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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
08-1-0032
November 15, 2007
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act, which
requires the U.S. Environmental
Protection Agency (EPA) to
prepare, and the Office of
Inspector General to audit, the
Agency's financial statements
each year. Our primary
objectives were to determine
whether:
•	EPA's consolidated financial
statements were fairly stated
in all material respects.
•	EPA's internal controls over
financial reporting were in
place.
•	EPA management complied
with applicable laws and
regulations.
Background
The requirement for audited
financial statements was enacted
to help bring about improvements
in agencies' financial
management practices, systems,
and controls so that timely,
reliable information is available
for managing federal programs.
For further information, contact
our Office of Congressional and
Public Liaison at (202) 566-2391.
To view the full report, click on the
following link:
www.epa.qov/oiq/reports/2008/
20071115-08-1 -0032.pdf
Catalyst for Improving the Environment
Audit of EPA's Fiscal 2007 and 2006 (Restated)
Consolidated Financial Statements
EPA Receives Unqualified Opinion
We rendered an unqualified, or clean, opinion on EPA's Consolidated Financial
Statements for fiscal 2007 and 2006 (restated), meaning that they were fairly
presented and free of material misstatement.
Internal Control Material Weakness, Significant Deficiencies Noted
We noted one material weakness with EPA's Implementation of the "Currently
Not Collectible" policy for accounts receivable that caused a Material
Understatement of Asset Value and led to the restatement of the fiscal 2006
financial statements. Further, we noted the following six significant deficiencies:
EPA did not properly compute an allowance for doubtful accounts.
EPA needs to improve internal controls in recording and accounting for
accounts receivable.
Key applications do not meet federal and EPA information security
requirements.
Access and security practices over critical information technology assets
need improvement.
EPA needs to improve controls over the Integrated Financial Management
System Suspense Table.
EPA did not maintain adequate documentation for obligating accounting
adjustments.
Noncompliance With Laws and Regulations Noted
EPA is in noncompliance with regulations relating to reconciling
intragovernmental transactions.
Federal Financial Management Improvement Act Noncompliance
We identified two instances of substantial noncompliance under the Federal
Financial Management Improvement Act. These noncompliances are also
significant deficiencies. Two critical applications did not meet federal and EPA
information technology security requirements. Also, key controls associated
with certain servers did not comply with federal guidelines.
Agency Comments and Office of Inspector General Evaluation
In a memorandum received on November 9, 2007, from the Chief Financial
Officer, the Agency recognized the issues raised and indicated it will take
corrective actions.

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