OFFICE OF INSPECTOR GENERAL
AUDIT REPORT
FINANCIAL MANAGEMENT
AUDIT OF EPA'S FISCAL 2000
FINANCIAL STATEMENTS
Audit Report 2001-1-00107
FEBRUARY 28, 2001
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Inspector General Divisions
Conducting the Audit:
Lead Division:
Financial Audit Division
Washington, D.C.
Assist Divisions:
Mid-Atlantic Audit Division
Philadelphia, Pennsylvania
Southern Audit Division
Atlanta, Georgia
Research Triangle Park, North Carolina
Northern Audit Division
Chicago, Illinois
Cincinnati, Ohio
Eastern Audit Division
New York, New York
Central Audit Division
Kansas City, Kansas
Dallas, Texas
Western Audit Division
San Francisco, California
Information Technology Audits Staff
Washington, D.C.
Regional and Program Offices
Involved:
Agency-wide
Photo of Grand Teton National Park
by Roland Cyr
Financial Audit Division
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February 28, 2001
MEMORANDUM
SUBJECT: Audit Report on EPA's Fiscal 2000 Financial Statements
FROM: Edward Gekosky /signed/
Divisional Inspector General
Financial Audit Division (2422)
TO: Michael W.S. Ryan
Deputy Chief Financial Officer (2710A)
Dave O'Connor
Acting Assistant Administrator for
Administration and Resources Management (3101 A)
Attached is our audit report on the Agency's fiscal 2000 financial statements. The report
recognizes that the Agency significantly improved the preparation process for the fiscal 2000
financial statements compared to prior year efforts. I am happy to say that the extensive effort
resulted in an unqualified audit opinion.
Our work shows, however, that further improvements are needed in the Agency's financial
statement preparation processes to ensure that accurate and timely information is available for
external reporting purposes, as well as on an ongoing basis for the day-to-day management of
the Agency's environmental programs. Of even greater significance, the report reflects our
view that the Agency is not in substantial compliance with the managerial cost accounting
standard, and your opposing view. The audit report also contains other findings that describe
issues the Office of Inspector General has identified and corrective actions the OIG
recommends.
This audit report represents the opinion of the OIG, and the findings contained in this
report do not necessarily represent the final EPA position. Final determinations on matters in
this audit report will be made by EPA managers in accordance with established EPA audit
resolution procedures. Accordingly, the findings described in this audit report are not binding
upon EPA in any enforcement proceeding brought by EPA or the Department of Justice. We
have no objections to the further release of this report to the public.
In this particular audit, the OIG did not measure the audited offices' performance against
the standards established by the National Contingency Plan (NCP). The findings contained in
this audit report are not binding in any enforcement proceeding brought by EPA or the
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Department of Justice under Section 107 of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) to recover costs incurred not inconsistent with
the NCP.
In accordance with EPA Order 2750, Audit Management Process, the primary action
official is required to provide us with a written response to the audit report within 90 days of
the final audit report date. Since this report deals primarily with financial management issues,
we are requesting the Deputy Chief Financial Officer, as the primary action official, take the
lead in coordinating and providing us a written response to this report. The response should
address all issues and recommendations contained in Attachments 1 and 2. For corrective
actions planned but not completed by the response date, reference to specific milestone dates
will assist us in deciding whether or not to close this report in our audit tracking system.
Should you or your staff have any questions about the report, please contact me at
260-1072, or either of the following staff: Paul Curtis at 260-8442 or Alan Bogus at
260-4943.
Attachment
cc: See Appendix IV, Report Distribution List
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Executive Summary
Introduction
We performed this audit in accordance with the Government Management Reform Act, which
requires the Environmental Protection Agency (EPA or the Agency) to prepare, and the
Office of Inspector General (OIG) to audit, the Agency=s financial statements each year. 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.
Objectives
Our primary objectives were to determine whether:
EPA=s financial statements were fairly presented in all material respects in conformity with
generally accepted accounting principles;
EPA's internal control over financial reporting related to the financial statements were in
place; and
EPA management complied with applicable laws and regulations which, if not followed,
could have a direct and material effect on the financial statements.
Results in Brief
Opinions on EPA's Fiscal 2000 Financial Statements
In our opinion, the consolidating financial statements present fairly the consolidated and
individual assets, liabilities, net position, net cost, net cost by goal, changes in net position,
budgetary resources, reconciliation of net cost to budgetary obligations, and custodial activity
of the U.S. Environmental Protection Agency and its subsidiary funds, the Superfund Trust
Fund and All Other Appropriated Funds, as of and for the year ended September 30, 2000, in
accordance with generally accepted accounting principles.
Review of EPA's Required Supplemental Stewardship
Information, Required Supplemental Information, and
Management Discussion and Analysis
We inquired of EPA's management as to their methods of preparing its Required
Supplemental Stewardship Information (RSSI), Required Supplemental Information, and
Management Discussion and Analysis, and reviewed this information for consistency with
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the principal financial statements. However, our audit was not designed to express, and we
are not expressing, an opinion on this information.
We did not identify any material inconsistencies between the information presented in EPA's
financial statements and the information presented in EPA's RSSI, Required Supplemental
Information, and Management Discussion and Analysis. The January 7, 2000, technical
amendments to OMB Bulletin No. 97-01, Form and Content of Agency Financial Statements,
require agencies to report, as Required Supplemental Information, their intra-governmental
assets and liabilities by federal trading partner. We did find that, through no fault of EPA,
other Federal agencies were unable to reconcile EPA's reported transactions with their
records. We note that this is a government-wide issue that needs to be resolved.
Evaluation of Internal Controls
The objective of our audit was not to provide assurance on internal controls, accordingly, we
do not express an opinion on internal controls. Material weaknesses are situations where
internal controls do not reduce, to a relatively low level, the risk that errors, fraud or
noncompliance in amounts material to the financial statements may occur and not be detected
in a timely manner by employees in the normal course of performing their assigned functions.
In evaluating the Agency's internal controls, we noted certain matters discussed below
involving the internal control and its operation that we consider to be reportable conditions.
However, none of the reportable conditions is believed to be a material weakness.
In evaluating the Agency's internal control structure, we identified seven reportable conditions
in the following areas which are detailed further in Attachment 1:
Process for Preparing Financial Statements
Accounting for Capitalized Property
EPA's Process for Reviewing Unliquidated Obligations
EPA's Interagency Agreement Invoice Approval Process
Documentation and Approval of Journal Vouchers
Timely Repayment of Asbestos Loan Debt to Treasury
Automated Application Processing Controls for the IFMS
Tests of Compliance with Laws and Regulations
As part of obtaining reasonable assurance about whether the Agency's financial statements
were free of material misstatement, we performed tests of its compliance with certain
provisions of laws and regulations, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. Providing an opinion on
compliance with certain provisions of laws and regulations was not an objective of our audit.
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Accordingly, we do not express such an opinion.
We did not identify any instances of noncompliance with laws and regulations that would
result in material misstatements to the audited financial statements. However, we did note the
following noncompliance issues.
Compliance with the Federal Financial Management Improvement Act
The Federal Financial Management Improvement Act (FFMIA) requires that, as a part of our
annual financial statement audit, we determine whether EPA's financial management systems
substantially comply with Federal financial management system requirements, applicable
accounting standards, and the Standard General Ledger at the transaction level.
We identified the following instance of substantial (as defined by OMB) noncompliance with
FFMIA requirements, and two other noncompliances with FFMIA which are discussed further
in Attachment 2, Compliance with Laws and Regulations.
The Agency was not in substantial compliance with Statement of Federal Financial
Accounting Standards (SFFAS) No. 4 that requires EPA to: (1) determine the full costs
of its activities, (2) accumulate and report cost of activities on a regular basis for
management information purposes, and (3) use appropriate costing methodologies to
accumulate and assign costs to outputs.
Reconciliation of intra-governmental transactions and financial system security were
reported as noncompliances, but they do not meet the OMB criteria for substantial
noncompliances.
Other Noncompliance Issue with Laws and Regulations
EPA is not complying with appropriation law when making disbursements for grants funded
with more than one appropriation. Disbursements for these grants are made using the oldest
available funding (appropriation) first, which may or may not be the appropriation that
benefitted from the work performed. Thus, EPA is not complying with Title 31 U.S.C. 1301
which requires EPA to match disbursements to the benefitting appropriation.
Agency Comments and OIG Evaluation
In a memorandum dated February 15, 2001, the Acting Comptroller responded to our draft
report. The OCFO generally concurred with our recommendations and has completed or
planned a number of corrective actions to implement most of our recommendations.
However, the OCFO disagreed with our classifying the process for preparing financial
statements as a reportable condition. The OCFO believed that the specific examples depicted
are few in number and, in some cases, reflect differences of professional judgement on
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presentation rather than errors and did not believe the occurrences were serious enough to
warrant a reportable condition on the preparation process. Also, the OCFO disagreed with
our conclusion that the Agency is in substantial noncompliance with the requirements of
SFFAS No. 4, Managerial Cost Accounting Concepts and Standards for the Federal
Government. The OCFO believes that the Agency is in substantial compliance with the
managerial cost accounting standard and therefore did not agree with our recommendations
for corrective action and did not believe that a remediation plan under FFMIA would be
required.
The OIG has not changed the classification of the process for preparing financial statements as
a reportable condition or our conclusion on reporting a substantial noncompliance with the
managerial cost accounting standard. The rationale for our conclusions and a summary of the
Agency comments is included in the appropriate sections of this report. The Agency's
complete response is included as Appendix II to this report.
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Table of Contents
Page
Executive Summary i
Inspector General's Report on EPA's
Fiscal 2000 Financial Statements 1
Review of EPA's Required Supplemental Stewardship Information,
Required Supplemental Information, and Management Discussion
and Analysis 2
Evaluation of Internal Controls 2
Tests of Compliance with Laws and Regulations 7
Prior Audit Coverage 8
Agency Comments and OIG Evaluation 9
Attachments
1. Reportable Conditions
2. Compliance with Laws and Regulations
Substantial Noncompliance with
Federal Financial Management Improvement Act
Other Noncompliance Issues with FFMIA
3. Status of Prior Audit Report Recommendations
Appendices
I EPA's Fiscal 2000 Financial Statements
II Agency's Response to the Draft Report
III Abbreviations
IV Report Distribution List
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Inspector General's Report on EPA's
Fiscal 2000 Financial Statements
The Administrator
U.S. Environmental Protection Agency
We have audited the consolidating balance sheet of the U.S. Environmental Protection
Agency and its subsidiary funds, the Superfund Trust Fund (Superfund) and All Other
Appropriated Funds (All Other) as of September 30, 2000, and the related consolidating
statements of net cost and changes in net position, consolidated statement of net cost by goal,
combined statement of budgetary resources, combined statement of financing, and
consolidated statement of custodial activity for the year then ended. These financial
statements are the responsibility of EPA's management. Our responsibility is to express an
opinion on these financial statements based upon our audit.
We conducted our audit in accordance with generally accepted auditing standards; the
standards applicable to financial statements contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and Office of Management and
Budget Bulletin 01-02, Audit Requirements for Federal Financial Statements. These
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
The financial statements include expense of grantees, contractors and other Federal agencies.
Our audit work pertaining to these expenses included testing only within EPA. Audits of
grants, contracts and interagency agreements performed at a later date may disclose
questioned costs of an undeterminable amount at this time. In addition, the United States
Treasury collects and accounts for excise taxes that are deposited into the Superfund and
Leaking Underground Storage Tank Trust Funds.1 The United States Treasury is also
responsible for investing amounts not needed for current disbursements and transferring funds
to EPA as authorized in legislation. Since the United States Treasury, and not EPA, is
responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General (OIG) is not independent with respect to amounts pertaining
to its operations that are presented in the financial statements. The amounts included for the
l The Leaking Underground Storage Tank Trust Fund is included in the All Other Appropriated Funds
column of the financial statements.
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OIG are not material to EPA's financial statements. The OIG is organizationally independent
with respect to all other assets of the Agency's activities.
In our opinion, the consolidating financial statements present fairly the consolidated and
individual assets, liabilities, net position, net cost, net cost by goal, changes in net position,
budgetary resources, reconciliation of net cost to budgetary obligations, and custodial activity
of the U.S. Environmental Protection Agency and its subsidiary funds, the Superfund Trust
Fund and All Other Appropriated Funds, as of and for the year ended September 30, 2000, in
accordance with generally accepted accounting principles.
Review of EPA's Required Supplemental Stewardship Information, Required
Supplemental Information, and Management Discussion and Analysis
We inquired of EPA's management as to their methods of preparing its RSSI, Required
Supplemental Information, and Management Discussion and Analysis, and reviewed this
information for consistency with the financial statements. However, our audit was not
designed to express an opinion, and accordingly, we do not express an opinion.
We did not identify any material inconsistencies between the information presented in EPA's
financial statements and the information presented in EPA's RSSI, Required Supplemental
Information, and Management Discussion and Analysis. The January 7, 2000, technical
amendments to OMB Bulletin No. 97-01, Form and Content of Agency Financial Statements,
require agencies to report, as Required Supplemental Information, their intra-governmental
assets and liabilities by federal trading partner. We did find that, through no fault of EPA,
other Federal agencies were unable to reconcile EPA's reported transactions with their
records (see Attachment 2 for additional details on this issue).
Evaluation of Internal Controls
As defined by OMB, internal control, as it relates to the financial statements, is a process,
effected by the Agency's management and other personnel, designed to provide reasonable
assurance that the following objectives are met:
Reliability of financial reporting - Transactions are properly recorded, processed, and
summarized to permit the timely and reliable preparation of the financial statements and
RSSI in accordance with generally accepted accounting principles; and assets are
safeguarded against loss from unauthorized acquisition, use, or disposition.
Reliability of performance reporting - Transactions and other data that support
reported performance measures are properly recorded, processed, and summarized to
permit the preparation of performance information in accordance with criteria stated by
management.
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Compliance with applicable laws and regulations - Transactions are executed in
accordance with laws governing the use of budget authority and other laws and
regulations that could have a direct and material effect on the financial statements or
RSSI; and any other laws, regulations, and government-wide policies identified by OMB.
In planning and performing our audit, we considered EPA's internal controls over financial
reporting by obtaining an understanding of the Agency's internal controls, determined whether
internal controls had been placed in operation, assessed control risk, and performed tests of
controls in order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements. We limited our internal control testing to those controls
necessary to achieve the objectives described in OMB Bulletin No. 01-02, Audit Requirements
for Federal Financial Statements, as supplemented by an OMB memorandum dated January
4, 2001, Revised Implementation Guidance for the Federal Financial Management
Improvement Act. We did not test all internal controls relevant to operating objectives as
broadly defined by the Federal Managers' Financial Integrity Act of 1982, such as those
controls relevant to ensuring efficient operations. The objective of our audit was not to
provide assurance on internal controls, and accordingly, we do not express an opinion on
internal controls.
Our consideration of the internal controls over financial reporting would not necessarily
disclose all matters in the internal control over financial reporting that might be reportable
conditions. Under standards issued by the American Institute of Certified Public Accountants,
reportable conditions are matters coming to our attention relating to significant deficiencies in
the design or operation of the internal control that, in our judgment, could adversely affect the
Agency's ability to record, process, summarize, and report financial data consistent with the
assertions by management in the financial statements. Material weaknesses are reportable
conditions in which the design or operation of one or more of the internal control components
does not reduce to a relatively low level the risk that misstatements in amounts that would be
material in relation to the financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing their assigned
functions. Because of inherent limitations in internal controls, misstatements, losses, or
noncompliance may nevertheless occur and not be detected. However, we noted certain
matters discussed below involving the internal control and its operation that we consider to be
reportable conditions. However, none of the reportable conditions is believed to be a material
weakness.
In addition, we considered EPA's internal control over the RSSI by obtaining an
understanding of the Agency's internal controls, determined whether these internal controls
had been placed in operation, assessed control risk, and performed tests of controls as
required by OMB Bulletin No. 01-02. Our procedures were not designed to provide
assurance on these internal controls, and accordingly, we do not express an opinion on such
controls.
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Finally, with respect to internal control related to performance measures presented in EPA's
Fiscal Year 2000 Annual Report, Section 1, Overview and Analysis (which addresses
requirements for a Management's Discussion and Analysis), we obtained an understanding of
the design of significant internal controls relating to the existence and completeness assertions,
as required by OMB Bulletin No. 01-02. Our procedures were not designed to provide
assurance on internal control over reported performance measures, and accordingly, we do
not express an opinion on such controls.
Reportable Conditions
Reportable conditions are internal control weakness matters coming to the auditor's attention
that, in the auditor's judgment, should be communicated because they represent significant
deficiencies in the design or operation of internal control that could adversely affect the
organization's ability to meet the OMB objectives for financial reporting discussed above.
In evaluating the Agency's internal control structure, we identified seven reportable conditions
in the following areas:
Process for Preparing Financial Statements
The Agency significantly improved the preparation process for its fiscal 2000 financial
statements compared to prior year submissions. However, the financial statement preparation
process did not provide the needed result, an unqualified audit opinion, without difficulty.
Problems were encountered by the Agency in fairly presenting grant accrual amounts.
Additionally, some other material items were identified by auditors and then jointly resolved
so they would not affect the audit opinion.
Accounting for Capitalized Property
For a number of years, we have reported that EPA needs to make improvements in its
accounting for property. During fiscal 2000, although the Agency continued to take action to
correct weaknesses in this area, we determined that the Agency needs to continue its efforts to
improve its accounting for property. Specifically, we found that:
property was not timely or accurately entered in the Fixed Assets Subsystem (FAS);2
there were weaknesses in the Agency's process for reconciling property information in
the Integrated Financial Management System (IFMS) with that in FAS;
financial statement balances for contractor-held property were incorrect;
contractor-held property transferred was misclassified; and
real property values were not accurately recorded.
2In late fiscal 1997, the Agency implemented FAS, the Agency's property accountability system, which is
integrated with IFMS, the Agency's accounting system.
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EPA's Process for Reviewing Unliquidated Obligations
EPA did not timely identify and deobligate inactive unliquidated obligations during its annual
review. As a result of weaknesses in the review process, the Agency had to perform an
additional "special review" to obtain a more accurate accounting of its unliquidated
obligations. This special review identified $26.5 million of open unliquidated obligations that
should have been deobligated by September 30, 2000.
EPA's Interagency Agreement Invoice Approval Process
Some EPA project officers did not fulfill oversight duties related to reviewing and approving
Interagency Agreement (IAG) invoices. We noted deficiencies in this area in prior reports,
and we continue to find instances where project offices at EPA's Headquarters and Cincinnati
Financial Management Center (CFMC) did not timely approve IAG invoices because they did
not receive the supporting cost information from other Federal agencies to substantiate
invoice amounts. Additionally, CFMC continued to use the "first-in first-out" accounting
basis (charging the first line of accounting) to allocate costs charged on IAGs with multiple
goals/subobjectives, which provides limited assurance that costs were charged to the
appropriate goals/subobjectives.
Documentation and Approval of Journal Vouchers
Journal and standard vouchers prepared by the Financial Reports and Analysis Branch, OCFO,
were not always properly documented and approved. While most of the entries appear to be
correct, we are concerned about the vulnerability associated with executing transactions
without proper supervisory review and approval.
Timely Repayment of Asbestos Loan Debt to Treasury
The Las Vegas Financial Management Center (LVFMC) has not made timely repayments of
the Agency's asbestos loan debt to the Department of Treasury. EPA collects payments from
loan recipient schools each year but has not made regular repayments to Treasury. The
balance, approximately $6.8 million, represents repayments of principal EPA has collected
since fiscal 1997 but has yet to repay, less the amounts paid to Treasury for annual interest.
Automated Application Processing Controls
We continue to be unable to assess the adequacy of the automated internal control structure
as it relates to automated input, processing, and output controls for IFMS. IFMS applications
have a direct and material impact on the Agency's financial statements. Therefore, an
assessment of each application's automated input, processing, and output controls, as well as
compensating manual controls, is necessary to determine the reliance we can place on the
financial statements.
