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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Quick Reaction Report
Agreed-Upon Procedures
on EPA's Fiscal Year 2011
Third Quarter Financial
Statements
Report No. 11-2-0699
September 23, 2011

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Report Contributors:	Paul Curtis
Robert Smith
Guillermo Mejia
Demetrios Papakonstantinou
Abbreviations
EPA	U.S. Environmental Protection Agency
FY	Fiscal year
GL	General ledger
OCFO	Office of the Chief Financial Officer
OIG	Office of Inspector General
OMB	Office of Management and Budget
RGLTS	Report of General Ledger Balance by Treasury Symbol
SFFAS	Statement of Federal Financial Accounting Standards
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail:	OIG Hotiirie@epa.aov	write: EPA Inspector General Hotline
phone:	1-888-546-8740	1200 Pennsylvania Avenue NW
fax:	703-347-8330	Mailcode 8431P (Room N-4330)
online:	http://www.epa.aov/oig/hotline.htm	Washington, DC 20460

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*. U.S. Environmental Protection Agency	11-2-0699
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At a Glance
Catalyst for Improving the Environment
Why We Performed These
Agreed-Upon Procedures
We performed agreed-upon
procedures on the U.S.
Environmental Protection
Agency's (EPA's) Fiscal Year
(FY) 2011 Third Quarter
Financial Statements. We did
so to assist EPA in evaluating
whether its quarterly financial
statements were compiled
consistently with the Treasury
United States Standard General
Ledger Crosswalk, and to
identify significant fluctuations
in financial line item balances
from the previous year.
Background
Agencies submit unaudited
interim financial statements to
the Office of Management and
Budget 21 days after the end of
each of the first three quarters
of the fiscal year. Comparative
interim financial statements are
limited to a Balance Sheet,
Statement of Net Costs, and
Statement of Budgetary
Resources.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2011/
20110923-11 -2-0699.pdf
Agreed-Upon Procedures on EPA's Fiscal Year 2011
Third Quarter Financiai Statements
What We Found
We performed certain agreed-upon procedures on the Agency's FY 2011 Third
Quarter Financial Statements. We compared the statements with EPA's
crosswalk, recomputed them for mathematical accuracy, and compared them with
balances separately generated by us.
Below are the results of our performance of the agreed-upon procedures:
The financial statements generated by the Office of Inspector General
agreed with EPA's FY 2011 Third Quarter Financial Statements for the
Consolidated Balance Sheet, Consolidated Statements of Net Cost, Net
Cost by Goal, Consolidating Statement of Changes in Net Position
(including Earmarked Funds), Combined Statement of Budgetary
Resources, and Statement of Custodial Activity.
The Agency identified 13 fluctuations in its financial statements and
submitted them to the Office of Management and Budget. Our analysis
identified 12 additional significant variances.
We found that EPA's Treasury Symbols were in compliance with
Statement of Federal Financial Accounting Standards 27.
We found that the on-top entry to record child agency balances agreed
with the child trial balance support.
We found that the Agency properly reversed the FY 2010 on-tops in
FY 2011.
The elimination and consolidation entries appear reasonable and
complete.
No differences were found in the comparison of the FY 2011 beginning
balances to the FY 2010 ending balances.
The agreed-upon procedures do not constitute an audit of the quarterly financial
statements or any part thereof, the objective of which would be the expression of
an opinion on the quarterly financial statements or any part thereof.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
September 23, 2011
SUBJECT: Agreed-Upon Procedures on EPA's Fiscal Year 2011
Third Quarter Financial Statements
Report No. 11-2-0699
FROM: Arthur A. Elkins, Jr.
Inspector General
TO:
Barbara Bennett
Chief Financial Officer
The U.S. Environmental Protection Agency (EPA), Office of Inspector General, conducted these
agreed-upon procedures on EPA's Fiscal Year 2011 Third Quarter Financial Statements. This
report is provided solely to assist you in evaluating whether the Fiscal Year 2011 Third Quarter
Financial Statements were compiled in a manner consistent with the Treasury United States
Standard General Ledger Crosswalk, and to identify significant fluctuations in financial line
balances from the previous year.
Our report is intended solely for your information and use, and should not be used by those who
have not agreed to the procedures or taken responsibility for the sufficiency of the procedures for
their purposes. No written response to this report is required.
If you have any questions, please do not hesitate to contact Paul Curtis at (202) 566-2523 or
curtis.paul@,epa.gov, or Bob Smith at (202) 566-2531 or smith.robertl@,epa.gov.

