not be cost effective to perform recovery audits.
In evaluating the accuracy and completeness of CSB's reporting and performance
in preventing, reducing, and recapturing improper payments, we determined that
CSB should improve its review of BPD's testing results of improper payments.
CSB considers improper payments a low-risk item and relies on BPD to ensure
payments are correct. Although the amount may be minimal, CSB should have
knowledge of BPD's analysis for improper payments and whether they are
correctly handled by BPD.
CSB Complies With IPERA
IPERA requires all agencies to publish and post on their website the PAR for their
most recent fiscal year. The PAR, as described by OMB Circular A-l 1,
Section 200.12, is a consolidated annual report of agency performance and
financial results, containing the agency's audited financial statements and detailed
information on efforts to achieve goals during the past fiscal year.
In its November 2012 PAR for FY 2012, CSB stated:
The CSB has not identified any significant risk with improper
payments. However, we recognize the importance of maintaining
adequate internal controls to ensure proper payments, and our
commitment to the continuous improvement in the overall
disbursement management process remains strong. In FY 2012, the
CSB continued our agreement with the Bureau of the Public Debt
(BPD) to process financial transactions, make administrative
payments, and prepare various financial reports. This agreement
promotes the accuracy of our financial records and payments.
Based on our review, we determined that CSB is compliant with this requirement
of IPERA.
IPERA also requires all agencies to conduct a specific risk assessment for each
program or activity that may have improper payments in excess of $10 million of
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all program or activity payments made during the fiscal year reported and
2.5 percent of program outlays. IPERA Section 2(f)(3) defines a payment as any
transfer or commitment for future transfer of federal funds such as cash,
securities, loans, loan guarantees, and insurance subsidies to any nonfederal
person or entity that is made by a federal agency, a federal contractor, a federal
grantee, or a governmental or other organization administering a federal program
or activity. Interagency agreements and payroll and benefits made to federal
agencies or employees, are excluded from consideration as a susceptible program
or activity.
For CSB, pursuant to IPERA Section 2(f)(3), only nonfederal expenses are
eligible for consideration as a susceptible program or activity because they are
payments made to a nonfederal person or entity. CSB's FY 2012 budget of
$11,129,165 is shown in table 1 below.
Table 1: CSB FY 2012 budget
Activity
Amount
Percentage
Federal expenses
$7,424,909
66.72%
Nonfederal expenses
3,704,256
33.28%
Total
$11,129,165
100.00%
Source: OIG analysis of CSB data.
Since CSB's FY 2012 budget for nonfederal expenses was less than $10 million,
CSB's nonfederal expenses did not meet the minimum dollar threshold for a risk
assessment.
IPERA Section 2(h)(2)(A) requires that"... the head of each agency shall conduct
recovery audits with respect to each program and activity of the agency that
expends $1,000,000 or more annually if conducting such audits would be cost-
effective." OMB Memorandum M-l 1-16, Part IB, implements the requirements
of Section 2(h) of IPERA. The OMB memorandum defines a payment recapture
audit, also known as a recovery audit, as a review and analysis of an agency's or
program's accounting and financial records, supporting documentation, and other
pertinent information supporting its payments, that is specifically designed to
identify overpayments. A payment recapture audit program is an agency's overall
plan for risk analysis and the performance of payment recapture audits and
recovery activities. The agency head should determine the most cost-effective
way to conduct payment recapture activities. These activities should include a
management improvement program, if appropriate, and a copy of the program
provided to the agency's inspector general annually.
According to OMB, a cost-effective payment recapture audit program is one in
which the benefits (i.e., recaptured amounts) exceed the costs (e.g., staff time and
resources, or payments to an audit contractor) associated with implementing and
overseeing the program. Agencies should consider the following criteria in
determining whether a payment recapture audit is cost effective:
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The likelihood that identified overpayments will be recaptured.
The likelihood that the expected recoveries will be greater than the costs
incurred to identify the overpayments.
If an agency determines that it would be unable to perform a cost-effective
payment recapture audit program for activities expending more than $1 million
annually, it should notify OMB and the inspector general of this decision and
provide them with the analysis used to reach this decision. The agency should also
report in its annual PAR:
A list of programs and activities for which it has determined that a
payment recapture audit program would not be cost effective.
A description of the justifications and analysis that it used to make that
determination.
In February 2012, CSB provided an analysis to determine the cost effectiveness of
performing recapture audits on all activities with annual outlays in excess of
$1 million. CSB concluded that a recapture audit program would not be cost
effective and notified OMB. OMB did not reply to CSB on its analysis.
In its November 2012 PAR for FY 2012, CSB stated:
Finally, in FY 2012, in accordance with OMB guidance, the CSB
conducted an analysis to determine the cost effectiveness of
performing recapture audits on all activities with annual outlays in
excess of $1,000,000. The CSB concluded that a recapture audit
program would not be cost effective.
OMB Memorandum M-l 1-16, Part I B, requires that agencies make a
determination on cost effectiveness at least once every 3 years. CSB made its
determination in February 2012, which complies with the IPERA requirement for
FY 2012. CSB should plan to conduct its next analysis to determine the cost
effectiveness of performing recapture audit on all activities with annual outlays in
excess of $1 million no later than FY 2015.
CSB Needs to Review Results of BPD's Testing for
Improper Payments
OMB Circular A-123, Management's Responsibility for Internal Control,
Section I, states:
[management is responsible for developing and maintaining
effective internal control. Effective internal control provides
assurance that significant weaknesses in the design or operation of
internal control, that could adversely affect the agency's ability to
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meet its objectives, would be prevented or detected in a timely
manner.