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Attachment 1 describes each of the above reportable conditions in more detail and provides
our recommendations and Agency comments on actions that should be taken to correct these
conditions. We will also be reporting other less significant matters involving the internal
control structure and its operation in a separate management letter.
Comparison of EPA'S FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, requires us
to compare material weaknesses disclosed during the audit with those material weaknesses
reported in the Agency's Federal Managers: Financial Integrity Act (FMFIA or Integrity Act)
report that relate to the financial statements and identify material weaknesses disclosed by
audit that were not reported in the Agency's FMFIA report. This year, for the first time, EPA
will report on Integrity Act decisions in EPA's Fiscal Year 2000 Annual Report. For a
discussion on Agency reported Integrity Act material weaknesses and corrective action
strategy, please refer to EPA's Fiscal Year 2000 Annual Report, Section III, FY 2000
Management Accomplishments and Challenges.
For reporting under FMFIA, material weaknesses are defined differently than they are defined
for financial statement audit purposes. OMB Circular A-123, Management Accountability
and Control, defines a material weakness as a deficiency that the Agency head determines to
be significant enough to be reported outside the Agency.
For financial statement audit purposes, OMB defines material weaknesses in internal control
as reportable conditions in which the design or operation of the internal control does not
reduce to a relatively low level the risk that errors, fraud, or noncompliance in amounts that
would be material in relation to the financial statements or RSSI being audited, or material to
a performance measure or aggregation of related performance measures, may occur and not
be detected within a timely period by employees in the normal course of performing their
assigned functions. Our audit did not disclose any material weakness that was not reported by
the Agency as part of the Integrity Act process.
As a part of the fiscal 2000 Integrity Act process, the Agency reported the following material
weaknesses that relate to the Agency=s financial statements:
Information System Security - The Office of Environmental Information (OEI)
recognizes that past improvements to its information security program have not resulted in
a complete, comprehensive information security program. Therefore, this office is
expanding its existing material and Agency weaknesses, Information Systems Security
Plans and Cyber Security, to address all security-related deficiencies. Corrective actions
are expected to be completed in fiscal 2002.
Construction Grants Close Out - In 1992, EPA designated this area as an Agency
weakness, and in 1996 reclassified it as a material weakness due to a concern that lack of
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Agency-wide attention might result in the loss of resources to properly complete the
program. Corrective actions are expected to be completed in fiscal 2002.
Tests of Compliance with Laws and Regulations
EPA management is responsible for complying with laws and regulations applicable to the
Agency. As part of obtaining reasonable assurance about whether the Agency's financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws and regulations, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts, and certain other laws and
regulations specified in OMB Bulletin No. 01-02, Audit Requirements for Federal Financial
Statements, as supplemented by an OMB Memorandum dated January 4, 2001, Revised
Implementation Guidance for the Federal Financial Management Improvement Act. The
OMB guidance requires that we evaluate compliance with Federal financial management
system requirements, including the requirements referred to in the FFMIA of 1996. We
limited our tests of compliance to these provisions and did not test compliance with all laws
and regulations applicable to EPA.
Providing an opinion on compliance with certain provisions of laws and regulations was not
an objective of our audit and, accordingly, we do not express such an opinion. There are a
number of ongoing investigations involving EPA's grantees and contractors that could reveal
violations of laws and regulations, but a determination about these cases has not been made.
None of the noncompliances discussed below would result in material misstatements to the
audited financial statements.
Federal Financial Management Improvement Act Noncompliance
Under FFMIA, we are required to report whether the Agency's financial management systems
substantially comply with the Federal financial management systems requirements, applicable
Federal accounting standards, and the United States Government Standard General Ledger at
the transaction level. OMB Bulletin No. 01-02, as supplemented by an OMB memorandum
dated January 4, 2001, Revised Implementation Guidance for the Federal Financial
Management Improvement Act, substantially changed the guidance for determining whether
or not an Agency substantially complied with the Federal financial management systems
requirements, applicable Federal accounting standards, and the United States Government
Standard General Ledger at the transaction level. The document is intended to focus Agency
and auditor activities on the essential requirements of FFMIA. The document lists the specific
requirements of FFMIA, as well as factors to consider in reviewing systems and for
determining substantial compliance with FFMIA. It also provides guidance to Agency heads
for developing corrective action plans to bring an Agency into compliance with FFMIA. To
meet the FFMIA requirement, we performed tests of compliance with
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FFMIA section 803(a) requirements and used the OMB guidance, revised on January 4, 2001,
for determining substantial noncompliance with FFMIA.
The results of our tests disclosed one instance where the Agency's financial management
systems did not substantially comply with the applicable Federal accounting standard. We
identified a substantial noncompliance with the SFFAS No. 4 accounting standard for
managerial cost accounting which is described more fully in Attachment 2.
In addition to the above instance of substantial noncompliance, we identified two other
noncompliances related to reconciliation of intra-governmental transactions and financial
system security. However, these noncompliances do not meet the definition of a substantial
noncompliance as described in OMB guidance.
Attachment 2 provides additional details and provides our recommendations and Agency
comments on actions that should be taken on these matters.
Appropriation Law Noncompliance
Disbursements for Multiple Appropriation Grants. EPA is not complying with
appropriation law when making disbursements for grants funded with more than one
appropriation. Disbursements for these grants are made using the oldest available funding
(appropriation) first which may or may not be the appropriation that benefitted from the work
performed. Thus, EPA is not complying with Title 31 U.S.C. 1301 which requires EPA to
match disbursements to the benefitting appropriation. A January 13, 2000, Office of General
Counsel decision concluded that making disbursements for multiple appropriation grants using
the oldest available funding first violates Title 31 U.S.C. 1301 and is an inappropriate method
of charging, except in limited situations. This issue was first reported in our fiscal 1994 audit.
See Attachment 3 for a description of the Agency's corrective action plans and milestones.
Prior Audit Coverage
During previous financial or financial-related audits, weaknesses that impacted our audit
objectives were reported in the following areas:
The Agency's process for preparing financial statements, including the Statements of
Budgetary Resources, Financing, and Net Cost.
• Complying with FFMIA requirements.
Reviewing unliquidated obligations.
Reporting intra-governmental assets and liabilities by Federal trading partner.
Accounting for the cost to achieve goals and complying with SFFAS No. 4,
Managerial Cost Accounting Concepts and Standards for the Federal Government.
Accounting for and managing Superfund accounts receivable.
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Accounting for and controlling property.
Recording accrued liabilities for grants.
Approving payments for IAGs.
• Documenting EPA's IFMS.
Complying with Federal financial management system security requirements.
Accounting for payments for grants funded from multiple appropriations.
Identifying and allocating indirect costs.
Reviewing Agency user fees.
Allocating costs to the Superfund Trust Fund.
Attachment 3, Status of Prior Audit Report Recommendations, summarizes the current status
of corrective actions taken on prior audit report recommendations in each of these areas.
The Chief Financial Officer, as the Agency=s Audit Follow-up Official, oversees EPA=s follow-
up on audit findings and recommendations, including resolution and implementation of
corrective actions. For these prior audits, final action occurs when the Agency completes
implementation of the corrective actions to remedy weaknesses identified in the audit.
We acknowledge that many actions and initiatives have been taken to resolve prior financial
statement audit issues. We also recognize that the issues we have reported are complex, and
require extensive, long-term corrective actions and coordination by the Chief Financial Officer
with various Assistant Administrators, Regional Administrators, and Office Directors before
they can be completely resolved. A number of issues have been unresolved for a number of
years.
In response to our inquiries on actions taken by the OCFO to resolve long outstanding audit
recommendations, a representative informed us of a number of efforts that were conducted in
fiscal 2000. The OCFO continued efforts to stress the importance of timely and effective
audit management practices. The OIG and OCFO held a joint meeting with the Audit Follow-
up Coordinators to: (1) reinforce their roles and responsibilities, (2) review expectations for
audit follow-up, as laid out in EPA Order 2750, Audit Management Process, and (3)
reemphasize the importance to Audit Follow-up Coordinators in keeping their managers and
the OIG informed of progress.
The OIG will continue to work with the OCFO in helping to resolve all audit issues resulting
from our financial statement audits.
Agency Comments and OIG Evaluation
In a memorandum dated February 15, 2001, the Acting Comptroller responded to our draft
report. The OCFO generally concurred with our recommendations and has completed or
planned a number of corrective actions to implement most or our recommendations.
However, the OCFO disagreed with our classifying the process for preparing financial
Audit Report 2001-1-00107
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statements as a reportable condition. The OCFO believed that the specific examples depicted
are few in number and, in some cases, reflect differences of professional judgement on
presentation rather than errors and did not believe the occurrences were serious enough to
warrant a reportable condition on the preparation process. Also, the OCFO disagreed with
our conclusion that the Agency is in substantial noncompliance with the requirements of
SFFAS No. 4, Managerial Cost Accounting Concepts and Standards for the Federal
Government. The OCFO believes that the Agency is in substantial compliance with the
managerial cost accounting standard and therefore did not agree with our recommendations
for corrective action and did not believe that a remediation plan under FFMIA would be
required.
The OIG has not changed the classification of the process for preparing financial statements as
a reportable condition or our conclusion on reporting a substantial noncompliance with the
managerial cost accounting standard.
The preparation process for financial statements, while substantially improved from prior
years, still is far from routine. Problems identified by our audit included several issues that
would have resulted in a qualified audit opinion. We continue to report this matter as a
reportable condition because the process should be routine, and should result in draft financial
statements without material errors. To a lesser degree than in prior years, auditors are being
used as a quality control mechanism. Accordingly, we believe the preparation process
warrants reporting as a reportable condition.
Relative to Agency comments on managerial cost accounting, the Agency did not produce or
utilize cost per output during fiscal 2000 as required by SFFAS No. 4. Without an indirect
cost policy that provides for full cost of outputs, the Agency cannot satisfy the accounting
standard. The goal, objective, and stated purposes of SFFAS No. 4 were not being met.
The rationale for our conclusions and a summary of the Agency comments is included in the
appropriate sections of this report and the Agency's complete response is included as
Appendix II to this report.
This report is intended solely for the information and use of the management of EPA, OMB,
and Congress, and it is not intended to be and should not be used by anyone other than these
specified parties.
/signed!
Edward Gekosky
Divisional Inspector General
Financial Audit Division
U.S. Environmental Protection Agency
February 26, 2001
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Attachment 1
Reportable Conditions
Table of Contents
Page
1 - Process for Preparing Financial Statements 1-1
2 - Continued Improvements Needed in
Accounting for Capitalized Property 1-5
3 - Further Improvements Needed in EPA's Process
for Reviewing Unliquidated Obligations 1-10
4 - Additional Improvements Needed in EPA's
Interagency Agreement Invoice Approval Process 1-12
5 - Improvement Needed in Documentation and
Approval of Journal Vouchers 1-14
6 - Timely Repayment of Asbestos Loan Debt
to Treasury Needed 1-16
7 - Automated Application Processing Controls
for the IFMS Could not be Assessed 1-18
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Audit Report 2001-1-00107
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Process for Preparing Financial Statements
The Agency significantly improved the preparation process for its fiscal 2000 financial
statements compared to prior year submissions. However, the financial statement preparation
process did not provide the needed result, an unqualified audit opinion, without difficulty.
Problems were encountered by the Agency in fairly presenting grant accrual amounts.
Additionally, some other material items were identified by auditors and then jointly resolved
so they would not affect the audit opinion. The grant accrual issue was resolved after we
issued the draft audit report, and EPA did consequently receive unqualified audit opinions on
its fiscal 2000 financial statements. Agency efforts were significant and exemplary to improve
their process for preparing the financial statements. Yet, the needed results were not obtained
without difficulty, thus requiring the preparation process to be categorized by us as a
reportable condition.
Statement Submitted Timely and Quality Control Evident
The Government Management Reform Act (GMRA) requires EPA to submit its audited
financial statements to OMB by March 1. To ensure timely completion of the fiscal 2000
audited financial statements, our office and the Office of the Chief Financial Officer (OCFO)
agreed that the OCFO would provide us a complete set of financial statements with related
footnotes and supplemental information by January 10, 2001. This information would be used
as the basis for expressing our opinions. The Agency provided a timely draft set of statements
that was better quality controlled than prior years, although a number of issues were
identified.
During the fiscal 1998 and 1999 financial statement audits, we reported financial statement
preparation as a material weakness. The Agency subsequently declared financial statement
preparation as an Integrity Act Agency-level control weakness. Building upon the corrective
actions taken in fiscal 1999, the Agency agreed to implement additional corrective actions to
improve the preparation of the fiscal 2000 financial statements. These corrective actions
included: (1) completing the data integrity evaluation of the IFMS accounting model by
analyzing each accounting transaction type, conducting general ledger account analysis, and
analyzing account relationship between proprietary and budgetary accounts; (2) completing
preparation of 9-month interim financial statements; (3) strengthening quality control
processes by increasing training, issuing financial statement preparation guidance, establishing
financial statement preparation milestones, and establishing controls with the OIG on audit
questions and adjustments; and (4) implementing the automated reporting process for SF133 /
FACTS II.
Further Improvements Needed
OCFO addressed some difficulties in the preparation and presentation of the financial
statements, in efforts to make the process routine. Improvement efforts combined with the
need to produce quality statements under rigid time frames meant that a number of OCFO
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staff were called upon to provide significant and exemplary work to prepare the financial
statements. OCFO leadership is dedicated to make the necessary process improvements to
prepare the financial statements and improve the Agency's financial management practices.
While we acknowledge the OCFO's efforts to improve the process, the financial statement
preparation efforts fell short in the area of grant accruals. Additionally, not having the
process to the point of routine indicates improvements are still needed.
EPA's Grant Accrual Liability for All Other Appropriated Funds was
Inconsistently Calculated
In its initial financial statement presentation, EPA did not properly calculate and accrue its
fiscal 2000 liability for grantee expenses. In prior years, EPA calculated the liability for
grantee expenses by confirming a sample of grantees for its three categories of grants
(Superfund, Construction, and Other). EPA then used the sample results and projected the
results to the respective categories of grants.
In fiscal 2000, EPA changed its method for calculating the liability for grantee expenses to
combining historical accrual percentages and cash flow projections. The new method was
meant to streamline a very cumbersome historical process. The new method improperly
combined Construction and Other grants, two categories of grants with materially different
accrual percentages, into one category. Calculating the accrual in this manner would have
materially misstated the grant accrual liability. However, after EPA became aware of the
error, attempts to recreate the accrual using a breakout of Construction and Other grants
consistent with prior years were successful and EPA did receive an unqualified audit opinion
on its fiscal 2000 financial statements.
A Routine Process is Needed
While the OCFO staff improved the quality level in the financial statement preparation
process, some problem areas remained. Continuing efforts are needed to provide draft
financial statements more timely that undergo even higher quality control, to make the
statement preparation process routine, and to provide the necessary financial information
routinely to all stakeholders throughout the year.
Auditor identification of issues, including some that were material, in the draft fiscal 2000
statements shows that OCFO's current process for preparing financial statements needs
further improvement to meet the intent of the CFO Act and GMRA. Several examples
follow:
For the Superfund and Leaking Underground Storage Tank Trust Funds, the change in
trust fund accounting was not initially properly reported and disclosed in the notes to the
financial statements.
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Superfund Trust Fund Appropriation Transfers from All Other Appropriated Funds to the
Superfund Trust Fund of $700 million was not initially properly reported and disclosed in
the notes to the financial statements.
• There was a $10 million difference in the fiscal 1999 ending balance and the fiscal 2000
beginning balance for contractor-held property.
• Note 17 "Environmental Cleanup Costs" was not complete and was inaccurate. A
portion of the note (dated January 10, 2001) was missing, which addresses cleanup
stemming from EPA's activities being paid from the Treasury Judgment Fund. The
agreed-upon milestone date between the OCFO and the OIG indicated EPA would
provide an interim legal letter on environmental liability by December 15, 2000.
However, the legal letter, with this information, was not issued until December 27, 2000,
and the January 10, 2001 statements did not include it. Furthermore, the estimated
accrued cleanup cost presented in the footnote was incorrect and did not present total
estimated costs. This is because not all survey responses for environmental liabilities and
cleanup costs were received by January 10, 2001 as was anticipated; the remaining
surveys were received by January 26, 2001. This issue is now resolved.
The RSI's Required Supplemental Stewardship Information (RSSI) and supporting
documentation was not submitted by the January 10, 2001 agreed-upon milestone date,
but was subsequently submitted on January 17, 2001. This issue is now resolved.
The OCFO needs to continue its efforts to improve the statement preparation process to
make this work routine. The present process leaves little margin for error and allows very
little time to correct any errors identified.
Recommendations
We recommend that the Chief Financial Officer:
1-1. Continue its aggressive efforts to improve the preparation and presentation of the
Agency's financial statements, in particular to evaluate and make process
improvements to the year-end closing process, and system improvements to assist in
the preparation of the financial statements.
1-2. Advance substantially the time frames for submitting the fiscal 2001 draft financial
statements. Prepare the financial statements with equivalent or better quality control
efforts, so there is more of a chance to quickly resolve any problems that may be
identified late in the final review and audit process.
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Agency Comments and OIG Evaluation
The OCFO appreciates the OIG's recognition of the significant improvements the Agency
has made in our process for preparing financial statements. The OCFO believes strongly in
the principle of continuous improvement and OCFO looks forward to a close working
relationship with the OIG again in the future. Together, OIG and OCFO can build on our
collective achievements in improving the financial statements and address evolving federal
requirements for financial statements.
The draft audit report contains a section entitled "A Routine Process is Needed." The OCFO
shares in the OIG's view that ultimately the production and audit of financial statements
should be considered a "routine" process. However, the OCFO believes the specific
examples depicted are few in number and, in some cases, reflect differences of professional
judgement on presentation rather than errors. The OCFO does not believe that these
occurrences are numerous enough or serious enough to warrant a reportable condition on the
preparation process. Rather, this discussion is more appropriate for inclusion in the
management letter. The OCFO also agreed with the thrust of our recommendations.
We, in OIG, believe the examples shown above support our judgement to categorize the
financial statement preparation process as a reportable condition. In our draft report, we
categorized the financial statement preparation process as a material weakness. Due to the
subsequent resolution of the material weakness resulting from the proper calculation and
accrual of EPA's fiscal 2000 liability for grantee expenses, we now classify the process as a
reportable condition. In addition, the examples shown here are just that: examples. Other
problems were found with the initial financial statements the Agency submitted to us. Some
of the issues would have warranted a qualified opinion, if not brought to Agency attention by
the auditors, and resolved before the financial statements were finalized. Also, we note that
the improvements that were made justify downgrading this issue from the material weakness
reported in fiscal 1999 to a reportable condition this fiscal year.
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Continued Improvements Needed in
Accounting for Capitalized Property
For a number of years, we have reported that EPA needs to make improvements in its
accounting for property. During fiscal 2000, although the Agency continued to take action
to correct weaknesses in this area, we determined that the Agency needs to continue its
efforts to improve its accounting for property. Specifically, we found that:
property was not timely or accurately entered in the Fixed Assets Subsystem (FAS)3;
there were weaknesses in the Agency's process for reconciling property information
in the Integrated Financial Management System (IFMS) with that in FAS;
financial statement balances for contractor-held property were incorrect;
contractor-held property transferred was misclassified; and
real property values were not accurately recorded.
When property is not accurately accounted for, it impacts the quality of data available to
manage EPA's resources, and increases the risk of theft, loss, or misuse of the property.
Property Not Always Recorded Timely or Accurately in FAS
OMB Circular No. A-123, Management Accountability and Control, requires that
transactions be promptly recorded, properly classified, and accounted for, in order to prepare
timely accounts and reliable financial and other reports. The Statement of Federal Financial
Accounting Standards (SFFAS) Number 6, Accounting for Property, Plant, and Equipment,
and Agency policy require that property be recognized when title passes to the acquiring
entity or when the property is delivered to the entity or an agent of the entity.