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Agreed-Upon Procedures on EPA's Fiscal Year 2011
Third Quarter Financial Statements
11-2-0699
Table of Contents
Purpose	 1
Background	 1
Scope and Methodology	 1
Results of Agreed-Upon Procedures	 2
Status of Recommendations and Potential Monetary Benefits	 6
Appendices
A OIG-Identified Significant Fluctuations Between 06/30/11 and 06/30/10	 7
B Distribution	 9

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Purpose
We performed these agreed-upon procedures at the request of the Office of the Chief Financial
Officer (OCFO). We did so to assist the U.S. Environmental Protection Agency (EPA) in
evaluating whether its Fiscal Year (FY) 2011 Third Quarter Financial Statements were compiled
consistently with the Treasury United States Standard General Ledger Crosswalk and to identify
significant fluctuations in financial line item balances from the previous year.
Background
According to Office of Management and Budget (OMB) Circular A-136, Financial Reporting
Requirements, interim unaudited financial statements, without notes, are required on a quarterly
basis. Agencies submit unaudited interim financial statements to OMB 21 days after the end of
each of the first three quarters of the fiscal year. Comparative interim financial statements are
limited to a Balance Sheet, Statement of Net Cost, and Statement of Budgetary Resources.
Agencies should include management's explanation of significant variances in types or amounts
of assets, liabilities, costs, revenues, obligations, and outlays, along with the submitted
statements. The analysis should be only on the significant variances between the current quarter
and the same quarter from the prior year. Management has discretion on what constitutes a
significant variance.
EPA prepares consolidated comparative interim financial statements for submission to OMB. In
addition to the three required interim statements, EPA prepares and submits a comparative
Consolidated Statement of Net Cost by Goal, Consolidating Statement of Changes in Net
Position, and Statement of Custodial Activity.
Scope and Methodology
We performed certain agreed-upon procedures, enumerated below, on EPA's unaudited
consolidated FY 2011 Third Quarter Financial Statements. The adequacy of these procedures is
the OCFO's responsibility. Consequently, we make no representation regarding the sufficiency
of the procedures. The agreed-upon procedures do not constitute an audit of the quarterly
financial statements or any part thereof, the objective of which would be the expression of an
opinion on the quarterly financial statements or any part thereof. Accordingly, we do not express
such an opinion. Were we to perform additional procedures, other matters might come to our
attention that we would report to assist the OCFO.
This agreed-upon procedures engagement was conducted using applicable generally accepted
government auditing standards, which incorporate attestation standards issued by the American
Institute of Certified Public Accountants. These standards provide guidance for performing and
reporting the results of agreed-upon procedures.
We performed the agreed-upon procedures from August 8 to September 7, 2011. We based our
procedures on EPA's FY 2011 Third Quarter Financial Statements and supporting schedules,
general ledger (GL) balances, and manual on-top adjustments.
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1

