*	' U.S. Environmental Protection Agency	12-P-0311
 JUL* \ Office of Inspector General	March 1 2012
s v\|/v S
At a Glance
Why We Did This Review
EPA Can Improve Its Improper Payments Reporting
Office of Management and
Budget (OMB) guidance for
implementation of the 2010
Improper Payments
Elimination and Recovery Act
(IPERA) specifies
responsibilities of agencies and
inspectors general. Agencies
are required, among other
things, to report on improper
payments, and inspectors
general are required to
determine whether the agency
is in compliance with IPERA.
Each year, the federal
government wastes billions of
taxpayer dollars on improper
payments to individuals,
organizations, and contractors.
Such payments can be made in
the wrong amount, to the
wrong entity, or for the wrong
reason. Despite efforts to
reduce improper payments, all
federal agencies reported an
estimated $125 billion in
improper payments for fiscal
year (FY) 2010.
What We Found
The U.S. Environmental Protection Agency (EPA) complied with IPERA in that
it reported all required information on improper payments, but EPA can improve
the accuracy and completeness of the information. In the Fiscal Year 2011
Agency Financial Report (AFR), EPA reported the results of its efforts to
recapture improper payments. EPA is taking actions to improve internal controls
in preventing, reducing, and recapturing improper payments.
EPA did not report all improper payments identified in audits and reviews of
grants to tribes, state and local governments, and universities in the FY 2011
AFR. IPERA requires that agencies report on all actions to detect and recover
improper payments. EPA did not update its detection and reporting procedures to
identify all grant improper payments as required by IPERA. As a result, EPA
understated grant improper payments by thousands of dollars. The Office of
Grants and Debarment has developed draft guidance and plans to report all grant
improper payments in the FY 2012 AFR. If it does not do so, grant improper
payments will continue to be understated.
The Agency is not reporting discounts not taken as improper payments.
According to IPERA, any payment that does not account for credit for applicable
discounts is considered an improper payment. In EPA's opinion, there are valid
reasons why certain discounts cannot be taken. In such cases, discounts should be
considered "non-applicable" for improper payments reporting purposes.
EPA did not correctly calculate improper payments reported in the FY 2011
AFR. OMB Memorandum M-l 1-16 requires inspectors general to evaluate the
accuracy and completeness of agency reporting. Errors occurred because EPA's
Office of the Chief Financial Officer did not issue guidance to ensure the
accuracy of improper payment reporting. As a result, EPA understated its error
rate for State Revolving Fund programs and made errors in its consolidation of
What We Recommend
For further information, contact
our Office of Congressional and
Public Affairs at (202) 566-2391.
The full report is at:
We recommend that EPA issue guidance requiring that the results of all grant
improper payment determinations and recaptures, as well as discounts not taken
as improper payments, be reported. We also recommend that EPA issue guidance
to program offices to ensure the quality of reported information. EPA agreed with
three of the four recommendations; it did not agree with the recommendation that
EPA report discounts not taken as improper payments. That recommendation is
unresolved with resolution efforts in progress.