As a result of the weaknesses in the Agency's property accounting, the OCFO's Financial
Management Division (FMD) made prior period adjustments to personal property and
accumulated depreciation at year-end of $8.5 million and $1.8 million, respectively, as shown
in the following table:
Acquisition
Acquisition
Accumulated
Date
Amount
Depreciation
Fiscal 1987-1998
$5,766,561
$1,548,694
Fiscal 1999
$2,749,590
$289,992
Total $8,516,151 $1,838,686
3In late fiscal 1997, the Agency implemented FAS, the Agency's property accountability system, which is
integrated with IFMS, the Agency's accounting system.
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FMD called these prior period adjustments as "Found-on-Station," which are considered
prior year acquisitions entered into FAS in the current year. In other words, the property
was not entered into FAS timely. FMD made these adjustments so that current year
acquisitions would not be overstated. Because of the numerous adjustments, we do not have
reasonable assurance as to the accuracy and reliability of the Agency's personal property
balance.
Problems Experienced During Year-End Reconciliation Process
Personal property balances reported in the fiscal 2000 financial statements were derived from
the IFMS general journal balances. FMD provided guidance and year-end instructions to the
Financial Management Officers (FMOs) requiring them to reconcile capital equipment
transactions recorded in IFMS with the entries recorded in FAS. This was done to ensure
the IFMS general journal properly reflected the amount of capitalized equipment. Any
differences were to be corrected by adjusting entries after a review of the source documents.
During the reconciliation process, if the FMOs identified payments in the IFMS general
journal for which there were no corresponding entries in the FAS, the FMOs were instructed
to forward supporting documentation (i.e. invoices or purchase requests) to the appropriate
Property Management Office (PMO). The PMO is responsible to locate the property,
complete the property fields in FAS, and forward the receiving report to finance staff.
We determined that year-end balances in FAS and the IFMS general journal did not
reconcile. For example, we found property that was included in the IFMS but not the FAS,
thus causing an imbalance in some instances. FMD personnel adjusted some property items
in the IFMS general journal in an attempt to match FAS because they believed the FAS is the
best source of Agency's property accountability. However, the FAS ending balance did not
match the 16th month IFMS general journal ending balance amount that was used for the
fiscal 2000 financial statements. While these amounts have no material effect on the Agency-
wide financial statements, failure to accurately record these items in the Agency's property
accountability systems in a timely manner increases the risk of theft, loss, or misuse of the
property. The differences in the FAS and the 16th month IFMS general journal for two
accounting points are shown in the following table:
Accounting
Point
FAS
Ending Balance
16th Month IFMS
General Journal
Ending Balance
Difference
AP99
$921,686
$1,208,486
($286,800)
AP22
$1,326,811
$4,108,343
($2,781,532)
Total
($3,068,332)
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Incorrect Financial Statement Balance for Contractor-held Property
Fiscal 2000 financial statement balances for contractor-held property and accumulated
depreciation are incorrect. In computing these balances, FMD made adjustments based on
differences in the fiscal 1999 ending inventory balances, and the fiscal 2000 beginning
inventory balances for contractor-held property. The previous year ending and current year
beginning balances should be the same, but differed by $10,198,000. The difference was
based on incorrect data provided by the Office of Acquisition Management (OAM). We are
working with FMD and OAM to resolve the difference.
Contractor-Held Property Transferred Misclassified
During fiscal 2000, the Agency transferred contractor-held property into FAS to strengthen
accountability. This property, which represents EPA-owned property being used by a
contractor, was reported at $20.7 million for fiscal 2000. FMD posted this amount in the
IFMS general ledger account 1750, "Equipment" instead of general ledger account 1770,
"Federal Equipment Held by Contractors." As a result, the Agency's fiscal 2000 financial
statement property footnote improperly classified the $20.7 million in the "EPA-Held
Equipment" instead of the "Contractor-Held Equipment."
We also found that, for one contractor, the property balance of about $22 million was about
$4 million less than the fiscal 1999 ending inventory balance of about $26 million. The
Agency attributed the difference to an adjustment based on a physical inventory conducted by
personnel at Research Triangle Park, although the Agency has not provided inventory
records to account for the difference. Consequently, property totaling about $4 million
remains unaccounted for and the risk of theft, lost, or misuse is increased.
Real Property Values Not Accurately Recorded
For fiscal 2000, the Agency continued to make on-top adjustments to financial statements so
that real property balances would be accurately stated. When the Agency implemented its
new FAS, the Agency recorded EPA's real property amounts at fiscal 1996 net book values.
However, EPA's real property should have been recorded in FAS at their original cost
estimate or acquisition value.
Failure to record the property in FAS at original cost estimate or acquisition value increases
the risk for misstatements in the real property account balances. For example, in fiscal 1999,
when the Agency disposed of real property, the total value of the property was not removed
from the Agency's accounting records. The Agency accurately removed the cost of capital
improvements made since fiscal 1997, but the fiscal 1996 net book value of the initial
property recorded in FAS was removed, even though notations were made to the FAS
records of the real property's original value. The on-top adjustment did not consider the
effects of the disposal on the property balance. As a result, the disposal of real property was
understated, which resulted in an overstatement of the fiscal 1999 property balance.
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To ensure that the Agency's financial statements accurately reflect the value of EPA's real
property, an adjustment for each year since fiscal 1996 is needed to restore the fiscal 1996
real property balances and related accumulated depreciation balances to recognize their
original cost estimate or acquisition value. For the fiscal 1996 financial statements, we made
an on-top audit adjustment. Subsequently, the Agency has been making an on-top
adjustment each year of approximately $94 million to the Agency's real property and related
accumulated depreciation balances to recognize their original cost estimate or acquisition
value.
Good accounting practices would suggest that information in any Agency system, such as the
FAS, have correct information, and that the system's users can use the system's functions
without the need to rely on adjustments to the financial statements to fairly state the real
property balances.
Recommendations
We recommend the Chief Financial Officer and Assistant Administrator for Administration
and Resources Management:
2-1. Strengthen controls over FMO and PMO accountability to ensure that property is
timely and accurately recorded in the FAS.
2-2. Continue to conduct monthly FMO reconciliations of IFMS and FAS, and ensure all
property is entered into FAS within 1 month of the last reconciliation.
2-3. Resolve the differences between the fiscal 1999 ending balance and the fiscal 2000
beginning balance for contractor-held property.
2-4. Revise the FMO year-end certification to include ending property balance amount in
FAS and IFMS reconciled as of September 30.
2-5. Reclassify the contractor-held property to general ledger account 1770, and include it
on the financial statements with the acquisition value for contractor-held property.
2-6. Work diligently with Research Triangle Park's PMO to reconcile the $4 million
difference for the fiscal 2000 transfer of contractor-held property.
2-7. Re-establish in FAS the balances for each real property item at the original cost
estimate or acquisition value instead of its recorded fiscal 1996 net book value.
We have reported property issues since our first financial statement audit of the Superfund
Trust Fund in fiscal 1992. Since that time, we have reported continuing problems with the
accountability and control of capitalized property. Over the years, we have qualified our
opinion based on property balances, and reported property findings as material weaknesses
and reportable conditions. Therefore, we also recommend the Chief Financial Officer and
Assistant Administrator for Administration and Resources Management:
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2-8. Undertake a comprehensive property study to review, make recommendations, and
propose corrective actions on:
/ the Agency's monthly and year-end reconciliation process of FAS and IFMS,
/ the accountability and recording of personal and real property,
/ transferring and recording of contractor-held property,
/ financial statement preparation, and
/ other areas as warranted to improve the accountability of the Agency's property.
Agency Comments and OIG Evaluation
In responding to our draft audit report, the Agency generally agreed with our
recommendations. The Agency agreed to conduct monthly FMO reconciliations of IFMS
and FAS, and ensure all property is entered into FAS within 1 month of the last
reconciliation; resolve differences between the fiscal 1999 ending balance and the fiscal 2000
beginning balance for contractor-held property; revise the FMO year-end certification to
include ending property balance amount in FAS and IFMS reconciled as of September 30;
reclassify contractor-held property to the proper general ledger account; reconcile the $4
million difference in contractor-held property transferred; and undertake a comprehensive
property study.
The Agency partially agreed with our recommendation to strengthen controls over FMO and
PMO accountability to ensure that property is timely and accurately recorded in FAS. The
Agency recognized that while some property was not being recorded timely, however,
adequate controls and accountability exists as the result of the implementation of FAS,
policies, procedures and the reconciliation process and numerous training sessions. The
Agency also commented that a two-way reconciliation process between the IFMS general
journal and FAS is ongoing and provides for greater control over property balances that EPA
owns and maintains.
The Agency disagreed with our recommendation to reestablish in FAS the balances for each
real property item at the original cost estimate or acquisition value instead of its recorded
fiscal 1996 net book value. The Agency cited their practice of recording the property at net
book value is an acceptable practice in accordance with the Statement of Federal Financial
Accounting Standard Number 6 and will request clarification from the FASAB. We agree
that recording property at net book value is an acceptable SFFAS practice only when
historical cost information was not maintained. However, EPA had determined the
acquisition value or original cost estimate of each property item. We continue to stress that
the Agency's reliance on FAS when properly utilized should avoid the need for manual yearly
on-top adjustments.
We concur with the Agency's planned and completed corrective actions.
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Further Improvements Needed in EPA's Process
for Reviewing Unliquidated Obligations
EPA did not timely identify and deobligate inactive unliquidated obligations during its annual
review. As a result of weaknesses in the review process, the Agency had to perform an
additional "special review" to obtain a more accurate accounting of its unliquidated
obligations. This special review identified $26.5 million of open unliquidated obligations that
should have been deobligated by September 30, 2000.
Review Process Needs Improvement
EPA Office of the Comptroller Policy Announcement 96-04 and OMB guidance require EPA
to review unliquidated obligations at least once each year to ensure transactions are valid
(i.e., that appropriated funds are still available for the purpose and time period specified, and
an actual need still exists within the life of that appropriation). As a part of this annual
review, OCFO sends reports on inactive unliquidated obligations to each responsible office
for review. EPA's policy requires officials to ensure that appropriate staff review the inactive
unliquidated obligations administered by their office, and that the review was completed and
appropriate deobligations were made. These certifications are then sent to the OCFO, which
verifies the submissions.
Weaknesses in EPA's deobligation process were previously documented by both internal and
external reports, and the Agency was aggressive during fiscal 2000 in identifying and
deobligating invalid obligations. Nonetheless, our fiscal 2000 audit work showed that EPA's
process for reviewing inactive unliquidated obligations for validity still needs improvement.
There were inadequacies in the Agency's annual review and certification of unliquidated
obligations, and the Agency did not deobligate unnecessary funds in a timely manner.
Special Reviews Necessary
Because the mandated annual review was not entirely effective in identifying and deobligating
invalid obligations, the Agency had to rely on a "special review" (performed subsequent to
the closing of the general ledger) to determine the true status of obligations and make
necessary adjustments. In fiscal 2000, as a result of this special review, the Agency was
required to make a $26.5 million "on-top" adjustment to its obligations balance in order to
more accurately present the Statements of Budgetary Resources and Financing. This
included $2.2 million that should have been deobligated based on the fiscal 1999 special
review.
Prior Recommendations Still Being Implemented
We recognize that the Agency has taken corrective actions in response to our previous
recommendations and plans to take additional corrective actions. Once the Agency's
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closeout weaknesses are resolved, OCFO plans to eliminate the "special review" process. To
strengthen obligation management, the OCFO also recognized that starting with the fiscal
2001 annual review, emphasis will be placed on older unliquidated obligations using EPA's
financial data warehouse reports, to be included as part of the annual review guidance. In
addition, the annual review guidance will include information about responsible official
deobligation verification requirements. These actions are scheduled for completion by April
30, 2001. Since this finding is similar to our fiscal 1998 and 1999 reported issues, we are not
repeating the respective recommendations, since the Agency has not completed implementing
all of these corrective actions. Attachment 3, Status of Prior Audit Report
Recommendations, notes our previous recommendations on this issue.
Agency Comments and OIG Evaluation
The OCFO agreed that the annual review process needs further improvement. The OCFO
indicated that the special review has been used as a safety net to ensure the integrity of the
financial statements and anticipates that one last special review will be needed for the fiscal
2001 financial statements.
However, the OCFO noted that weaknesses in the grant and Interagency Agreement closeout
process, rather than the annual review process, constituted the major portion of the year-end
adjustment. Approximately $24.4 million of the $26.5 million adjustment was to address
grant and Interagency Agreement obligations identified in the special review balances on
grants/Interagency Agreements that the Agency was unable to close out by September 30,
2000.
We concur with Agency plans to address the needed corrective actions, including the grant
and Interagency Agreement closeout process, to fairly present unliquidated obligations in its
financial statements at fiscal year end.
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Additional Improvements Needed in EPA's
Interagency Agreement Invoice Approval Process
Some EPA project officers did not fulfill oversight duties related to reviewing and approving
Interagency Agreement (IAG) invoices. We noted deficiencies in this area in prior reports,
and we continue to find instances where project offices at EPA's Headquarters and
Cincinnati Financial Management Center (CFMC) did not timely approve IAG invoices
because they did not receive the supporting cost information from other Federal agencies to
substantiate invoice amounts. As a result, CFMC disbursed funds and recorded transactions
in the accounting system with limited assurance that invoices were valid, appropriate, and
allowable under the terms of the IAG. Additionally, CFMC continued to use the "first-in
first-out" accounting basis (charging the first line of accounting) to allocate costs charged on
IAGs with multiple goals/subobjectives, which provides limited assurance that costs were
charged to the appropriate goals/subobjectives.
Project Officer Responsibilities Outlined
The Resources Management Directive System, Section 2550C, Chapter 4, Interagency
Agreements, paragraph 5 (g), states that the project officer is responsible for:
providing technical and managerial oversight;
receiving and reviewing detailed cost information submitted by other agencies, which
should be provided on a project-by-project basis;
approving vouchers and OP AC (On-Line Payment and Collection System) billings
received from other agencies after determining that performance is in accordance with the
agreement; and
forwarding approved vouchers to CFMC for payment within five days after receipt.
EPA's training manual for project officers, Managing Your Financial Assistance Agreement,
3rd Edition, October 1996, Module VIII, provides guidance on OP AC billing. CFMC
charges a bill to the appropriate IAG and submits the invoice to the project officer for
approval. If there is a problem with the bill, EPA has 90 days to "charge back" the funds to
the appropriate account.
Progress Being Made But Further Improvements Needed
We recognize that the Agency has taken corrective actions in response to our previous
recommendations and plans to take additional corrective actions. On February 7, 2000, the
GAD issued Fact Sheet No. 12, "Project Officer's Responsibility for Payments Under
Interagency Agreements." The fact sheet directs program leaders to assure project officers
disapprove IAG invoices unless adequate information on progress and costs incurred are
reasonable. In addition, the fact sheet advises project officers to request the necessary
information from the receiving Agency (with GAD or Financial Services Branch assistance, if
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necessary) and to request Financial Management Division to suspend or charge back payment
if information is not provided promptly.
In response to our previous recommendations, the Agency indicated that since March 2000,
notifications have been sent to IAG approving officials of the project officers with numerous
outstanding approval forms, and the Agency plans to continue this practice until the backlog
is eliminated. In addition, the Agency indicated a new database for tracking IAGs will be
developed to automatically send second notices. In April and October, 2000, Senior
Resource Officials were sent a list of chronically delinquent project officers to elicit their
assistance in having invoice reviews completed timely and properly.
Since our finding on IAG invoices is similar to what we previously found, and since EPA
appears to be taking steps to implement its corrective actions, we are not repeating our
previous recommendations. We will continue to evaluate the effectiveness of the Agency's
corrective action plans during subsequent financial statement audits. Attachment 3, "Status
of Prior Audit Report Findings," notes our previous recommendations on this issue and the
status of corrective actions.
Agency Comments and OIG Evaluation
In response to our draft report, the OCFO commented that CFMC used a "FIFO-like"
process for IAGs to temporarily charge payments pending confirmation of appropriate
charging by the project officer. This process evolved to reduce the excessive balances in
EPA's suspense account (OPAC bills were placed in suspense accounts until the related IAG
was identified). If the returned approval form indicated that the "FIFO-like" accounting was
incorrect, CFMC recorded the proper charge based on the project officer's assertions. The
OCFO also indicated that most IAGs do not charge multiple PRCs, so the original FIFO-like
charge generally does not change.
The OIG acknowledges that the "FIFO-like" practice as originally developed, addressed a
disbursing method limited to charging older funds first. In light of the Agency's recent actions
to align its costs to its goals/subobjectives, the FIFO-like practice has more of an impact in
charging costs at the PRC level. The cost information and project officers' certification of
approval forms are the control factors to validate costs charged to EPA's goals/subobjectives.
The absence of these control factors provide uncertainty that the "FIFO-like" payments for
IAGs with multiple PRCs are always charged to the appropriate PRC.
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Improvement Needed in
Documentation and Approval of Journal Vouchers
Journal and standard vouchers prepared by the Financial Reports and Analysis Branch of the
Financial Management Division, OCFO, were not always properly documented and approved
While most of the entries appear to be correct, we are concerned about the vulnerability
associated with executing transactions without proper supervisory review and approval. An
appropriate review and approval process minimizes the potential for errors to occur, and
adequate documentation is needed in order for sufficient reviews to be conducted.
Policy Notes Documentation and Approval Requirements
EPA's Comptroller Policy Announcement No. 93-02 states that all journal voucher entries
must be submitted to the Financial Reports and Analysis Branch for approval. Furthermore,
the policy requires that all financial transactions recorded in the accounting system be
supported by adequate source documentation, and that this documentation be easily
accessible.
EPA's Integrated Financial Management System (IFMS) User's Guide, Subsystems Manual,
General Ledger, Chapter 2 includes information on the use of journal vouchers and standard
voucher documents. Included in that chapter is the prescribed EPA Form 1017-G for the
preparation of journal vouchers. The EPA form includes a place for preparer and approval
signatures.
Instances of Inadequate Documentation and Approval Noted
During our review, we noted the following documentation and approval weaknesses at the
Financial Reports and Analysis Branch:
No. of Transaction
Weakness
Documents
Inadequate backup to support entries
74
Vouchers not reviewed and approved by appropriate
level of management
44
Missing voucher transaction documents
15
Entries made directly from backup without journal or
standard voucher being completed
27
Documentation and approval weaknesses were evident in both Superfund and All Other
transactions. Although the specific cause for the noted conditions was not determined during
testing, it appears that there was a breakdown in the basic internal control and process.
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Recommendations
We recommend that the Chief Financial Officer direct appropriate Financial Reports and
Analysis Branch personnel to:
5-1. Review EPA's Comptroller Policy Announcement No. 93-02.
5-2. Review and approve all journal and standard voucher entries prior to entry into IFMS,
and assure that all the vouchers are properly documented prior to approval.
Agency Comments and OIG Evaluation
In response to our draft report, the OCFO agreed with our recommendations. We concur
with the OCFO's completed and planned corrective actions.
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Timely Repayment of Asbestos Loan Debt
to Treasury Needed
The Las Vegas Financial Management Center (LVFMC) has not made timely repayments of
the Agency's asbestos loan debt to the Department of Treasury. EPA collects payments from
loan recipient schools each year but has not made regular repayments to Treasury. The
balance, approximately $6.8 million, represents repayments of principal EPA has collected
since fiscal 1997 but has yet to repay, less the amounts paid to Treasury for annual interest.
While we are not aware of any specific criteria, it is good business practice to repay debts to
Treasury.
Further, the borrowing authority, which should be declining, has not. Funds have not been
appropriated for the asbestos loan program since fiscal 1993, and the Agency anticipates no
new loans. The borrowing authority of $3,941,299 should be reduced.
No Criteria Apparent Regarding Repayment
The Asbestos Grant and Loan program was established in 1984 and is administered under the
Asbestos School Hazard Abatement Act of 1986. The program provides financial assistance
to financially needy public and private schools with hazardous asbestos abatement projects.
LVFMC is the responsible accounting point for transactions associated with non-Federal loans
receivable. LVFMC personnel indicated that their operating procedures do not include steps
to pay down the debt, but they recognize that it should be done.
Repayment Would Be Good Business Practice
Despite the lack of criteria, we believe it is good business practice to repay debt to Treasury
on an annual basis, and Financial Management Division personnel agreed with us that EPA
should be paying down its debt. LVFMC made four payments through 1997. LVFMC plans
to resume to pay down the debt in fiscal 2001.