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Results of Agreed-Upon Procedures
Procedure 1
Obtain EPA's third quarter financial statements, adjusted trial balance, on-top entries, and
support for the statements (including Earmarked Funds). Import the Report of General Ledger
Balance by Treasury Symbol (RGLTS); enter the Agency's on-top entries into ProSystem; and
generate an adjusted trial balance, Consolidated Balance Sheet, Consolidated Statement of Net
Cost, and Consolidating Statement of Changes in Net Position.
Results of Procedure 1
We obtained the Agency's third quarter financial statements, adjusted trial balance, on-
top entries, and support for the statements (including Earmarked Funds and Child Agency
Trial Balances). We imported the RGLTS and entered the Agency's on-top adjusting
entries to beginning balances into Prosystem to generate an adjusted trial balance,
Consolidated Balance Sheet, Consolidated Statement of Net Cost, and Consolidating
Statement of Changes in Net Position.
Procedure 1.a
Compare the ProSystem-generated adjusted trial balance to the Agency's adjusted trial balance
and note any differences.
Results of Procedure 1.a
We compared the Prosystem-generated adjusted trial balance based upon the Agency's
support to the Agency's adjusted trial balance. The Agency's adjusted trial balance for
the FY 2011 third quarter agreed with our Prosystem-adjusted trial balance amounts,
except for immaterial rounding differences. We verified that the statements complied
with and are in accordance with EPA's crosswalk.
Procedure 1.b
Compare the ProSystem-generated financial statements to EPA's financial statements and note
any differences.
Results of Procedure 1.b
We compared the Prosystem-generated financial statements to EPA's financial
statements (Consolidated Balance Sheet, Consolidated Statement of Net Cost, and
Consolidating Statement of Changes in Net Position). We did not note any differences.
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Procedure 1.c
Enter the FY 2011 and 2010 GL balances and on-top entries into Excel spreadsheets. Prepare the
Combined Statement of Budgetary Resources and Statement of Custodial Activity, compare to
the Agency's statements, and note any differences.
Results of Procedure 1.c
We entered the FY 2011 GL balances and on-top adjustment entries into an Excel
spreadsheet. We prepared and compared the Office of Inspector General (OIG)
Combined Statement of Budgetary Resources and Statement of Custodial Activity to the
Agency's statements.
Combined Statement of Budgetary Resources:
The Agency's balances for the FY 2011 third quarter agreed with our amounts for this
statement except for immaterial rounding differences.
Statement of Custodial Activity:
The Agency's balances for the FY 2011 third quarter agreed with our amounts for this
statement except for immaterial rounding differences.
Procedure 1.d
Extract GL ending balances for Earmarked Funds from the RGLTS using Interactive Data
Extraction Analysis and enter into ProSystem. Enter on-top entries, generate a Consolidating
Statement of Changes in Net Position-Earmarked Funds, and compare to EPA's Consolidating
Statement of Changes in Net Position-Earmarked Funds.
Results of Procedure 1.d
We extracted the GL ending balances from the RGLTS for Earmarked Funds, generated a
Consolidating Statement of Changes in Net Position-Earmarked Funds, and compared it
to EPA's Consolidating Statement of Changes-Net Position for Earmarked Funds. We
did not note any differences.
Procedure 1.e
Compare the Agency's third quarter Consolidated Statement of Net Cost by Goal to the
consolidated totals from the Consolidated Statement of Net Cost and note any differences.
Results of Procedure 1.e
We compared the Agency's third quarter Consolidated Statement of Net Cost by Goal to
the consolidated totals (total costs, total earned revenue, and net cost of operations) from
the Consolidated Statement of Net Cost. The amounts agreed.
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Procedure 1.f
Mathematically verify accuracy of the Consolidated All Other column on the Consolidating
Statement of Changes in Net Position in the Agency's financial statements.
Results of Procedure 1.f
We mathematically verified the accuracy of the Consolidated All Other column in the
Agency's financial statements on the Consolidating Statement of Changes in Net Position
in the Agency's financial statements.
Procedure 1.g
Identify significant fluctuations in balances by comparing current year balances to prior year
balances. (Criteria: Percentage change of 10 percent or more and dollar change exceeding
$50 million.)
Results of Procedure 1.g
The Agency identified 13 significant fluctuations in the Consolidated Balance Sheet,
Consolidated Statement of Net Cost, and Combined Statement of Budgetary Resources.
Our analysis identified eight additional significant fluctuations in these statements. We
also identified four significant fluctuations in the Consolidating Statement of Changes in
Net Position (a nonrequired statement). OIG- and Agency-identified fluctuations are
detailed in appendix A.
Procedure 2
Obtain and compare EPA's identified Earmarked Treasury Symbols to Federal Accounting
Standards Advisory Board Statement of Federal Financial Accounting Standards (SFFAS) 27,
Identifying and Reporting Earmarked Funds, for compliance.
Results of Procedure 2
We obtained and compared EPA's identified Earmarked Treasury Symbols to SFFAS 27.
We found that EPA's Treasury Symbols are in compliance with SFFAS 27. Earmarked
Treasury Symbols consist of the following trust funds: Hazardous Substance Superfund;
Federal Insecticide, Fungicide, and Rodenticide Act Fund; Revolving Fund for
Certification and Other Services; Licenses and Other Services; Environmental Services;
Exxon Valdez Settlement Fund; Pesticide Registration Improvement Act Fund; Oil Spill
Response Fund; Contributed Funds; and Leaking Underground Storage Tank Trust Fund.
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Procedure 3
Obtain and compare FY 2011 and 2010 Child Trial Balances to the child on-top entry.
Results of Procedure 3
We obtained and compared EPA's FY 2011 and 2010 Child Trial Balances to the child
on-top entry. We found that the on-top entry to record child agency balances agreed with
the child trial balance support.
Procedure 4
Compare the FY 2011 reversals to the FY 2010 on-top adjustments and EPA's Closing
Instructions to assess whether EPA followed the guidance in the instructions.
Results of Procedure 4
We compared the FY 2011 reversals to the FY 2010 on-top adjustments and to EPA's
closing instructions to assess whether EPA followed the guidance in the instructions. We
found that the Agency reversed the FY 2010 on-tops properly in FY 2011.
Procedure 5
Compare the RGLTS FY 2011 beginning balances to the FY 2010 ending balances and note any
differences.
Results of Procedure 5
We compared the RGLTS FY 2011 beginning balances to FY 2010 ending balances and
found no differences
Procedure 6
Review elimination and consolidation entries prepared by the Reporting and Analysis Staff for
reasonableness and completeness.
Results of Procedure 6
We reviewed elimination and consolidation entries prepared by the Reporting and
Analysis Staff. The elimination and consolidation entries appeared reasonable and
complete.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec.
No.
Page
No.
Subject
Status1
Planned
Completion
Action Official	Date
No recommendations
POTENTIAL MONETARY
BENEFITS (in $000s)
Claimed
Amount
Agreed To
Amount
1
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Appendix A
OIG-ldentified Significant Fluctuations
Between 06/30/11 and 06/30/10
(Dollars In thousands)
Notes for each table are as follows:
j	..... .
EPA-identified significant fluctuation also identified by OIG in the third quarter analysis reported to OMB.
2 OIG-identified significant fluctuation not identified by EPA in the third quarter analysis reported to OMB.
Consolidated Balance Sheet