Section III identifies the IPIA of 2002 as one of the statutory requirements that
should be part of an agency's internal control framework. IPIA requires agencies
to identify activities and programs that might be susceptible to significant
improper payments. It states:
[ajgencies must annually submit estimates of improper payments,
corrective actions to reduce the improper payments, and statements
as to whether its current information systems and infrastructure can
support the effort to reduce improper payments.
CSB has continued its agreement with the BPD to process financial transactions,
make administrative payments, and prepare various financial reports. CSB relies
on the BPD to perform all of the necessary testing and analysis required for
identifying any possible improper payments. BPD has a performance metric of
less than 1 percent for improper payments for all of its customer agencies, which
is stated in its interagency agreement with CSB. In addition, BPD performs a
random sampling once a month of accounts payable invoices that are equal to or
less than $2,500 and are not subject to a secondary review prior to being
scheduled for payment. BPD's policy requires any accounts payable invoice
greater than $2,500 to undergo a secondary review. BPD's testing results are on
its website; however, the results are not listed by each of its customers.
From our review of BPD's website, we cannot confirm whether CSB has any
improper payment transactions for FY 2012. In addition, CSB does not review,
and BPD does not provide, any results of its testing related to CSB's improper
payment performance through its agreement. In accordance with OMB Circular
A-123, CSB should confirm that BPD performs the test for its improper
payments, as stated in the terms of the agreement, and review the results to meet
its responsibility for maintaining effective internal controls.
CSB noted:
BPD receives unqualified opinions on its annual financial statement audit
reports, which gives CSB a high degree of confidence in BPD's work.
During the course of financial audits, CSB talks with auditors who travel
to BPD, interview the staff, and review their procedures and documents.
The financial auditors consistently report to CSB that both BPD's staff
and work quality are outstanding.
Improper payments are a low-risk item that is handled competently and,
therefore, verification of BPD work is not necessary.
If BPD found an improper payment was made, it would inform CSB so
that CSB could take appropriate action regarding the improper payment
and avoid future improper payments.
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BPD receives annual reviews in accordance with the Statement on
Standards for Attestation Engagements No. 16, Reporting on Controls at a
Service Organization, which provide its customer agencies with
independent verification that BPD's controls, including disbursement
controls, are in place and are operating effectively.
Recommendation
We recommend that the Chairperson, U.S. Chemical Safety and Hazard
Investigation Board:
1. Receive and review the results of BPD's testing for CSB improper
payments on, at a minimum, a semiannual basis.
CSB Response and OIG Evaluation
CSB concurred with our recommendation and stated that BPD will be providing
its testing results to CSB every 6 months. CSB has not provided a milestone for
completion. Until CSB establishes a date to begin review of BPD's testing for
CSB improper payments, this recommendation remains unresolved. We evaluated
CSB's intended planned action for this recommendation and concluded that the
planned action should correct the concern identified.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATION
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
7 Receive and review the results of BPD's testing
for CSB improper payments on, at a minimum, a
semiannual basis.
Chairperson, U.S. Chemical
Safety and Hazard
Investigation Board
Claimed
Amount
Ag reed-To
Amount
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
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Appendix A
CSB Response
U.S. Chemical Safety and
Hazard Investigation Board
2.175 K Street, NW Suite 650 Washington, DC 20037-1809
Phone; (202) 281-7800 Fax: (202) 261-7650
wwwxsb.gov
Rafael Moure-Eraso, Ph.D.
Chairperson
Mark Griffon
Board Member
Beth J. Rosenberg, ScD, MPH
Board Member
March 4, 2013
Melissa M. Heist
Assistant Inspector General for Audits
Office of Inspector General
U.S. Environmental Protection Agency
Washington, DC 20460
Dear Ms. Heist:
Thank you for the opportunity to review and comment on the draft report on the CSB's
compliance with the Improper Payments Elimination and Recovery Act (IPERA). We are
pleased that you found CSB fully compliant with IPERA's reporting requirements.
The draft report states that the CSB should improve its review of the Bureau of the Public Debt's
(BPD's) testing results of improper payments. However, the draft does not acknowledge that
BPD, a shared service provider, receives annual reviews in accordance with the Statement on
Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service
Organization. This review gives the CSB and other customer agencies independent verification
that BPD's controls, including disbursement controls, are in place and are operating effectively.
The most recent report is publically available at
https://arc.publicdebt.treas.gov/docs/OIG12Q68.pdf.
CSB is comfortable relying on the independent auditors' report that found BPD's controls are in
place and effective, but your office is recommending that CSB also receive and review the
results of BPD's testing for CSB improper payments on, at a minimum, a semiannual basis.
While we do not think this level of review is necessary, BPD will start providing us with their
testing results every six months.
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Finally, BPD asked that we clarify with you that the 1% metric mentioned in several places in
your draft report is a measure for all customer agencies and is not calculated at the individual
customer level. If you or your staff have any questions about this response, please feel free to
contact Anna Brown, Audit Liaison, at 202-261-7639.
Sincerely,
/ J
Rafael Moure-Eraso, Ph.D.
Chairperson
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Appendix B
Distribution
Chairperson and Chief Executive Officer, U.S. Chemical Safety and Hazard Investigation Board
Managing Director, U.S. Chemical Safety and Hazard Investigation Board
Deputy Managing Director, U.S. Chemical Safety and Hazard Investigation Board
Counselor to the Chair, U.S. Chemical Safety and Hazard Investigation Board
Director of Financial Operations, U.S. Chemical Safety and Hazard Investigation Board
Director of Administration, U.S. Chemical Safety and Hazard Investigation Board
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