Additionally, the Financial Management Division indicated in its quarterly certification to
Treasury on FMS Form 2108, Year-end Closing Statement, that the borrowing authority of
$3,941,299 needs to be reduced. They plan on reducing this amount during fiscal 2001.
Recommendation
We recommend that the Chief Financial Officer:
6-1. Require the Director, LVFMC to develop a schedule for repaying its asbestos loan
debt to the Department of Treasury on an annual basis, and
6-2. Reduce the asbestos loan borrowing authority balance to zero.
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Agency Comments and OIG Evaluation
The OCFO agreed with our recommendations, and, in the first quarter fiscal 2001
transmission of the FACTS II report to Treasury, the Agency took steps to reduce the
borrowing authority. Also, the Agency plans to develop a schedule for repaying asbestos loan
debt by June 2001.
We concur with the Agency's planned and completed actions.
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Automated Application Processing Controls
for the IFMS Could Not Be Assessed
We continue to be unable to assess the adequacy of the automated internal control structure
as it relates to automated input, processing, and output controls for IFMS. IFMS applications
have a direct and material impact on the Agency's financial statements. Therefore, an
assessment of each application's automated input, processing, and output controls, as well as
compensating manual controls, is necessary to determine the reliance we can place on the
financial statements.
Criteria Outlines Requirements
The Joint Financial Management Improvement Program (JFMIP) Core Financial System
Requirements (JFMIP-SR-99-4), dated February 1999, state that it should be used in
conjunction with JFMIP's recently established WEB-based electronic repository. This
electronic repository knowledge base, at http://memphis.lmi.org/EXT/cfo_fms_r.nsf, expands
core system requirements, and lists mandatory and value-added financial system requirements.
Framework for Federal Financial Systems (FFMSR-O), dated January 1995, and the
knowledge base include mandatory minimum documentation requirements. As a minimum,
the Federal guidance identifies three types of system documents as required: (1) systems
documentation, (2) operations documentation, and (3) user documentation. Systems
documentation must include information necessary for a systems analyst or a programmer not
familiar with the system to learn and maintain the system in a timely and efficient manner.
Prior Reports Noted Issues
During past financial statement audits, we attempted to evaluate controls without
documentation, but these alternatives proved to be inefficient and impractical. Program level
transaction flowcharts or similarly descriptive narrative system documentation were not
available. Furthermore, we previously concluded that the IFMS users manuals and other EPA
contractor baseline Federal financial systems manuals did not contain the level of detail
necessary to construct tests of automated internal controls that would satisfy our field work
standards. Since 1995, the following events have occurred:
1995 Agency officials disagreed with the conclusions and recommendations made in the
OIG's report on fiscal 1995 financial statements for EPA's trust funds, revolving
funds, and commercial activity. Officials maintained that sufficient documentation
existed in the Change Management System. Furthermore, management stated that the
OIG's opinion was restricted by its definition of acceptable documentation.
1996 In response to the OIG report on fiscal 1996 financial statements, the Agency
completed a system documentation analysis, developed updated accounts receivable
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documentation, and completed an analysis for creating a comprehensive IFMS data
dictionary.
1998 As part of our fiscal 1998 financial statement audit, we concluded that the updated
accounts receivable documentation was not adequate to establish the reliability of
IFMS transaction processing controls, and that management still needed to develop a
data dictionary.
1999 In the fiscal 1999 financial statement audit, we did not agree that Treasury's Financial
Management Service report conclusions about systems documentation were
adequately supported. These issues involved IFMS compliance with overall system
documentation requirements, the extent of IFMS customization, and use
documentation. Consequently, we could not place reliance on the Treasury's findings
for audit purposes.
Progress Made But Improvement Still Needed
Our fiscal 2000 work indicated EPA upgraded its user documentation in 1999, and that it was
adequate for users' needs for entering data. However, we determined that the combined
upgraded users and technical systems documentation still did not address critical system
operational controls, such as access to tables or data, electronic approvals, and use of
supervisory overrides. Furthermore, neither the users nor technical systems documentation
addressed transaction "processing" edits and data flows. Lastly, the Agency has not
developed a data dictionary. OIG is continuing to work with the Agency to develop a cost-
effective solution that will adequately address our concerns and ensure the Agency's internal
control environment is adequate.
In U.S. Senate Appropriations Committee Report 106-410, the Agency was directed to
initiate actions to replace IFMS. The Agency repeatedly has indicated its plans to replace
existing financial systems. However, in the absence of tangible actions to do so, we believe
the Chief Financial Officer should take positive steps to upgrade IFMS system documentation,
including development of a data dictionary. OIG staff continue to work with Agency officials
to upgrade or replace various existing financial systems (e.g., EPA's payroll system), but all
parties expect that it will be several years before IFMS is replaced.
In conclusion, we continue to believe that IFMS documentation does not adequately describe
operational system controls and does not meet JFMIP system requirements. Moreover, we
believe that potential cost savings will be addressed when the Agency initiates the replacement
of IFMS and completes a cost benefit study. The OCFO continues to maintain that the
benefits do not justify the costs to develop and maintain systems documentation or a data
dictionary for IFMS. However, to date, OCFO has taken no action to conduct a cost benefit
study.
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Because our prior audit reports contained recommendations to develop a data dictionary and
systems documentation, we will not make further recommendations at this time. Although
management disagreed with our past recommendations, we expect Agency actions to address
the Senate Appropriations Committee report will lead to tangible action plans to replace or
upgrade IFMS, including developing a data dictionary and enhancing system documentation.
Agency Comments and OIG Evaluation
In response to the draft audit report, the OCFO concurred with our description of the current
status of this issue. Until management approves an IFMS replacement plan that addresses our
issues, we plan to continue working toward a mutually agreeable cost effective interim
solution.
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Attachment 2
Compliance with Laws and Regulations
Table of Contents
Substantial Noncompliance with Federal Financial Management
Improvement Act
Page
8 - EPA Did Not Comply with the Managerial
Cost Accounting Standard 2-1
Other Noncompliance Issues with FFMIA4
9 - EPA Unable to Reconcile Intra-Governmental
Transactions 2-8
10 - Despite Improvements, Financial System Security Plans
Continue to be Noncompliant 2-10
4 We are reporting these two noncompliance issues under FFMIA as they are directly related to FFMIA
reporting requirements, however, we note that the two issues do not meet the OMB criteria for substantial
noncompliances under FFMIA.
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EPA Did Not Comply with the
Managerial Cost Accounting Standard
EPA did not comply with Statement of Federal Financial Accounting Standard (SFFAS)
No. 4, Managerial Cost Accounting Concepts and Standards for the Federal Government,
during fiscal 2000. Specifically, EPA did not comply with the requirements to:
determine the full cost of its activities,
accumulate and report costs of activities for each output (subobjective) on a regular
basis for management information purposes, and
always use appropriate costing methodologies to accumulate and assign costs to
outputs.
This noncompliance was also reported in our fiscal 1999 financial statement audit, and the
OCFO disagreed with our conclusions. The lack of sufficient cost information adversely
impacts many facets of EPA's operations, including budget formulation, program execution,
and cost recovery.
The OCFO maintained that its cost accounting system substantially complied with SFFAS No.
4 in fiscal 1999 and continued to do so in fiscal 2000. The OCFO believes that cost
accounting is primarily a management tool that will continue to improve as needs are better
identified. However, we maintain that EPA did not comply with SFFAS No. 4 during fiscal
2000, and its cost accounting needs to be substantively improved.
SFFAS Outlines Need for Cost Information
SFFAS No. 4 specifies that cost information is to be provided for three primary user groups,
for the following purposes.
Government managers, who need reliable and timely cost information that helps them
ensure resources are spent to achieve expected results and outputs, and alerts them to
waste and inefficiency.
Congress and Federal executives, who need cost information to compare alternative
courses of action and make program authorization decisions by assessing costs and
benefits, and to evaluate program performance.
Citizens, who need cost information to judge whether resources are allocated to programs
rationally, and whether the programs operate efficiently and effectively.
EPA established the Government Performance and Results Act structure (goal, objective, and
subobjective), and defined subobjectives as "outputs." Subobjectives reflect subunits within
the objectives and strategic goals. EPA identified 124 subobjectives, and planned to fully
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cost each subobjective. Cost per output (subobjective) information is a key element needed to
satisfy the needs of Government managers, Congress and Federal executives, and citizens.
During fiscal 1999 and again during fiscal 2000, EPA did not produce cost per output
information as required by the standard. In addition to this concern, we continue to have
concerns in the areas described below.5
Determining Full Cost of EPA Activities
SFFAS No. 4 requires EPA to measure and report the full cost of its outputs. SFFAS No. 4
states, "the full cost of an output produced by a responsibility segment is the sum of (1) the
costs of resources consumed by the segment that directly or indirectly contribute to the
output, and (2) the costs of identifiable supporting services provided by other responsibility
segments within the reporting entity, and by other reporting entities."
EPA did not have an Agency-wide indirect cost rate and policy, which prevents it from being
able to report the full cost of objectives and subobjectives. The Agency's cost accounting
system should be able to identify and report both the direct and indirect costs of Agency goals,
objectives, and subobjectives (outputs), but it was not able to do so. Indirect costs are
required for full costing of activities, and without including indirect costs the full cost of
outputs cannot be established.
In a recent OIG audit, Follow-up Audit on Headquarters Interagency Agreements,6 we noted
that EPA did not bill other agencies for EPA's indirect costs related to performing work or
furnishing materials. By not recovering full costs, EPA was, in effect, transferring to other
agencies some of EPA's resources that could have instead been used by EPA to accomplish its
mission.
Regular Reporting of Costs for Use by Management
SFFAS No. 4 requires each reporting entity to accumulate and report the cost of its activities
on a regular basis for management information purposes. In order to perform managerial cost
accounting on a "regular basis," entities should establish procedures to accumulate and report
cost continuously, routinely, and consistently. Information should be provided to help the
user determine the costs of providing specific programs and activities. SFFAS No. 4 further
notes that cost information should be reported in a timely manner and on a regular basis
5 Our audit work was designed to determine whether the Statement of Net Cost fairly presented the Agency's
costs by goal and whether the Agency complied with SFFAS No. 4. After we determined that the Agency's
cost accounting process did not comply with SFFAS No. 4, we did not perform additional audit work. Further
audit work could disclose other issues regarding the Agency's compliance with SFFAS No. 4 in addition to
those discussed.
6 Audit Report 2000-P-0029, issued September 29, 2000.
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consistent with the needs of users and the requirements of both budgetary and financial reporting.
During fiscal 2000, Agency managers and others did not have accurate and reliable
information for the full cost of each of its goals, objectives and outputs (subobjectives). The
Agency now accumulates most costs by Program Results Codes (PRC) that mirror the
strategic goal structure. However, costs relating to earlier appropriations are accumulated by
Program Element (PE) Codes that mirror the budget structure. After year end, the costs that
are accumulated by PE codes are cross-walked to a PRC. Because the costs accumulated by
PE code and the costs accumulated by PRC were not merged during the year to show total
costs for outputs (subjectives), the full cost of these key activities were not available during
the year.
EPA planned to produce cost per output information for the first time ever in January 2001.
As of the end of our fieldwork, cost per output had not been provided to us. Producing cost
per output is a major step in the right direction, if it occurs. Nonetheless, it should be noted
that cost by output was not available during fiscal 2000 and the noncompliance therefore
existed during that year. In addition, we acknowledge that a debate exists on whether the
"timely" reporting standard for providing cost information under SFFAS 4 means daily,
monthly, quarterly, or annually. Regardless of the outcome of that debate, we believe timely
reporting means that the information must be available for use during the year being audited.
Use of Appropriate Costing Methodologies
SFFAS No. 4 requires EPA to produce cost information in a consistent and reliable manner.
However, we determined that inappropriate costing methodologies were sometimes being
used for Interagency Agreements and Performance Partnership Grants.
EPA continues to make some disbursements for Interagency Agreements using basically a
first-in first-out disbursement method. This resulted in payments being recorded against the
oldest PRC rather than the actual code or codes against which the payment should have been
charged. The utilized method does not assure that costs are matched to the activities
undertaken by goal, objective and subobjectives. Consequently, the information is not
reliable.
Performance Partnership Grants fund activities that cover more than one goal, objective, and
subobjective. The OCFO established a policy that allows a cost allocation percentage to be
established as the grant is awarded. As costs are claimed under the grant, the percentages
should be applied to the PRC. However, there has been some inconsistent implementation of
the policy. Project Officers have not always made the determinations based on their review
of the work plan. Instead, percentages established by Headquarters have sometimes been the
basis for the allocation rather than the activities approved in the grant. To make the
allocation percentage reasonable, it must be determined on a grant-by-grant basis by someone
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with intimate knowledge of the particular grant, and it must match cost estimates of grant
activities.
Recommendations
We recommend that the Chief Financial Officer:
8-1. Conduct a formal, aggressive education campaign to give key users of EPA
accounting information substantive knowledge on what the possibilities are for cost
accounting at EPA. This will include formally canvassing a user group to determine
their needs and desires; satisfy users where practicable; and define and develop timely,
reliable, and accurate cost reports that enable managers to monitor the cost of their
programs and outputs on an ongoing basis.
8-2. Develop an Agency-wide indirect cost rate and policy to more accurately determine
the full cost of Agency outputs.
8-3. Produce cost for each output (subobjective) at least annually for use during the fiscal
year. As part of the education and canvassing effort described in recommendation
8-1, determine whether key users want such information more frequently than
annually, and satisfy the key user needs for timing and frequency.
8-4. Eliminate the use of costing methodologies that do not satisfy the requirements of
SFFAS No. 4 for consistency and reliability and implement viable alternatives.
Agency Comments and OIG Evaluation
The OCFO believes they are in substantial compliance with the Managerial Cost Accounting
Standard and therefore a remediation plan under FFMIA is not required. The OCFO agrees
that further improvements in cost accounting are desirable but maintains that implementing
managerial cost accounting is an evolutionary process and Agency improvements and
enhancements are on-going. Their detailed response is included in Appendix II and
summarized below.
Determining Full Cost of EPA Activities
The OCFO believes that it is not necessary to produce full cost per output (subobjective) to
satisfy SFFAS No. 4. Further, the OCFO maintains that indirect costs need only be
associated with some activities at EPA to be in compliance with the standard, and not with
each output. If needed, the OCFO maintains that PE costs and PRC costs can now be
combined to provide cost by output. The OCFO quotes the standard as follows: "The
standard does not require full cost reporting in federal entities' internal reports or special
purpose cost studies."
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As for identifying supporting services provided by other agencies, OCFO believes they
comply with all requirements.
The OCFO also does not agree that an "Agency-wide indirect cost policy" is necessary.
Comptroller Policy Announcement No. 98-10, Accounting for Resources under the
Government Performance and Results Act, addresses the allocation of costs and the
capturing of every new obligation authority dollar at the subobjective level.
The OCFO stated they can agree with the concept of an indirect cost policy, but they firmly
believe that any such "policy" must be broad and flexible in consideration of the diverse
nature of EPA's component organization and activities. Accordingly, they are planning to
develop an "indirect cost policy" that will provide guidance to program offices when they
have a specific need for indirect cost rates.
Regular Reporting of Costs for Use by Management
The OCFO maintains there are numerous standard reports and ad hoc reports, available by
PRC that program managers can use to manage their programs. Reports are also available to
managers for those obligations and expenses still in the PE structure. The OCFO did not
produce a combined PE and PRC report in fiscal 2000 because of the intensive effort
involved in developing the crosswalk for the Statement of Net Cost. An end-of-year report
is being developed detailing disbursements by PRC and PE for fiscal 2000. The OCFO also
plans to develop a 6-month report, as well as a year-end disbursements report for fiscal 2001
for combined PRC and PE disbursements.
Use of Appropriate Costing Methodologies
The OCFO believes that their costing methodologies satisfy SFFAS No. 4.
The OCFO stated that CFMC's use of a "First in, First out"-like process to temporarily
charge IAG payments generally does not result in changes to multiple PRCs. The OCFO
also stated that Performance Partnership Grant implementation issues we identified were
incorrect or have now been corrected.
The OCFO intends to conduct additional quality assurance work with PRC accounting
during the coming months to ensure that the Agency is following the Comptroller Policy
Announcement No. 98-10.
OIG Evaluation
The OIG disagrees with the OCFO's conclusion that the Agency is in substantial compliance
with the Managerial Cost Accounting Standard.
Cost per output is required to satisfy the very purpose for SFFAS No. 4. The full cost of
outputs, including related indirect costs and inter-entity costs, is required to give the
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anticipated beneficiaries of cost accounting information (Government managers, Congress
and Federal executives, and Citizens) the cost data necessary to improve budget formulation,
program execution, and cost recovery. The Agency did not produce cost per output during
fiscal 2000. While the OCFO noted that PE costs can be combined with PRC costs, the
combination did not occur. Consequently, the users of EPA financial information did not
have cost per output during the year, and still do not have it. Expected benefits from
utilization of cost per output information have not been achieved. Accordingly, the OIG
concludes the Agency has not complied with SFFAS No. 4.
Following are relevant points from SFFAS No. 4 that support our conclusion.
Paragraph 13 states that "Reliable information on the costs of federal programs and activities
is crucial for effective management of government operations." It goes on to say that "the
objectives of federal financial reporting are to provide useful information to assist internal
and external users in assessing the budget integrity, operating performance, stewardship, and
systems and control of the federal government."
Paragraph 14 states "Managerial cost accounting is especially important for fulfilling the
objective of assessing operating performance."
Paragraph 15 states " The topics of costs and performance measurement are related because
it is by associating cost with activities or cost objectives that accounting can make much of
its contribution to reporting on performance."
Paragraph 16 indicates that the goal for cost accounting standards is to "provide a method
for identifying the unit cost of all government activities."
Paragraph 22 establishes the specific objectives of SFFAS No. 4, as follows. "The
managerial cost accounting concepts and standards presented here are intended for all the
user groups identified above. These standards are aimed at achieving three general
objectives:
Provide program managers with relevant and reliable information relating costs to
outputs and activities. Based on this information, program managers can respond to
inquiries about the costs of the activities they manage. The cost information will assist
them in improving operational economy and efficiency;
Provide relevant and reliable cost information to assist the Congress and executives in
making decisions about allocating federal resources, authorizing and modifying programs,
and evaluating program performance; and
Ensure consistency in costs reported in general purpose financial reports and costs
reported to program managers. This includes standardizing terminology for managerial
cost accounting to improve communication among federal organizations and users of cost
information."
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Paragraph 32 indicates the main purposes of using cost information as follows. "Cost
information is essential in the following five areas: (1) budgeting and cost control, (2)
performance measurement, (3) determining reimbursements and setting fees and prices, (4)
program evaluations, and (5) making economic choice decisions." Each of these purpose is
discussed in further detail in the standard.
Paragraph 79 states that: "Managerial cost accounting should:
1. Define and accumulate outputs, and if feasible, quantify each type of output in units;
2. Accumulate costs and quantitative units of resources consumed in producing the outputs;
and
3. Assign costs to outputs, and calculate the cost per unit of each type of output."
In response to the draft audit report, the OCFO acknowledges that they "are helping develop
indirect rates for use in setting user fees and are developing indirect rates for reimbursable
program costs." The OCFO further acknowledges that cost per output was not produced
during fiscal 2000 by stating that "This crosswalk provides the total cost of outputs that are
in the PE structure and allows us to combine those costs with the PRC costs, if needed."
Both statements are confirmations, in OIG's view, that the standard has not been complied
with. We believe that without indirect costs built into fees and reimbursable program costs,
and without cost per output produced and utilized during the year, that SFFAS No. 4 cannot
be satisfied.
We believe cost per output is necessary to accomplish the goal, objectives, and purposes of
SFFAS No. 4. The Agency has taken a step in the right direction by producing cost per goal.
The standard requires cost per output (subobjective). Cost per output is necessary for the
above anticipated benefits to be realized and purposes of the standard to be accomplished.