FY 2011
FY 2010

Difference
%
ASSETS





Fund Balance With Treasury1
$14,697,168
$17,447,250

($2,750,082)
-15.76%
Accounts Receivable, Net1
$405,444
$352,427

$53,017
15.04%
Property, Plant and Equipment1
$933,104
$823,207

$109,897
13.35%






NET POSITION





Unexpended Appropriations - Other Funds1
$13,425,540
$16,353,716

($2,928,176)
-17.91%
Cumulative Results of Operations - Other Funds2
$661,080
$585,867

$75,213
12.84%
Source: FY 2011 Financial Statements provided by EPA.
Consolidating Statement of Changes in Net Position

FY 2011
All Other
Funds
FY 2010
All Other
Funds

Difference
%
CUMULATIVE RESULTS OF OPERATIONS





Budgetary Financing Resources





Trust Fund Appropriations2
($1,156,073)
($1,280,570)

$124,497
-9.72%






BUDGETARY FINANCING RESOURCES





Appropriations Received2
$8,583,237
$10,180,421

($1,597,184)
-15.69%
Source: FY 2011 Financial Statements provided by EPA.
Consolidating Statement of Changes in Net Position

FY 2011
Consolidated
Earmarked
Funds
FY 2010
Consolidated
Earmarked
Funds

Difference
%
CUMULATIVE RESULTS OF OPERATIONS





Budgetary Financing Resources





Trust Fund Appropriations2
$1,156,073
$1,280,570

($124,497)
-9.72%
Source: FY 2011 Financial Statements provided by EPA.
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Combined Statement of Budgetary Resources

FY 2011
FY 2010

Difference
%
BUDGETARY RESOURCES





Recoveries of Prior Year Unpaid Obligations2
$205,369
$277,201

($71,832)
-25.91%
Appropriation1
$8,658,352
$10,255,083

($1,596,731)
-15.57%
Collected1
$436,415
$741,526

($305,111)
-41.15%
Advance Received1
$85,831
$293,563

($207,732)
-70.76%
Without Advance from Federal Sources1
($24,680)
($99,295)

$74,615
-75.14%
Anticipated for Rest of Year, Without Advances1
$185,190
$277,346

($92,156)
-33.23%
Permanently Not Available1
($157,556)
($41,500)

($116,056)
279.65%






STATUS OF BUDGETARY RESOURCES





Reimbursable2
$501,800
$451,208

$50,592
11.21%
Apportioned1
$8,548,673
$9,587,875

($1,039,202)
-10.84%
Unobligated Balances Not Available2
$185,731
$433,916

($248,185)
-57.20%






CHANGE IN OBLIGATED BALANCE





Unpaid Obligations, Brought Forward, October 11
$13,872,909
$15,788,389

($1,915,480)
-12.13%
Less: Recoveries of Prior Year Unpaid Obligations,
Actual2
($205,369)
($277,201)

$71,832
-25.91%
Change in Uncollected Customer Payments from
Federal Sources2
$4,494
$69,953

($65,459)
-93.58%
Unpaid Obligations2
$10,304,328
$12,232,169

($1,927,841)
-15.76%
Less: Uncollected Customer Payments from Federal
Sources2
($435,462)
($503,871)

$68,409
-13.58%






NET OUTLAYS





Less: Offsetting Collections1
($545,191)
($1,062,830)

$517,639
-48.70%
Source: FY 2011 Financial Statements provided by EPA.
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Appendix B
Distribution
Chief Financial Officer
Deputy Chief Financial Officer
Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
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