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EPA Unable to Reconcile Intra-Governmental
Transactions
EPA was unable to reconcile its data on intra-governmental receivables and payables with the
records maintained by the other Federal agencies. Although EPA made a concerted effort to
correct this problem, it nonetheless occurred, primarily because: (1) some Federal entities did
not perform reconciliations, and (2) Federal agencies' financial systems lacked common data
elements at the transaction level to identify intra-governmental transactions. The U.S.
Treasury needs the information to eliminate intra-governmental transactions when preparing
Government-wide financial statements, while EPA needs the information to properly manage
resources.
OMB Requires Intra-Governmental Transaction Reconciliations
The January 7, 2000 technical amendments to OMB Bulletin No. 97-01 require Federal
agencies to report intra-governmental assets, liabilities, and earned revenue by Federal
trading partner. This information is to be presented in financial statements as Required
Supplementary Information, and should reconcile with the applicable line items in the
financial statements. The Treasury Financial Manual also requires Federal agencies to
disclose intra-governmental assets, liabilities, and earned revenue by trading partner in the
Federal Agencies Centralized Trial-Balance System transmission. On September 29, 2000,
Treasury issued the Federal Intra-governmental Transactions Accounting Policies and
Procedures Guide to provide a foundation for federal agencies to account for and facilitate
the reconciliation of intra-governmental transactions.
EPA Took Proactive Approach to Reconciling
OCFO issued two procedural documents in fiscal 2000 to assist finance offices in properly
recording and identifying intra-governmental transactions in the Agency's financial
accounting system. OCFO personnel undertook proactive efforts to reconcile EPA's intra-
governmental transactions by scheduling multiple meetings with EPA's trading partners,
submitting confirmation letters of EPA's asset/liability balances to other Federal agencies,
and conducting follow-up communications. However, since the vast majority of EPA's
trading partners did not respond, EPA prepared the Required Supplementary Information
using data from its own financial accounting system.
OIG acknowledges and commends EPA's efforts to reconcile intra-governmental
transactions as required. EPA implemented internal controls to properly account for intra-
governmental transactions, as recommended by OIG in its audit of the fiscal 1999 financial
statements. At this time, OIG does not have any additional recommendations, since further
action is needed at the Federal level.
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Agency Comments and OIG Evaluation
In response to our draft report, the OCFO concurred with the findings and conclusions. The
OCFO will continue to work with other Federal agencies and to reconcile its
intra-governmental transactions.
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Despite Improvements, Financial System Security Plans
Continue to be Noncompliant
As of September 30, 2000, security plans for EPA's financial and mixed-financial systems
continued to be noncompliant with OMB Circular A-130, Management of Information
Resources, and related National Institute of Science and Technology (NIST) guidance.
Despite the progress that had been made, security plans still did not adequately cover
financial systems' operational controls and related risks. As a result of our fiscal 2000 audit
work and subsequent discussions with Agency personnel, the OCFO, on November 13, 2000,
submitted a revised remediation plan that we believe sufficiently addresses the weaknesses
identified. OCFO corrective actions should be completed during fiscal 2002. EPA officials
agreed the Agency's Security Program was a material weakness under the Federal Managers'
Financial Integrity Act.
Security Plan Deficiencies Noted in Prior Reports
The OIG's separate audits of fiscal 1997, 1998, and 1999 financial statements, all reported
that EPA's financial management systems did not substantially comply with Federal system
security requirements. The 1997 report noted the Agency's Core financial systems did not
have completed security plans. The 1998 report indicated the security plans for five Core
systems continued to be substantially noncompliant. The 1999 report stated that, despite
improvements, the Core financial systems were still noncompliant. In particular, we noted
substantial improvements were needed to document the operational security program with
known weaknesses and compensating controls to minimize risk, based on OMB Circular
A-130 and NIST guidance. We recommended incorporating significant planned security
actions into a revised formal remediation plan.
Fiscal 2000 Audits Related to Information Security Controls
During fiscal 2000, the OIG and General Accounting Office (GAO) issued audit reports that
impacted on a number of information security issues. Since the reports contained a number
of findings and recommendations, and the Agency has agreed to implement corrective
actions, we summarize below the major issues related to information security controls
resulting from OIG and GAO evaluations.
OIG Report - Security of Region VIIIs Dial-Up Access, No. 2000-P-16 dated March 31,
2000 - OIG reported that dial-up access controls were not adequate to properly secure
access to the Agency's network. OIG issued recommendations to the Region VIII
management and to the Director, Office of Environmental Information (OEI). Region VIII
management has reported they implemented corrective actions. In the latest management
reply, dated December 18, 2000, OEI stated they had begun implementing firewall
technology on all remote access servers throughout the Agency. OEI has committed to
installing on each remote access server device an appropriate ISO firewall feature set and
implementing the capability within 90 days.
2-10
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OIG Report - RACF Security Controls, No. 2000-1-00330 dated June 30, 2000 - OIG
reported that Resource Access Control Facility (RACF) controls over mainframe operating
system were inadequate to protect system resources. EPA's National Technology Services
Division corrected the mainframe access control weaknesses and established procedures for
periodic reviews.
OIG Report - Contract Payment System RACF Facility Audit (IGOR no. 2000-805) - OIG
completed and closed an audit of the Contract Payment System concluding that the current
implementation of Resource Access Control Facility provides sufficient access security to the
Contract Payment System application. In addition, the OIG suggested improving the
monitoring of security violations on a daily basis and reflecting this in the Contract Payment
System security plan and establishing a process to require all users passwords to expire after
90 days.
GAO Report - Fundamental Weaknesses Place EPA Data and Operations at Risk,
GAO/AIMD-OO-215, dated July 6, 2000 (non-sensitive version) - GAO reviewed (1)
management of EPA's security program, (2) the adequacy of the Agency's computer-based
controls, and (3) the extent and impact of computer security incidents. The sensitive version
of GAO's report contained over 100 technical system mainframe and server operational
security control recommendations. The Agency has initiated corrective actions to establish
Internet firewalls, improve specific Agency network access and correct computer servers
operating systems control weaknesses. However, a substantial number of recommended
technical controls over the Agency's networks and various servers were scheduled to be
completed after September 30, 2000. As of January 8, 2001, OEI was still developing
Agency-wide security management program policies and procedures. In September, the OEI
completed an Information Security Action Plan that established a schedule for addressing all
of GAO's report recommendations. The action plan presented a three-tier approach to
implementing corrective measures:
! Phase One should be completed by December 2000. These "short-term fixes"
primarily target specific controls, but also include a pilot to establish a risk assessment
process that would include general support systems and some financial systems.
! Phase Two should be completed by May 2001. During this phase, EPA will conduct
a series of risk assessments and revise security plans for major information systems.
! Phase Three will address all remaining GAO report issues, and should be completed
by November 30, 2001.
Revised Remediation Plan Satisfactory
We determined that the remedial plan issued in 1998 was not sufficient. However, after
discussions with OIG, on November 13, 2000, the OCFO submitted a revised remediation
plan to OMB. We determined that this revised plan now sufficiently addresses prior OIG
concerns, as well as concerns expressed in separate reviews by the National Security Agency
and the General Accounting Office. The revised plan addresses 13 major security areas, and
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includes numerous corrective actions and milestones. Four of the 13 areas have already been
documented as completed or substantially completed. Risk assessments are scheduled in
fiscal 2001, and the remaining corrective milestones are scheduled for completion during
fiscal 2002. Attachment 3, Status of Prior Audit Report Recommendations, under fiscal
1999 recommendation 7-1, provides summary information from the remediation plan on the
planned corrective actions and completion dates. We note that the Agency reported many
actions that had been completed at the time the remediation plan was submitted to OMB. In
our opinion, the revised remediation plan, if properly implemented, should resolve our
concerns regarding financial and mixed-financial systems security, and we are making no
further recommendations at this time.
Agency Comments and OIG Evaluation
In the response to the draft audit report, the OCFO continues to take financial system
security very seriously and remains committed to addressing the related security issues
through the action steps listed in EPA's November 2000 Remediation Plan. We note that the
OCFO continues to make progress in completing planned corrective actions.
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Attachment 3
Status of Prior Audit Report Recommendations
Table of Contents
Page
Audit of EPA's Fiscal 1999 Financial Statements 3-1
Audit of EPA's Fiscal 1998 Financial Statements 3-8
Audit of EPA's Fiscal 1997 Financial Statements 3-20
Fiscal 1994 Financial Statement Audit of EPA's Trust Funds,
Revolving Funds and Commercial Activity 3-22
Fiscal 1993 Financial Audit; Pesticides Revolving Funds and
the Oil Spill Trust Fund 3-24
Fiscal 1992 Financial Audit; Superfund, LUST and
Asbestos Loan Program 3-24
Fiscal 1991 Financial Audit; Hazardous Substance Superfund 3-24
Audit Report 2001-1-00107
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Audit Report 2001-1-00107
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Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
AUDIT OF EPA'S FISCAL 1999 FINANCIAL STATEMENTS
(Audit Report 00100231, Issued 02/28/2000)
EVALUATION OF INTERNAL CONTROLS - MATERIAL
WEAKNESSES:
OIG Comments: The following management comments and corrective action plans are based on the OCFO's
September 28, 2000 Revised Response to Final Audit Reports, Audit of EPA's Fiscal 1998 Financial Statements
and to the Audit of EPA's Fiscal 1999 Financial Statements.
1 - FURTHER IMPROVEMENTS NEEDED IN THE AGENCY'S
PROCESS FOR PREPARING FINANCIAL STATEMENTS
OIG Note: Our fiscal 2000 audit identified a reportable condition in this
area. Please refer to Attachment 1 for additional comments and
recommendations. This was also a repeat finding from the fiscal 1998
audit.
1. OCFO Comments: The final FY 1999 report made no new recommendations beyond those reported in the FY
1998 audit. Rather, the final report concluded with the statement "We strongly encourage the Acting CFO to
undertake immediate corrective action in response to our FY 1998 recommendations." We agree with this
statement.
Specific corrective actions are discussed below in response to the fiscal 1998 audit recommendations.
EVALUATION OF INTERNAL CONTROLS - REPORTABLE
CONDITIONS:
2 - FURTHER IMPROVEMENTS NEEDED IN EPA'S PROCESS FOR
REVIEWING ITS UNLIQUIDATED OBLIGATIONS
OIG Note: Our fiscal 2000 audit identified a reportable condition in this
area. Please refer to Attachment 1 for additional comments and
recommendations. Since some fiscal 1999 findings were similar to our
fiscal 1998 reported issues, we did not repeat the respective fiscal 1998
recommendations, as the Agency had not completed its implementation of
corrective actions.
We recommended the Acting Chief Financial Officer (CFO):
2.1 incorporate the same analysis of individual obligations applied in the
"special" year-end review into the annual review in order to
perform one, thorough annual review. For example, the Agency
should develop reports which emphasize older, open unliquidated
obligations; and
2.1 We concur with the recommendation to perform one thorough annual review. Currently, OCFO conducts the
"special" year-end review to determine the impact of the FMFIA weakness concerning grant closeouts and of the
backlog of contract and IAG closeouts. The results of the review are used to ensure that the obligations reported in
the financial statements are fairly presented. Once the Agency's closeout weaknesses are resolved, we will eliminate
the "special" review.
The reports used for the annual review of unliquidated obligations were developed in collaboration with the user
community, individual components of which identified the types of reports that would best assist them in meeting the
deobligation requirements.
Further, the Agency has data warehouse reports that emphasize older unliquidated obligations. To strengthen
obligation management, OCFO will notify the responsible officials that they can get obligation reports aged by last
action date from the data warehouse. Starting with the FY 2001 annual review, we will include information about
this reporting tool in the Annual Review guidance.
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Include information about the data warehouse obligation aging reports in the Annual Review guidance.
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Status of Prior Audit Report Recommendations
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and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
2.2 require FMD to verify that deobligation requests have been
processed in the IFMS and that prescribed annual review and
deobligation processes are completed at each location.
2.2 We concur with the OIG's recommendation. FMD already works with the responsible officials to verify that
they completed the prescribed annual review process. In FY 1999, FMD strengthened the process by: 1)
verifying that the SFOs completed the deobligation process for all deobligations requested by responsible
officials and 2) providing responsible officials with a follow-up report to facilitate monitoring deobligations.
To improve our process further, FMD will verify with responsible officials that all deobligations that they
requested have been processed. We will begin this additional verification in September 2000 and will
incorporate it into the standard procedures for the Annual Review.
2.2.a Request Responsible Official verification that all deobligations identified during the annual review have been
processed.
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2.2.b Include information about the Responsible Official deobligation verification requirement
in the Annual Review guidance.
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3 - FURTHER IMPROVEMENTS NEEDED IN MANAGING EPA'S
ACCOUNTS RECEIVABLE
Since some findings are similar to our fiscal 1998 reported issues, we are
not repeating the respective fiscal 1998 recommendations, as the
Agency has not completed its implementation of corrective actions.
We recommend the Acting Chief Financial Officer (CFO):
3.1 revise RMDS 2540 Chapter 10 to include a timeframe for clearing
balances held in suspense accounts.
We agree that constant vigilance and continued improvements are needed to ensure that responsible offices provide
FMOs with all documents establishing accounts receivable within the three day standard. Our emphasis in
this area has been unrelenting. However, as stated in the response to the draft report, we do not believe that
the findings cited are sufficient to conclude a chronic timeliness problem exists within the Agency.
3.1 We agree with the recommendation and will amend RMDS 2540 Chapter 10 to include a timeframe for
clearing balances in suspense accounts.
OIG Note: Comptroller Policy Announcement No. 00-12 amended RMDS 2540, Chapter 10, setting 30 days to
clear suspense accounts
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4 - ADDITIONAL IMPROVEMENTS NEEDED IN EPA'S
INTERAGENCY AGREEMENT INVOICE APPROVAL
PROCESS
Weaknesses in the IAG invoice approval process were also identified in
prior financial statement audits. We had no additional
recommendations resulting from our 1999 audit. However, our
fiscal 2000 audit identified a reportable condition in this area.
Please refer to Attachment 1 for additional comments. Since EPA
appears to be taking steps to implement its corrective actions, we
are not repeating our previous recommendations.
See below for a number of completed corrective actions in response to the fiscal 1998 recommendation 5. However,
in a July 24, 2000 memo, the OCFO planned to implement an additional corrective action, to develop a new
database for tracking IAGs that will automatically send second notifications. This corrective action is
planned to be completed by December 31, 2001.
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Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
5 - CONTINUED IMPROVEMENTS NEEDED IN ACCOUNTING
FOR CAPITALIZED PROPERTY
We recommend the Acting Chief Financial Officer (CFO):
5.1 issue guidance clarifying the criteria for capitalizing an ADP
system;
5.2 revise BOC definitions for capital equipment to be consistent with
Agency policy for capitalizing systems; and
5.3 improve the reconciliation process by: (1) ensuring FAS
reconciliations are conducted monthly and at year-end; (2)
requiring FMOs to thoroughly research any discrepancies between
the general journal and FA tables in FAS; and (3) requiring the
FMOs to certify the year-end reconciliations.
We recommend the Acting CFO, in conjunction with the Assistant
Administrator for Administration and Resources Management,
continue to work to strengthen controls designed to ensure that
property is timely and accurately recorded in the Agency's
property accountability system, FAS. Specifically, reemphasize to
the appropriate Agency personnel their responsibilities to:
5.4 ensure procurement requests are completed with the correct
budget sub-object class code;
5.5 report receipt of accountable and capital property to the appropriate
PMO in a timely manner when property acquisitions are directly
delivered to the ordering official, and forward copies of
appropriate documentation to the PMO; and
5.6 ensure that the appropriate personnel at EPA's offices are trained on
their roles and responsibilities when property is delivered.
OIG Note: Our fiscal 2000 audit identified a reportable condition in this
area. Please refer to Attachment 1 for additional comments and
recommendations.
5.1 We agree with this recommendation. The OCFO is developing WCF guidance which will clarify criteria for
capitalizing ADP Systems.
5.2 We agree with this recommendation. On February 28, 2000, the OCFO revised the current budget sub-object
class code definition of "ADP Equipment" to make it consistent with Agency guidance on accounting for
systems.
5.3 We agree that the OCFO needs to improve the reconciliation process by ensuring that the Fixed Assets
Subsystem (FAS) reconciliations are conducted monthly and at year-end. We require the Financial
Management Offices (FMO) to thoroughly research any discrepancies between the general journal and Fixed
Assets tables in FAS. We also require the FMOs to certify year-end reconciliations. In addition, in our FY
2000 Quality Assurance Workplan guidance, we instructed the FMOs to include a review of FAS
reconciliations in their workplans to ensure they are performed timely and accurately. The following action
plan is being implemented to ensure that the above items are carried out:
Send FMOs reconciliation reports by the 15th of each month requesting them to research discrepancies.
Send FMOs Year-End reconciliation reports.
Receive FMOs certification of year end reconciliations.
5.4 We agree with the recommendation. On January 12, 2000, OCFO staff provided a course to National
Technical Services Division (NTSD) staff on preparing procurement requests for property. NTSD purchases
a substantial portion of the Agency's capital equipment. We will provide additional training as needs are
identified. Further, as noted above, the OCFO is developing WCF guidance on capitalizing ADP Systems
and that guidance will include a reminder of responsibilities for accounting data, including sub-object class
codes.
5.5 We agree with the recommendation. On January 12, 2000, the Office of Administration and Resources
Management (OARM) sent a memorandum to the SROs reminding them of their property management
responsibilities. The memorandum also requests their assistance in ensuring that any item of property that
their office receives is reported to their respective property management officer timely. The memorandum is
also on the FMSD web site.
5.6 OARM agrees with the importance of informing personnel about their roles and responsibilities when
accountable property is received. We believe that the January 12, 2000, memorandum to EPA's SROs,
although not formal training, will serve to inform the appropriate personnel of those roles and responsibilities
and thereby meets the intent of this recommendation.
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Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
6 - AUTOMATED APPLICATION PROCESSING CONTROLS FOR
THE INTEGRATED FINANCIAL MANAGEMENT SYSTEM
COULD NOT BE ASSESSED
This issue has been reported since our fiscal 1995 financial statement
audit of EPA's Trust Funds, Revolving Funds and Commercial
Activity. Please refer to our fiscal 2000 final report, Attachment 1,
Reportable Conditions, for a summary of past audit findings and
our current comments on this issue. In conclusion, we continue to
believe that IFMS documentation does not adequately describe
operational system controls and does not meet JFMIP system
requirements. Moreover, we believe that potential cost savings will
be addressed when the Agency initiates the replacement of IFMS
and completes a cost benefit study. The OCFO continues to
maintain that the benefits do not justify the costs to develop and
maintain systems documentation or a data dictionary for IFMS.
However, to date, OCFO has only taken preliminary actions to
replace IFMS.
In a July 24, 2000 memorandum, Response to Final Audit Reports, Audit of EPA's Fiscal 1998 Financial
Statements and to the Audit of EPA's Fiscal 1999 Financial Statements, the OCFO provided the following
comments.
The OIG continues to state that they cannot evaluate the IFMS input, processing, and output controls without more
detailed documentation. The OIG indicated that alternatives were inefficient and impractical because of
limited auditing resources. Neither the FY 1999 nor 1998 reports include any new recommendations; the
recommendations still outstanding on this issue stem from the FY 1995 financial statement audit.
We continue to have concerns about the OIG's position and therefore do not at this time concur with the specific
recommendations from the FY 1995 audit, especially the recommendation for systems documentation, which
we believe would cost at least $1 million. However, we see a benefit to reassessing our current policies and
procedures for systems internal controls in recognition of how the environment has changed in the years since
this finding was first reported.
Also, we would like to resolve the OIG's concerns rather than continuing a mode of OIG audit finding and OCFO
non-concurrence year after year. Accordingly, the OCFO proposes a risk-based review of systems controls
and of the need for additional documentation. We would appreciate the OIG's full participation and
assistance in this analysis, which will consider the following factors:
! A review of the existing IFMS technical and user documentation, including the module manuals, and
whether further systems documentation is available from AMS, subject to their contract terms and
proprietary considerations;
! The results of our upcoming risk assessment, which should identify key existing controls and relate them to
information system threats;
! The costs and benefits of any investments, including an IFMS data dictionary and other documentation,
recognizing that cost beneficial documentation still needs to be prioritized with other system needs and that
the decision must consider available resources;
! Consultation with a third party, such as JFMIP or the General Accounting Office accounting systems staff
from the Accounting and Information Management Division;
! The retention of a third party CPA or other qualified firm to assess the adequacy of the automated internal
control structure, since this issue is the OIG's major concern, as indicated in the audit findings over the years.
The OCFO proposes to begin this assessment in July with a kick-off meeting with the OIG to identify specific
concerns and to agree on an assessment methodology. For purposes of responding to this audit finding, we
propose the corrective actions listed below. Interim detailed milestones will be developed jointly.
Kick-off Meeting
Final Decision on Results of Risk Assessment and Required Actions
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Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
COMPLIANCE WITH LAWS AND REGULATIONS
7 - REVISED FINANCIAL SYSTEM SECURITY PLANS CONTINUE
TO BE IN SUBSTANTIAL NONCOMPLIANCE WITH
FEDERAL FINANCIAL MANAGEMENT SYSTEM
REQUIREMENTS
We recommended the Acting Chief Financial Officer (CFO):
7.1 incorporate planned fiscal 2000 security plan actions for financial
systems (IFMS, CPARS, MARS and EPAYS) into a formal
remediation plan.
OIG Note: Attachment 2 of our fiscal 2000 audit reported a
noncompliance with FFMIA requirements. The noncompliance
falls short of the recently revised OMB criteria for defining this
noncompliance as substantial.
On November 13, 2000, the Agency submitted its Fiscal Year 1999 Remediation Plan to OMB to fulfill the
statutory requirements of FFMIA. Included in the Remediation Plan, were four major sections discussing
various issues resulting from our audits and planned corrective actions.
Section 1 discussed the Financial Statements Preparation Process. This discussion included 4 major corrective
actions including a data integrity evaluation of the IFMS accounting model, preparation of interim nine
month financial statements, a strengthened quality control process, and implementing an automated
reporting process for the SF 133, Report on Budget Execution & Federal Agencies Centralized Trial
Balance System (FACTS) II. Also refer to Attachment 1 for additional comments on this matter.
Section 2 discussed Compliance with the Managerial Cost Accounting Standard. See below for agency corrective
actions under finding 8. EPA WAS NOT ABLE TO ACCURATELY ACCOUNT FOR THE COST TO
ACHIEVE EACH OF ITS GOALS
Section 3 discussed Federal Trading Partner Information. This section discussed a number of corrective actions, all
of which have been completed, except for having other Federal agencies confirm EPA's balances. Because
the confirmation and reconciliation process involves sharing of information among various federal
organizations, the Department of Treasury recently issued its Federal guidance on reconciling trading
partners data between agencies. Also refer to Attachment 2 for additional comments on this matter.
Section 4 discussed Financial System Security Plan Improvements. This discussion included 13 planned corrective
action items and numerous sub-items, with projected completion dates through June 2002. The OCFO
acknowledged that efforts to comply with all federal financial system security requirements were, in some
respects, incomplete as of September 30, 1999. However, EPA has made significant progress since that time.
This progress includes both actions completed and actions planned. The EPA offices responsible for
financial and mixed systems, the Office of the Chief Financial Officer (OCFO) and the Office of
Administration and Resources Management (OARM), have been working closely with the Agency's Office
of Environmental Information (OEI) to address security issues in a coordinated, comprehensive manner. The
corrective actions presented reflect this joint effort and include steps to address the findings from the
February 2000 GAO audit. In addition, for the financial and mixed systems listed in the Agency's Financial
Systems Inventory, EPA is using the GAO model for managing information security through a cycle of risk
management activities. The risk management cycle includes the following four key steps: (1) assess risk to
determine information security needs, (2) develop and implement policies and controls that meet these needs,
(3) promote awareness to ensure that risks and responsibilities are identified. The discussion identified a
number of actions that have been completed.
OIG Comments: As required by FFMIA, we will report on the Agency's progress in implementing corrective
actions in the IG's Semi-annual Reports to Congress and in our annual financial statement audits.
Last action
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Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
8 - EPA WAS NOT ABLE TO ACCURATELY ACCOUNT FOR THE
COST TO ACHIEVE EACH OF ITS GOALS
We recommended the Acting Chief Financial Officer (CFO):
8.1 establish, for both PEs and PRCs, procedures to identify actual
costs by goal, objective and subobjective at the time the costs are
recorded;
As stated in previous responses, OCFO believes the flexibility inherent in SFFAS No. 4 must be considered
when evaluating compliance and that EPA's actions to date are consistent with the Standard's intentions.
Also consistent with SFFAS No. 4, OCFO agrees that improvements are necessary over time to enhance cost
accounting capabilities. Based on points raised in the audit report and subsequent discussions with OIG
representatives, OCFO agrees to the following courses of action:
8.2 develop timely, reliable, accurate cost reports to enable managers
to monitor, on an ongoing basis, the total costs of their programs,
including indirect/support costs; and
8.3 develop a Statement of Net Cost with accurate and reliable cost
information by goal which can be used for external reporting
purposes.
OIG Note: Attachment 2 of our fiscal 2000 audit reported a repeat
substantial noncompliance with FFMIA requirements. Please
refer to Attachment 2 for additional comments and
recommendations.
! The FY 2000 Statement of Net Costs will be presented by Goal on or before January 10, 2001.
! The crosswalk used as the basis for the Statement of Net Costs will identify Program Element (PE) expenses
to the Sub-objective level. OCFO projects that 29% of FY 2000 expenses are funded from PE accounts
(down from 59% in FY 1999). Of the cross walked amounts, OCFO has determined that approximately
68% link readily to a single Sub-objective based on the nature of the work, as defined in the Sub-objective
Description Book. The remaining PE-funded expenses will be cross walked by the Responsible Program and
Implementation Officials in accordance with instructions prescribed by OCFO in a July 28, 2000
memorandum.
! An allocation of Goal 10 costs to Goals 1-9 will be shown on the Statement of Net Costs on or before
January 10, 2001. The methodology will be disclosed in a footnote to this Statement.
! OCFO will establish a web page with a report which will incorporate the results of the Sub-objective level
crosswalk along with the costs accounted for in the Planning Results Code (PRC) structure. The web page
will show Agency cost per output and be completed by December 31, 2000. This provides a delineation of
all Agency FY 2000 costs by Sub-objective and thus offers to any Agency office the means to consider total
Sub-objective costs for resource planning and analysis. This information will supplement the plethora of
existing Agency financial reporting tools.
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! For FY 2002, we plan to produce cost per output information at year end and at least once during the course
of the year.
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! After the close of FY 2000, OCFO will evaluate the need for future crosswalks and other options depending
on the level and nature of remaining PE-funded expenses. This will be completed after the issuance of the
financial statements.
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! As part of the iterative improvement process envisioned by SFFAS #4, we will survey Agency managers to
determine their views on timeliness needs for this data and usefulness of the cost per output information. The
survey, to be completed by March 31, 2001, will also solicit suggestions for improvements to the cost per
output information that can be made.
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Status of Prior Audit Report Recommendations
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and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
9 - EPA WAS UNABLE TO PRESENT REQUIRED INFORMATION
ON ITS TRADING PARTNERS
We recommended the Acting Chief Financial Officer (CFO):
9.1 issue an OCFO policy to require all finance offices to expedite the
review of trading partner transactions and the input of the trading
partner information into IFMS to ensure that the Agency can track
and report trading partner information, and
9.1 We agree with the recommendations. On March 31, 2000, we issued Comptroller Transmittal Notice 00-07,
"Recording Intragovernmental Transactions in the Integrated Financial Management System (IFMS)." On
June 6, 2000, we issued Comptroller Policy Announcement 00-06, on "Policies and Procedures for Verifying
and Correcting Trading Partner Information in EPA's Integrated Financial Management System." Both of
these documents establish procedures for timely, accurate and reliable entry of trading partner data in IFMS.
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9.2 establish quality control procedures to ensure the trading partner
information is entered into IFMS timely, accurately, and reliably to
meet applicable reporting requirements.
OIG Note: Attachment 1 of our fiscal 2000 audit identifies a
noncompliance with FFMIA requirements for this issue. The
noncompliance falls short of recently revised OMB criteria for
defining this noncompliance as substantial. EPA implemented
internal controls to properly account for intra-governmental
transactions, as recommended by OIG in its audit of the fiscal 1999
financial statements. At this time, OIG does not have any
additional recommendations, since further action is needed at the
Federal level.
9.2 We are also working on another related Policy Announcement, this one on confirming and reconciling balances
with trading partners. Because the confirmation and reconciliation process involves sharing of information
among various federal organizations, the Department of Treasury recently circulated a draft guidance
document for agencies' review. We reviewed the draft guidance and provided comments to the responsible
work group. FMD is, incidentally, represented on the federal trading partner workgroups both to participate
in the shaping of the federal guidance and to ensure that we have the knowledge necessary to act quickly to
finalize our Policy Announcement once the federal parameters are reasonably defined.
Issue Policy Announcements on Confirming and Reconciling Balances with Trading Partners (Target Date
dependent in part on how quickly Treasury issues final guidance.)
OIG Note: Policy Announcement on Confirming and Reconciling Balances with Trading Partners not yet issued as
of the date of this report.
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10 - ADDITIONAL ACTION IS NEEDED TO BRING EPA INTO
COMPLIANCE WITH USER FEE REQUIREMENTS
We recommended that the Acting Chief Financial Officer (CFO):
Repeat finding from a fiscal 1993 audit on the Pesticides Revolving Funds
and the Oil Spill Trust Fund (Audit Report E1AML3-20-7001-
4100230, issued March 31,1994)
10.1 follow through and either institute, revise, or update all user fees
or obtain exceptions from OMB as required by OMB Circular A-
25, "User Charges."
OCFO finalized the Biennial Review of User Fees, on January 19, 2001. Also, on January 19, 2001, the Deputy
Administrator transmitted EPA's formal request to OMB for the needed exceptions.
Biennial Review of Fees - Final Report
Update Exceptions sent to OMB
Final disposition of Exception Requests
Note: OCFO deleted this milestone since it is outside the control of the Agency. The OIG has no objection to the
deletion of the milestone.
10/13/00
10/31/00
12/29/00
Completed
1/19/01
Completed
1/19/01
N/A
Audit Report 2001-1-00107
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AUDIT OF EPA'S FISCAL 1998 FINANCIAL STATEMENTS
(Audit Report 99B0003, Issued 09/28/99)
EVALUATION OF INTERNAL CONTROLS - MATERIAL
WEAKNESSES:
1.0 IMPROVEMENTS NEEDED IN THE AGENCY'S PROCESS
FOR PREPARING FINANCIAL STATEMENTS
We recommend the Chief Financial Officer (CFO):
1.1 evaluate the OCFO's process for preparing the financial
statements, including the OCFO resources assigned, necessary
improvements to IFMS, contol processes within the Financial
Reports and Analysis Branch, and the Year-End Closing Process,
1.1 Complete evaluation of the OCFO process for preparing financial statements
Complete evaluation of IFMS accounting model
Document financial statement preparation process
Recommend scope of possibilities for automation
08/31/99
07/31/00
09/08/00
09/18/00
3/31/01(rev)
Completed
Completed
9/21/00
Completed
9/29/00
Open
Implement the new automated reporting process using the Standard General Ledger for the SF-133 and Statement of
Budgetary Resources
10/30/99
09/30/00(rev)
Completed
10/00
1.2 update the Agency's policies and procedures for preparation of
annual financial statements to reflect the new legislative
requirement, new accounting standards, and new format and
presentation requirements. The procedures should include
milestone dates and activities for completion, OCFO and other
offices' roles and responsibilities, descriptive processes for
preparing the financial statements, and plans for obtaining the
needed information and providing reliable supporting
documentation, and
1.2 Issue Final Policies and Procedures on Preparing Financial Statements
OIG Note: Comptroller Policy Announcement 00-11 issued 9/29/00
03/31/00
08/31/00(rev)
Completed
9/29/00
1.3 establish a quality review process to ensure that the draft financial
statements including the footnotes, supplemental information, and
overview are complete and reliable, and the Director, FMD,
certifies such documents prior to submittal for audit.
1.3 Establish Quality Control Group
Training on new requirements
Reach agreement with OIG on timeline for key milestones in preparing and finalizing the statements
Establish formal controls w/OIG in addressing audit questions and adjustments
08/15/00
09/30/00
09/30/00
Completed
Completed
Completed
10/30/00
OIG Note: We reported a reportable condition in the Agency's process
for preparing financial statements in our fiscal 2000 and a material
weakness in our fiscal 1999 audit report. Please refer to our fiscal
2000 report, Attachment 1, for additional comments and audit
recommendations on this issue.
OIG Note
Audit Report 2001-1-00107
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Status
2.0 AGENCY ENCOUNTERED SIGNIFICANT DIFFICULTIES IN
PREPARING THE STATEMENTS OF BUDGETARY
RESOURCES AND FINANCING
We recommend the Chief Financial Officer:
2.1 review all fiscal year 1989 and prior unliquidated obligation and
authority balances and make any necessary adjustments,
2.1 In a July 24, 2000, memorandum, the OCFO provided the following comments. We implemented the review of
unliquidated obligation balances in April 1999 as part of the FY 1999 Review of Unliquidated Obligations.
We completed the review of authority balances in February 2000, and discussed the resulting adjustment to
the general ledger with OMB and the OIG. Both agreed to this action as part of the 2000 audit of the
Statement of Budgetary Resources. Status should now be "closed."
Feb. 2000
Completed
2.2 develop reports for the annual review of unliquidated obligations
which highlight older open unliquidated obligations.
2.2 We do not agree with this recommendation because OCFO provides the responsible officials with reports listing
all inactive obligations (no activity for 180 days) grants, contracts and IAGs for the annual review of
unliquidated obligations. OCFO requires officials to review all inactive obligations including older open
unliquidated obligations. Thus, the Agency maximizes its ability to efficiently use resources available and
identify, deobligate and reuse these funds. The reports that OCFO provides comply with EPA and GAO
review requirements
None - due to
disagreement.
OCFO
provides
reports listing
all inactive
obligations
2.3 require responsible officials to justify unliquidated obligation
balances whose period of performance has ended, if the balances
are not deobligated.
2.3 We do not agree with this recommendation since FMD has already implemented more stringent requirements.
The March 25, 1999, guidance memorandum for the FY 1999, "Review of Unliquidated Obligations,"
requires responsible Agency officials to maintain documentation in their office's files justifying all
unliquidated balances retained on the inactive obligation lists, as defined in the response to 2.2 above, that
will be available for audit review
None - more
stringent
requirements
already
implemented
2.4 follow up on responsible officials' deobligations to verify
appropriate actions were taken,
2.4 While we agree with the thrust of this recommendation, we want to clarify the roles and responsibilities for the
verification process. Verification of deobligations requires two action plans: one for those identified during
FMD's special analysis and another for deobligations identified by the allowance holders during the annual
review of unliquidated obligations.
Follow up with the appropriate procurement and/or finance office(s) regarding any unneeded funds that have not
been deobligated,
Monitor the document's fund status in IFMS (or CPS for contracts) until the deobligation has been processed, and
Provide FMD at year end with the document number and funding information for any unneeded funds identified
during the review that were not deobligated
Ongoing
Ongoing
10/30/99
Completed
01/16/01
Completed
01/16/01
OIG Comments: The OCFO's February 24, 2000 response to our draft fiscal 1999 audit report indicated that
action was completed for this recommendation. We have not received a written certification from the Action
Official, or delegated program manager, that action was complete for this recommendation as is required by
EPA Order 2750.
OIG
Comments
Audit Report 2001-1-00107
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2.5 prepare the SF-133s from the general ledger,
2.5 We agree with the recommendation because beginning in FY 1999, we began preparing the SF133 report
directly from the General Ledger. We are now well underway in automating this process and plan to
implement this process by October 30, 1999
10/30/99
Completed
2.6 prepare and retain support for all journal entries and adjustments
made to produce the SF-133s, and
2.7 require evidence of supervisory approval to help ensure that
procedures have been followed.
OIG Note: For fiscal 2000, we had a reportable condition concerning the
Agency's review of unliquidated obligations. Please refer to our
audit report, Attachment 1, for additional comments and
recommendations.
2.6 We agree with this recommendation as all the above referenced documentation is maintained by FRAB. It is
Agency policy to prepare and retain support for all journal entries and adjustments to the SF-133's.
Beginning in FY99, we will reflect all SF-133 adjustments in the General Ledger
2.7 We disagree with this recommendation. Hard copies of the SF-133s are produced after they are electronically
transmitted for post review purposes. The present electronic format, unlike previous years, does not provide
for the supervisors' signature before transmission. Supervisory certification will be incorporated in the new
FACTS II transmission (which will include the SF-133 and year end close-out reports). We will ensure that
we annotate hard copies maintained within FRAB
Action
already
implemented
None - due to
disagreement
Completed
9/30/99
OIG Note
EVALUATION OF INTERNAL CONTROLS - REPORTABLE
CONDITIONS:
3.0 AGENCY NEEDS TO ESTABLISH PROCEDURES FOR
TRACKING UNILATERAL ADMINISTRATIVE ORDERS
We recommend the Chief Financial Officer:
3.1 track in IFMS all demands for payment issued under UAOs,
3.1 We partially agree with this recommendation. We believe that this recommendation should only refer to the
tracking of Superfund UAOs. and not all UAOs. Our partial disagreement is due to our understanding of the
conclusions reached at the March 9, 1999, meeting between the OIG, OGC, OECA, and OCFO that Agency
efforts should be focused on tracking Superfund UAOs only at this time.
Issue Final Policy for Tracking UAOs. Comptroller Transmittal 00-05, dated 1/11/2000 outlines procedures for
recording and tracking Superfund UAOs.
9/30/99
Completed
1/11/00
Implement and Monitor Policy
Ongoing
Completed
Audit Report 2001-1-00107
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Date
Status
3.2 determine if other demands for payment are issued by the Agency,
the respective amounts demanded, and whether a need exists to
track the amounts demanded in IFMS, and
3.2 We partially agree with this recommendation. We believe that this recommendation should refer to other
Superfund Demands and not "other Demands" for the same reasons discussed in our response to
recommendation 3.1 above. The OCFO will address and determine other Superfund Demands which may or
may not require tracking.
Determine other Superfund Demands that may or may not require Tracking
4/1/00
Completed
3.3 revise RMDS to clearly differentiate between administrative
orders (particularly administrative orders on consent and UAOs),
describe when the administrative orders need to be established as
an accounts receivable in IFMS or separately tracked as a demand
for payment in IFMS, and describe all other demands for payment
that need to be tracked in IFMS.
3.3 We partially agree with this recommendation. We believe that "other Demands" for payments should be deleted
from this recommendation for the same reasons discussed under 3.1 above. The OCFO has already taken
steps to clearly differentiate between Superfund administrative orders and describe when they need to be
tracked in IFMS. This will be addressed after proper coordination with OECA, OSWER, and OGC taking
into consideration the varying levels of enforcement tools available to the Agency. A final draft policy is in
place which will supplement RMDS and includes: a clarification of the difference between Administrative
Orders on Consent and Unilateral Administrative Orders (UAOs), and a discussion if these documents can be
used to record accounts receivable; and guidelines for separately recording oversight accounts receivable to
enhance the Agency's ability to track oversight amounts for management and reporting purposes.
Issue Final Policy. Comptroller Transmittal 00-05, dated 1/11/2000 outlines procedures for recording and tracking
Superfund UAOs
9/30/99
1/11/2000
Completed
Update policy to for tracking other Superfund Demands, if needed
5/31/00
Completed
We recommend the Assistant Administrator for Enforcement and
Compliance Assurance:
3.4 develop guidance for ORCs, program offices and finance offices
regarding the types of instruments used in the Superfund
enforcement process. For each instrument, describe when to
establish an accounts receivable or separately track as a demand
for payment, and describe the Agency's basis for legal liability
under each instrument, and
3.4 OSRE/OECA previously responded to these audit recommendations 3.4 and 3.5 in memoranda dated February
17 and February 26, 1999. Comptroller Transmittal 00-05, dated 1/11/2000
1/11/00
Completed
3.5 clarify the model language to be used by ORCs, program offices
and finance offices to clearly differentiate between demands for
payment and bills for payment used in the Superfund enforcement
process.
Completed
Audit Report 2001-1-00107
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Management Comments and Corrective Action Plans
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Date
Status
4.0
FURTHER IMPROVEMENTS NEEDED IN MANAGING EPA'S
ACCOUNTS RECEIVABLE
We
recommend the Chief Financial Officer (CFO):
4.1
continue to provide training on calculating the allowance for
doubtful accounts, particularly in the area of developing the
percentage portion of the allowance and maintaining proper
supporting documentation,
4.1 Provide Training on Calculating Allowances for Doubtful Accounts
Ongoing
Completed
4.2
review finance offices' management and accounting for accounts
receivable during regularly scheduled Quality Assurance Reviews
to ensure FMOs understand and are following guidance on
accounts receivable, and
4.2 Determine which regions require quality assurance reviews
Conduct FMO training
Conduct quality assurance reviews to ensure FMOs are properly following accounting guidance
Annually
As needed
As needed
Completed
Completed
Completed
4.3
instruct the FMOs to follow-up with ORCs and program offices
when responses to requests for receivable collectability
information are not received timely; instruct the FMOs to assess
how communication with the ORCs and the program offices can be
improved; and reemphasize FMOs' responsibilities in ongoing
training sessions.
4.3 The Agency continuously emphasizes the need for more effective accounts receivable and collections
management. We continue to make improvements in this area and believe that we are doing a better job of
managing our accounts receivable and collections. Numerous actions taken during fiscal 1999 included
discussing policy and procedures during a June 1999 Superfund Cost Recovery and Financial
Management Training Conference, periodic meetings with DOJ to improve accounts receivable recording
and discuss status of collections, issuing a joint OCFO and OECA memorandum dated July 26, 1999,
entitled Superfund Accounts Receivable Collections, to emphasize collection of outstanding accounts
receivable and OECA and OCFO discussions concerning the establishment of a Superfund collections
workgroup.
Provide periodic training and workshops on the management of accounts receivable and collections
Annually
Completed
We
recommend the Assistant Administrator for Enforcement and
Compliance Assurance:
Meet with DOJ
Ongoing
Completed
4.4
continue to work to improve the Regional process for meeting
guidelines in the July 16,1998, memo to Regional Counsels entitled
"Effective Debt Management," and
4.4 We disagree with this recommendation. OSRE and FMD began this review by issuing a memorandum dated
July 26, 1999, to the Regional Comptrollers, Waste Division Directors, and the Office of Regional Counsel
Branch Chiefs addressing Superfund Accounts Receivable Collections. The memorandum requires each
region to prepare and submit to Headquarters, within a month of the receipt of the memorandum, a plan to
address overdue receivables. As a coordinated effort among the financial management offices, offices of
regional counsel, program offices and the DOJ, each plan should define the roles and responsibilities of each
organization in performing the steps in addressing overdue receivables, the estimated time frames to complete
these steps, and a primary regional contact. OSRE and FMD will continue to work with the regions to
monitor their progress in addressing the overdue receivables
None due to
disagreement
and ongoing
activities
Audit Report 2001-1-00107
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Management Comments and Corrective Action Plans
Target
Date
Status
4.5 revise the Department of Justice interagency agreement to require
DOJ to directly transmit to the ORCs and Regional finance offices
copies of final source documents (i.e. Consent decrees, judgments)
required to establish the recording of accounts receivable within 7
days of entry by the courts, and notify both the ORC and finance
offices of any changes in the status of the collectability of the debt
within 30 days of such determinations.
We recommend the CFO and the Assistant Administrator for
Enforcement and Compliance Assurance work together to:
4.6 assure the roles and responsibilities of offices involved in the
oversight billing process are maintained so that the Agency can
sustain its emphasis on timely billing and collection of oversight
costs, and
4.7 develop and implement performance measures for the Senior
Resource Officials to assess how well the regions are managing
their oversight cost billings and other cost recovery activities. Tie
the performance measures into EPA Goal 10, Effective
Management, which calls for EPA to "establish a management
infrastructure that will set and implement the highest quality
standards for effective internal management and fiscal
responsibility."
OIG Note: We also noted a Reportable Condition for accounts receivable
in our fiscal 1999 audit. Please refer to our fiscal 1999
recommendation 3.1 and to our fiscal 1997 recommendations 2.1
through 2.5 for additional comments and current status on this
4.5 We agree with this recommendation and OSRE, FMD, and DOJ have been working to implement an electronic
network to satisfy the requirements for establishing the recording of accounts receivables. Data management
personnel have acquired the necessary software to implement this electronic system. We believe that this
system will be more effective and prompt in transmitting the source documents. After addressing any initial
system problems and ensuring the effectiveness of the electronic system, the Department of Justice IAG will
be revised
04/30/01
Open
4.6 The roles and responsibilities of the regional offices in carrying out the oversight billing process were
documented by each region in April 1998. The roles and responsibilities vary among regions, and the OCFO
will continue to emphasize the need to have clear regional roles and responsibilities for this process.
Maintain roles and responsibilities for the regional oversight billing process
Ongoing
Completed
4.7 This was completed in July 1999. The OCFO has implemented the recently developed SRO Performance
Measure on Superfund oversight billing. The first measurement period will be FY 2000. We also have
developed a new Financial Management Core Measure on Oversight billing which automatically ties in to
Goal 10, Objective 2, and Subobjective 1. Within Subobjective 1, annual performance goal # 2 requires
core finance activities meet OCFO Core Financial Management Performance Measures.
Develop and Implement the SRO Measure on Superfund oversight billing
7/28/99
Completed
OIG Note
Audit Report 2001-1-00107
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and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
5.0
ADDITIONAL CONTROLS NEEDED IN INTERAGENCY
AGREEMENT INVOICE APPROVAL PROCESS
We
recommend the Director, Grants Administration Division (GAD):
5.1
develop a fact sheet for Agency managers explaining the invoice
approval requirements to help ensure responses are provided
timely,
5.1 The OCFO did not agree with the initial OIG recommendation and, instead, indicated it would be more
beneficial for the Grants Administration Division to develop and issue a GAD Fact Sheet for Agency
Managers explaining the requirement and the need for timely responses.
OIG
Comments
Completed
2/07/00
OIG Comments: The OIG concurs with the GAD proposal. The fact sheet can also be a useful tool to alert
managers to related concerns about timely return of the approval form, completeness and the need for cost
details to support the invoice.
Issue GAD Fact Sheet
3/31/00
5.2
5.3
consider expanding the IAG portion of the project officer
training/refresher course to place more emphasis on the
importance of timely and properly completing the approval form.
Consider having an official from CFMC present this portion of the
course or prepare the materials to be used, and
work with the Director, Financial Services Division, to have the
Chief, CFMC notify the IAG approving officials when project
officers are delinquent or not timely in completing and returning
the IAG invoice approval forms.
5.2 In a July 24, 2000 memorandum, the OCFO provided the following updates on corrective actions taken. The
CFMC has provided the GAD a copy of its guide for project officers. GAD will use this guide in future
training courses. In an effort to reach more project officers, CFMC also posted the project officer guide on
the OCFO web site. CFMC has also provided training to: Region III project officers, Superfund project
officers through a joint course with the Corp of Engineers, and attendees at the annual Reimbursable
workshop. The reimbursable workshop included finance staff from all Regions as well as Headquarters.
CFMC will continue to work with the GAD to identify opportunities to attend project officer training
courses. As of June 22, 2000, for FY 2000, the GAD conducted four basic training sessions and two one-
day refresher training sessions. In addition, the following are planned: Basic Course: (07/18-20/00 &
08/22-24/00); and a One Day Refresher course on 07/25/00. Participate in GAD Project Officer Training
Course
5.3 In a July 24, 2000 memorandum, the OCFO provided the following updates on corrective actions taken. GAD
has worked with the Chief, CFMC/FSD on notifying the IAG approving officials when project officers are
delinquent or not timely in completing and returning the IAG invoice approval forms. Since March 1, 2000,
CFMC has been sending by email second notifications to Approving Officials who are responsible for Project
Officers that have numerous outstanding approval forms. As a result, the backlog has been significantly
reduced. We will continue this practice until the backlog is eliminated. In addition, we will be developing a
new database for tracking IAGs that will automatically send second notifications
Ongoing
12/31/01
Completed
Open
We
recommend the Director, Financial Services Division direct the
Chief, CFMC:
5.4
to notify IAG approving officials when project officers are
delinquent or not timely in completing and returning IAG invoice
approval forms, such as by sending the second request to
approving officials, and
5.4 See comments to 5.3 above.
Audit Report 2001-1-00107
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Date
Status
5.5 to compile a list of project officers with outstanding, late or
incomplete invoice approval forms and forward to the Senior
Resource Officials on a semiannual basis, asking for their
assistance in getting project officers to timely and properly
complete the forms.
OIG Note: This issue was first reported by us in our FY 94 financial
statement audit of EPA's Trust Funds, Revolving Funds and
Commercial Activity. Please refer to our fiscal 2000 Attachment 1,
for additional comments on this issue.
6.0 CONTINUED IMPROVEMENTS NEEDED IN ACCOUNTING
FOR CAPITALIZED PROPERTY
We recommend the Chief Financial Officer, in conjunction with the
Assistant Administrator for Administration and Resources
Management:
6.1 continue to work to strengthen controls designed to ensure that
property is timely and accurately recorded in the Agency's
property accountability system, FAS. Specifically, reemphasize
to the appropriate Agency personnel their responsibilities to:
• provide descriptive information about an existing
parent property item in the procurement request for
capital improvements; and
• report receipt of accountable and capital property to the
appropriate PMO in a timely manner when property
acquisitions are directly delivered to the ordering
official, and forward copies of appropriate
documentation to the PMO.
5.5 In a July 24, 2000 memorandum, the OCFO provided the following update on corrective actions taken. The
OCFO sent the Senior Resource Officials a list of "chronically" delinquent project officers on April 20,
2000, in order to elicit their assistance in having the reports completed timely and properly. We will
continue to do this on a routine basis. Our next report will be issued in October 2000. This action should
now be closed in the tracking system.
OIG Comment: We would appreciate receiving a written certification from the Action Official, or delegated
program manager, that action was complete for this recommendation as is required by EPA Order 2750.
Date not
provided
Completed
OIG
comment
OIG
Note
6.1 We concur with the above recommendation. We believe it important to emphasize, however, that the
appropriate Agency personnel who need to be reminded of their property management responsibilities are not
necessarily Property or Financial Management personnel. Users of Agency property, such as custodial
officers, project officers, funds certifying officers and managers, and other ordering officials, must be made
aware of Agency property management requirements. To correct this problem OARM's role in this effort
will be to coordinate with specific organizations when property records indicate they are not complying with
Agency property management policy. In addition to site visits performed by OARM's Facilities
Management Services Division (FMSD), FMSD in conjunction with FMD, plans to take every opportunity
to present briefings, conduct training sessions (such as the Fixed Asset Subsystem training conducted
February 2-4, 1999), attend organizational meetings, and participate in any way to disseminate information
and guidance concerning accurate documentation and timely processing of required receiving documents.
As mentioned in the Audit report, during October 1998, the Financial Management Division (FMD) issued
Transmittal Notice (TN) 99-03, "Guidelines on Preparing Requisitions for Property and Related Goods."
This guidance provided detailed instruction on preparing purchase requests for capital improvements. The
instructions give examples of how to prepare requisitions for capital improvements when descriptive
information concerning an existing parent property is required. FMSD will issue a memorandum to Agency
Senior Resources Officials: (1) reminding them of their responsibility to follow Agency property
management policy along with a copy of the FMD TN 99-03 and (2) requesting that they distribute it to their
respective project officers, ordering, and funds certifying officers.
Audit Report 2001-1-00107
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OIG Note: We again noted a reportable condition for accounting for
capitalized property in our fiscal 2000 audit. Please refer to
Attachment 1, for additional comments and recommendations.
We have reported property issues since our first financial statement audit
of the Superfund in FY 92 and other financial related audits of the
Superfund since FY 82. Since that time, we have reported
continuing problems with accounting for and controlling property.
Management should continue its emphasis in this area.
Finally, ETSD is scheduling a joint review session with RTP FMSD, RTP OAM and FMD to address WCF
property accounting problems. At the conclusion of this session, ETSD expects to have a plan of action for
correcting problems before the end of this fiscal year.
Issue memorandum to Agency Senior Resource Officials
Implement an action plan to correct WCF property accounting problems
9/30/99
9/30/99
07/31/00(rev)
Completed
01/12/00
Completed
7/3/00
OIG Note
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Date
Status
COMPLIANCE WITH LAWS AND REGULATIONS
9.0 EPA IS NOT IN SUBSTANTIAL COMPLIANCE WITH
FEDERAL FINANCIAL MANAGEMENT SYSTEM
REQUIREMENTS
Because the organizational responsibility for the financial and mixed-
financial systems varies, we are directing our recommendations to
multiple action officials. The following recommendations
intentionally address corrective actions at a high level, because it
would be too prescriptive and voluminous to elaborate on
corrective actions for each system within the confines of this final
report. Furthermore, we believe managers should be responsible
for determining minimum security controls, based on the risk
associated with system operations. For more specific information,
managers should refer to the detailed evaluations which we
previously forwarded to system owners.
We recommend the Chief Financial Officer:
9.1 develop an overall remediation plan which specifies resources,
remedies and intermediate target dates associated with bringing
CPARS, CPS, EPAYS, IFMS, MARS, TM+ and BAS systems into
substantial compliance with OMB, NIST and Agency
requirements, and addresses the critical security controls shown in
Table 2.
In the CFO's 8/16/99 response to the draft report, she stated: With respect to compliance with the Federal Financial
Management Improvement Act, we continue to believe that we are substantially in compliance with the
requirements of that law. In those areas where the audit cites deviations from procedural requirements, we
have documented the steps we have taken to remedy those findings.
9.1 We do not agree with this recommendation. We believe that the Agency financial systems cited above (in FY 98
report) are substantially in compliance with OMB, NIST and Agency requirements. See FY 98 report,
Appendix II, pages 14 - 25 for detail discussions supporting the CFO position on this recommendation.
OIG Comment: Based on our review of evidence provided to us at the time of the audit, and subsequently, we
have not changed our position on the need to develop an overall remediation plan.
Additional Agency Comments: The OCFO's February 24, 2000 response to our draft fiscal 1999 audit report
indicated "The report notes (page 3-1, last paragraph) that the Agency revised its core system security plans
during 1999. Thus the "remediation plan corrective actions were completed on schedule." The auditors
evaluated the adequacy of the security plans for IFMS, MARS, CPARS, and EPAYS, as approved in 1999.
A revised security plan for CPS was approved May 26, 1999, and a new security plan for TM+ was
approved on September 13, 1999. Since the auditors report no adverse findings with respect to these
security plans, we believe that no further remediation under this recommendation is necessary."
Additional OIG Comments: As also stated in our fiscal 99 report, page 3-1, we performed a follow up review of
security plans prepared as a result of our FY 98 recommendations. We found that the security plans were
improved, but that they still lacked significant detail to document critical operational security controls,
identify audit trails, and implement system-related guidance. For fiscal 1999, we again reported a
noncompliance with laws and regulations for federal financial management system requirements in fiscal
1999. In responding to our fiscal 1999 draft audit report, the OCFO agreed to develop a formal remediation
plan by March 31, 2000. Please refer to our fiscal 1999 recommendation 7.1, for additional comments and
our audit recommendation resulting from our fiscal 19 99 audit.
OIG Note: In a February 2, 2000, exit briefing, GAO reported to senior EPA officials that the Agency's financial
systems security plans were inadequate. We understand that GAO will be issuing a report by June 2000.
Accordingly, additional corrective actions may be needed based on GAO's recommendations. For a
summary of the issued GAO audit report findings, please see our fiscal 2000 Attachment 2, Despite
Improvements, Financial System Security Plans Continue to be Noncompliant.
Fiscal 2000 update: On November 13, 2000, management finalized a remediation plan and sent it to OMB. Please
refer to our 1999 audit, finding 7.1 for a summary of the remediation plan and planned corrective action
plans. The remediation plan included a number of corrective actions and additional planned target dates to
revise plans based on risk assessments. The last planned target date was June 2002.
OIG
Comment
Additional
Agency
Comments
Additional
OIG
Comments
OIG Note
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Management Comments and Corrective Action Plans
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Date
Status
We recommend the Director for Acquisition Management:
9.2 develop security plans for CDOTS, ICMS, SPEDI, and CIS which
address the critical security controls depicted in Table 2 above,
and bring these systems into compliance with OMB Circular A-
130, NIST and Agency requirements.
9.2 We do not agree with this recommendation. We believe that the Agency procurement systems cited above are
substantially in compliance with OMB, NIST and Agency requirements. Also in support of our position, the
facts related to this issue are as follows:
-- The Contracts Information System (CIS) has been in operation for a number of years and has had an approved
Security Plan in the past. Although security controls for CIS have not changed, security information for this
system is being incorporated into the ICMS Security Plan.
Additional Agency Comments: The OCFO's February 24, 2000 response to our draft fiscal 1999 audit report
indicated that the Contracts Information System (CIS) was retired on December 31, 1999. Therefore, a
security plan for CIS is no longer needed.
OIG Comment: As this system was retired, we concur that a security plan for CIS is no longer needed. However,
we have not received or reviewed documentation from the system manager about the decision to retire this
system.
-- A Security Plan for the ICMS family of applications, which includes ICMS, SPEDI and CDOTS, was approved
by the Security Information Resources Management Officer (SIRMO). The SIRMO has directed OAM to
address issues brought up in an extensive critique of the Security Plan by OIRM's IRM Policy and
Evaluation Division to add information to specific sections of the plan.
Additional Agency Comments: The OCFO's November 13, 2000 remdiation plan indicated that the ICMS
Security Plan was revised and will be redone based on a risk assessment.
Complete full Security Plan
OIG Comment: This corrective action meets the intent of our recommendation for ICMS
We recommend the Director, Grants Administration Division:
9.3 address the critical security controls, as indicated in Table 2,
needed to bring the P2000 security plan into compliance with OMB
Circular A-130, NIST and Agency requirements, and
9.4 coordinate with GICS data owners and address the critical security
controls, shown in Table 2, necessary to bring the GICS security
plan into compliance with OMB Circular A-130, NIST and Agency
requirements.
9.3 The GAD Systems Security Plan was completed in August 2000.
Issue P2000/IGMS Security Plan (P2000/IGMS Security Plan was issued/signed October 5, 2000)
9.4 We disagree with this recommendation. The GAD Systems Security Plan as of September 30, 1998, represents
a sufficient level of detail as required by EPA guidelines. GAD agrees to coordinate with the Office of
Water, the co-owner of GICS data, and jointly address the additional critical security controls necessary to
keep the GICS Security Plan in compliance with OMB, NIST and Agency requirements. The Plan has
already been revised as part of our ongoing reviews to incorporate a sufficient level of detail as required by
OMB and NIST standards and arrangements are being made to conduct an independent audit of the system.
Issue Revised GICS Security Plan (Revised GICS Security Plan was issued/signed August 15, 2000)
09/30/00
01/31/0 l(rev)
6/30/00
07/31/00(rev)
09/30/00(rev)
3/31/00
No longer
applicable
Additional
Agency
Comments
OIG
Comment
Additional
Agency
Comments
Open
OIG
Comment
Completed
10/05/00
Completed
8/15/00
Audit Report 2001-1-00107
3-18
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
We recommend the Region 5 Assistant Regional Administrator for
Resources Management:
9.5 develop a security plan for the CTS financial system which
addresses the critical security controls shown in Table 2 and makes
the system compliant with OMB Circular A-130, NIST, and
Agency requirements.
OIG Note: We have reported a substantial noncompliance with FFMIA
for federal financial management system requirements since our
fiscal 1997 audit. However, for fiscal 2000, the noncompliance falls
short of recently revised OMB criteria for defining this
noncompliance as substantial. Please refer to our fiscal 2000 audit
report, Attachment 1, for additional comments.
9.5 Issue CTS Security Plan
Fiscal 2000 update: According to the November 13, 2000 remediation plan submitted to OMB, all of the security
plans for financial and mixed financial systems are scheduled to be revised after a risk assessment is
completed.
3/31/00
Completed
9/30/99
OIG Note
Audit Report 2001-1-00107
3-19
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
AUDIT OF EPA'S FISCAL 1997 FINANCIAL STATEMENTS
(Audit Report E1AML7-20-7008-8100058, Issued 03/2/98)
EVALUATION OF INTERNAL CONTROLS - REPORTABLE
CONDITIONS:
2.0
FURTHER IMPROVEMENTS NEEDED IN MANAGING EPA'S
ACCOUNTS RECEIVABLE
We recommend that the Acting CFO:
2.1. provide detailed training to regional finance personnel on how to
calculate an allowance for doubtful accounts,
2.2. conduct site visits to regional finance offices and perform quality
assurance reviews to ensure FMOs are properly following
accounting guidance,
2.3. develop procedures that require FMOs to follow-up with ORCs
and program offices when responses to their requests for
receivable collectibility information are not received timely, and
2.4. work with the Assistant Administrator for Enforcement and
Compliance Assurance to implement guidance that will ensure
Offices of Regional Counsel and program offices timely provide
financial management offices with the supporting documents they
need to record and write off accounts receivable.
2.5 We recommend the Assistant Administrator for Enforcement and
Compliance Assurance emphasize to ORCs:
2.5.1. the need to forward to FMOs within 3 workdays, copies of all
source documents that are required to establish accounts
receivable, and
2.5.2. the need to respond back to FMOs within 30 days concerning
receivable collectibility determinations.
OIG Note: We also noted a Reportable Condition for accounts receivable
in our fiscal 1999 and 1998 audits. Please refer to our fiscal 1999
recommendation 3.1 and to fiscal 1998 recommendations 4.1
through 4.7 for additional comments and current status on this
issue.
2.1 Conduct training at a technical workshop.
2.2 In a 9/30/98 memo, the CFO informed us that they performed quality assurance reviews in prior years, and in
FY 1998, conducted such reviews in Regions I, IV, and V. The CFO further informed us that, on an as
needed basis in future years, the CFO would: 1) determine which regions require quality assurance reviews;
2) conduct FMO training; and 3) conduct quality assurance reviews to ensure FMOs are properly following
accounting guidance
2.3 In a 9/30/98 memo, the CFO informed us that, based on discussions (with Regional Program Offices and Offices
of Regional Counsel), there was a need to clarify the management of oversight bills. Guidance was provided
by the Financial Management Division in April 1998. The CFO also recognized a need to continue
providing periodic training and workshops on the management of accounts receivable and collections to
further improve performance in this area. Accordingly, the OCFO will annually provide training and
workshops on the management of accounts receivable and collections and will meet monthly with the
Department of Justice (which began in April 1998)
2.4 Issue Cross Servicing Policy Announcement on delinquent debts
Issue Revised RMDS 2540, Chapter 9 (11/22/99 update - comments being reviewed)
Additional Agency Comments: The OCFO's February 24, 2000 response to our draft fiscal 1999 audit report
indicated that the target publication date was changed to 3/31/00, due to amount of comments and changes
that have to be incorporated into the RMDS 2540 Chapter9.. RMDS 2540, Chapter 9, was revised and
issued on 6/20/00.
2.5 In a 9/30/98 memo, the CFO informed us that, on July 26, 1998, the Assistant Administrator for Enforcement
and Compliance Assurance issued a memorandum entitled "Effective Debt Management" to the Regional
Counsels. The purpose of that memo was to reiterate and reinforce the Agency's policy regarding the
Regional Counsels' responsibility in the identification and collection of accounts receivable
06/12/98
09/30/98
06/12/98
03/30/98
06/30/98
07/30/98 (rev)
12/15/98 (rev)
04/30/99 (rev)
08/30/99 (rev)
01/31/00 (rev)
03/31/00 (rev)
Completed
Completed
Completed
09/30/98
Completed
06/09/98
Completed
6/20/00
Completed
07/26/98
OIG Note
Audit Report 2001-1-00107
3-20
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
7.0
7.1
PROCEDURES NEED TO BE ESTABLISHED FOR
IDENTIFYING, TRACKING AND REPORTING EPA'S
ENVIRONMENTAL LIABILITY
We recommend that the Acting CFO work with the Assistant
Administrator for Enforcement and Compliance Assurance,
Acting Assistant Administrator for Administration and Resources
Management, and the Office of General Counsel to jointly develop
policies and procedures for tracking and annually reporting the
Agency's environmental liability.
11.0
11.1
EPA IS NOT COMPLYING WITH APPROPRIATIONS LAW
WHEN DISBURSING GRANTS FUNDED WITH MULTIPLE
APPROPRIATIONS
We recommend that the Acting CFO and Acting Assistant
Administrator for Administration and Resources Management
finalize and implement guidance for awarding and disbursing
multiple-funded grants that complies with Title 31 U.S.C. 1301.
OIG Note: This noncompliance with appropriations law was first
reported by us in our fiscal 1994 financial statement audit of EPA's
Trust Funds, Revolving Funds and Commercial Activity and was
again mentioned in our fiscal 1995,1998,1999 and 2000 reports.
7.1 Jointly draft policies and procedures for tracking and annually reporting EPA's environmental liability.
Jointly finalize policies and procedures for tracking and annually reporting EPA's environmental liability.
(11/22/99 update - In Comptroller's office for review)
Additional Agency Comments: The OCFO's February 24, 2000 response to our draft fiscal 1999 audit report
indicated that this action was completed on 1/13/00, with the issuance of Policy Announcement No. 00-02.
11.1 In a 9/30/98 memorandum, the CFO provided the following status "The determination of whether our
accounting practices violate Appropriations Law remains under OGC review. We will continue to
encourage them to issue an OGC decision as soon as possible, so we can resolve this issue."
OGC opinion requested from OGC
Obtain OGC opinion
Implement accounting changes dependent on OGC opinion. Target date will be established after OGC opinion is
received
Issue GAD Policy on multiple funded grants
OIG Comment: On January 17, 2001, GAD representatives advised the OIG that the Policy has been revised based
on the OGC decision, but not yet finalized and issued.
Fiscal 2000 update: OGD is planning to issue the Split Funding Policy by March 31, 2001. OGD is currently
working with OCFO to resolve some implementation issues raised by the Comptroller's office. GAD still
expects to issue the policy, but will probably limit the policy to an exception basis grant award for multi
funded instruments.
04/30/98
07/15/98 (rev)
07/31/98
08/31/98 (rev)
10/30/98 (rev)
03/31/99 (rev)
05/31/99 (rev)
08/31/99 (rev)
01/31/00 (rev)
03/06/96
03/31/0l(rev)
03/31/0l(rev)
Completed
07/31/98
Completed
01/13/00
Completed
Completed
01/13/00
Open
Open
OIG
Comment
Audit Report 2001-1-00107
3-21
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
FISCAL 1994 FINANCIAL STATEMENT AUDIT OF EPA's TRUST
FUNDS, REVOLVING FUNDS AND COMMERCIAL
ACTIVITY
(Audit Report E1SFL4-20-8001-5100192, Issued 2/28/95)
4.0 GRANTEE PAYMENT REQUESTS DO NOT PROVIDE
NECESSARY ACCOUNTING INFORMATION
4.1 Chief Financial Officer require a clause in all assistance
agreements funded from multiple appropriations that specifies how
the payments should be charged to the various appropriations. If,
for example, all work can be paid for from any appropriation, the
clause should state that the finance office may charge any
appropriation. However, if certain work should be paid for from a
specific appropriation, the clause should require the recipient to
include accounting information with each payment request.
Prepare a draft policy on split funded projects.
Circulate to Grants Customer Relations Counsel for comment.
Enter the policy into the Green Border process.
Finalize and issue the policy.
OIG Comment: On January 17, 2001,a GAD representatives advised the OIG that the Policy has been revised
based on the OGC decision, but not yet finalized and issued.
Fiscal 2000 update: OGD is planning to issue the Split Funding Policy by March 31, 2001. OGD is currently
working with OCFO to resolve some implementation issues raised by the Comptroller's office. GAD still
expects to issue the policy, but will probably limit the policy to an exception basis grant award for multi
funded instruments.
08/15/95
08/31/95
09/30/95
01/97 (rev)
11/30/95
03/31/0 l(rev)
Completed
12/96
Completed
12/96
Completed
2/12/97
Open
OIG
Comment
Audit Report 2001-1-00107
3-22
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
10.0 A COMPREHENSIVE AGENCY-WIDE POLICY ON
INDIRECT COSTS SHOULD BE IMPLEMENTED
10.1 Chief Financial Officer develop and implement an Agency-wide
policy for identifying and allocating indirect costs.
10.1 Identify the major tasks and requirements associated with implementing Agency-wide cost accounting based on
FASAB managerial cost accounting standard, the provisions of GPRA and other applicable considerations.
Commence development of detailed cost accounting policy including financial system requirements analysis.
OIG Notes: FMD indicated that the two milestones above were completed on 3/15/97 and 8/28/97 respectively and
closed this recommendation in its audit tracking system on 9/4/97. FMD closed this recommendation upon
the issuance of a 8/28/97 memorandum to the Office of Site Remediation Enforcement which discussed a
preliminary methodology for developing Superfund "full cost" indirect cost rates. FMD also indicated that
their goal is to develop and implement the new Superfund indirect methodology by fiscal year 1999. Upon
closing this recommendation in its audit tracking data base, FMD officials provided a number of reasons why
they believed it is premature at this time to commit to a corrective action plan with specific milestones. In
conclusion, FMD officials indicated that. . the development and implementation of an EPA-wide
comprehensive cost accounting system will require a long term plan that coordinates system development,
policy considerations, and user needs. The integration of these requirements are complex, and a simple
corrective action plan at this time is insufficient. Therefore, we will address this issue when we update our
Five-Year Plan." During FY 98, EPA developed detailed cost accounting procedures for implementation in
FY 99.
Fiscal 1999 update: EPA discussed its Goals and Strategies to Support Federal Financial Management Priorities
as part of its FY 2001 OMB A-l 1 Section 52.2 submission to OMB on November 5, 1999. The goals and
strategies included six priorities, two of which discussed Improving Financial Accountability and Improving
Financial Management Systems. Neither of these two discussion topics mentioned the development or the
implementation of an agency-wide indirect cost policy. We acknowledge that the discussion did mention the
accomplishment of implementing the five basic accounting standards and the cost accounting standard issued
by the Federal Accounting Standards Advisory Board (FASAB) as well as developing related policy
announcements. The CFO should identify additional corrective action plans and milestones to implement
our recommendation. We believe an Agency-wide Indirect Cost Policy should identify what costs should be
consistently included to recover its "full cost" when determining the appropriate level of user fees for
programs that receive fees for services provided by EPA, costs for billing other government agencies for work
performed by EPA, and Superfund Indirect Costs to be included in billings to responsible parties for site
cleanups, etc. A cost accounting system, by itself, is not sufficient to take the place of an agency-wide
indirect cost policy. Such a policy would help ensure costs are consistently identified for inclusion in
determining the "full cost" of conducting agency programs and activities.
Fiscal 2000 update. On May 26, 2000, the Comptroller issued Policy Announcement No. 00-05, Accounting for
Indirect Costs Associated with Superfund Site Specific Activities. Since the policy does not address
Agency- wide indirect costs as part of its managerial cost accounting standard, we are reporting a substantial
noncompliance with FFMIA in our fiscal 2000 audit report. See Attachment 2, for additional comments and
recommendations.
06/30/96
03/01/97 (rev)
10/31/96
03/01/97 (rev)
09/30/97 (rev)
Open
Open
OIG Notes
Audit Report 2001-1-00107
3-23
-------
Status of Prior Audit Report Recommendations
Report Findings
and Recommendations
Management Comments and Corrective Action Plans
Target
Date
Status
FISCAL YEAR 1993 - FINANCIAL AUDIT - PESTICIDES
REVOLVING FUNDS AND THE OIL SPILL TRUST FUND
(Audit Report E1AML3-20-7001-4100230, Issued 3/31/94)
7.0 HIGHER PRIORITY NEEDS TO BE PLACED ON
COMPLETING REQUIRED REVIEWS OF USER FEES
7.1 CFO include timely review of user fees as one of the financial
management performance measures used to evaluate program
offices in the future.
FISCAL YEAR 1992 - FINANCIAL AUDIT - SUPERFUND, LUST AND
7.1 Implement financial management performance measures in the program offices
OIG Note: A related issue was included in the Fiscal 1992 Pesticides Revolving Funds audit (report no. E1EPL2-
20-7001-3100065, dated 6/30/93). On 11/5/97, the Acting CFO provided the Administrator with a biennial
fee review report. The report showed five current fees, four proposed fees, and eight exceptions. Fiscal 2000
Update: The next biennial review of user fees was finalized by the OCFO on January 19, 2001. Also, on
January 19, 2001, the Deputy Administrator transmitted EPA's formal request to OMB for the needed
exceptions. Additionally, in response to the FY 2000 draft report, the OCFO responded that they will
"evaluate the benefits of establishing SRO performance measures for fees."
12/01/94
04/01/95 (rev)
07/31/97 (rev)
9/30/99 (rev)
Open
OIG Note
ASBESTOS LOAN PROGRAM
(Audit Report P1SFL2-20-8001-3100264, Issued 6/30/93)
OIG Comment: The OCFO gave no target date for their revised position on this issue, therefore the
recommendation will remain open at this time.
OIG
Comment
4.0 ACCOUNTING FOR GRANT DRAWDOWNS DOES NOT
PROVIDE REQUIRED ACCOUNT INFORMATION
4.1 CFO review the results of the Quality Action Team's analysis of
this issue and determine if additional procedures need to be
developed to account for grant drawdowns.
4.1 Establish QAT to review the procedures, establish milestones, report to process owners, and implement changes.
OIG Note: Our fiscal 1994 audit report also discussed this issue. For a current status on corrective actions, please
refer to our fiscal 1994 audit recommendation 4.1 above.
N/A
Completed
OIG Note
FISCAL YEAR 1991 - FINANCIAL AUDIT - HAZARDOUS
Fiscal 2000 Update: Based on response received and corrective actions planned in response to referenced 1994
recommendation, we are considering action complete on this outstanding recommendation.
SUBSTANCE SUPERFUND
(Audit Report P1SFF1-11-0026-2100660, Issued 9/30/92)
3.0 CERTAIN ALLOCABLE COSTS WERE NOT ALLOCATED TO
SUPERFUND
3.1 Obtain a written opinion from the OGC on the legal basis for
charging Superfund administrative expenses to the Salaries and
Expenses Appropriation. If the OGC determines that the Agency's
current practice of charging the S&E appropriation for Superfund
administrative expenses after the Superfund administrative ceiling
is reached is improper, then the OGC should provide guidance on
appropriate corrective action.
3.1 Request a legal opinion from OGC to reaffirm the legality of charging Superfund expenses to the S&E
appropriation
OIG Note: OGC issued a memo to the Comptroller on July 11, 1996 reaffirming prior OGC opinions concerning
the charging of Superfund administrative expenses to other appropriation accounts. On September 17, 1996,
the Comptroller sent us a memo advising us that they are not planning to move S&E charges to the
Superfund account for FY91 or subsequent years. The OC and OGC are examining the application of the
statute for allocating costs between appropriations. The OC believed that the history behind the
administrative expense ceiling in Superfund may permit EPA to appropriately discontinue allocating costs
once the ceiling limitation has been reached.
Fiscal 2000 update: In a January 13, 2000 meeting, the Director, APBD, advised us that they were discussing this
issue with an appropriations committee and were hoping to resolve this issue through legislative action. On
June 30, 2000, the Acting CFO provided a proposed final resolution to the charging issues discussed in this
recommendation. On July 31, 2000, the OIG agreed with the CFO's proposal and closed the 1991
Superfund Audit.
02/15/93
06/30/95 (rev)
Completed
06/30/00
OIG Note
Audit Report 2001-1-00107
3-24
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Appendix I
EPA's Fiscal 2000 Financial Statements
Audit Report 2001-1-00107
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This page intentionally left blank
Audit Report 2001-1-00107
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February 2001
EPA's FY2000 CFO
AUDITED FINANCIAL
STATEMENTS
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of the Comptroller
Financial Management Division
-------
-------
TABLE OF CONTENTS
Overview and Analysis 3
Principal Financial Statements 19
EPA's FY 2000 Annual Financial Statements Page 1
-------
Note: All components of EPA's FY2000 CFO Audited Financial Statements are included in
EPA's FY 2000 Annual Report (Publication Number: EPA-190-R-01-0001). The
"Overview and Analysis" section of this report serves as Section I of the Annual Report.
The "Principal Financial Statements" section of this report is contained in Section IVof the
Annual Report.
Page 2
EPA's FY 2000 Annual Financial Statements
-------
OVERVIEW
AND
ANALYSIS
EPA's FY 2000 Annual Financial Statements
Page 3
-------
-------
OVERVIEW AND ANALYSIS
INTRODUCTION
The U.S. Environmental Protection Agency (EPA) leads the nation's efforts to safeguard the natural environment
and protect human health. The Agency is committed to ensuring that the American public has air that is safe to
breathe, water that is clean and safe to drink, food that is free from dangerous pesticide residues, and
communities that are protected from toxic chemicals. To accomplish this mission EPA set 10 long-term strategic
goals that identify the environmental outcomes or results the Agency is working to attain and the sound financial
and management practices it intends to employ. Each year, as required under the Government Performance and
Results Act (GPRA), EPA prepares an annual plan that translates the Agency's long-term goals and objectives
into specific actions to be conducted and resources to be allocated for the fiscal year. EPA is accountable to the
American public for achieving these annual performance goals for the protection of the environment and human
health and for using taxpayers' dollars efficiently and effectively to do so.
A central purpose of GPRA is to gain better results from government programs by requiring federal agencies to
define their performance goals and holding them accountable for achieving these goals. Successfully managing
for results depends, in part, on strong links between annual and longer-term planning, budgeting, financial
accounting, and performance results. EPA has gone farther than most other federal agencies in structuring its
1997 and 2000 revised Strategic Plans to reflect the full scope of the Agency's resources and workforce and in
restructuring its budget to mirror its strategic goals and objectives. Under this approach EPA's strategic goals
include both environmentally oriented goals, such as Clean Air and Safe Water, and functional goals, such as
Sound Science and Effective Management, that are critical to the achievement of these environmental and human
health outcomes.
In a further step to promote accountability, this report includes the Agency's audited financial statements, an
independently reviewed accounting of expenditures to demonstrate that EPA has sound financial management
practices in place. These financial reports provide not only the assurance that EPA is managing its resources
soundly and efficiently, but also information needed to ensure that EPA uses its resources strategically and
effectively to achieve environmental goals.
Linking planning, budgeting, financial accounting, and performance assessment helps EPA focus resource
allocation decisions on the environmental and human health results to be achieved, provides longer-term
perspective and continuity for budgeting, and reinforces the importance of financial stewardship and fiscal
integrity in achieving the Agency's mission. As a result EPA can demonstrate to Congress and the public how
taxpayers' dollars are applied across the Agency's strategic goals and how they support the achievement of results.
EPA's Fiscal Year 2000 Annual Report serves several purposes. First it describes the progress that EPA, working
with its federal, state, tribal, and local government partners, made toward the annual performance goals
established in the Agency's Fiscal Year (FY) 2000 Annual Plan. Next it presents major management
accomplishments and challenges EPA faced during the year and discusses Agency approaches and solutions.
Finally it summarizes EPA's financial activities and achievements. As a whole the Annual Report provides an
opportunity for the Agency to review its performance, highlight particularly noteworthy accomplishments,
examine causes for missed goals or targets, and, most importantly, reflect on how EPA's experience in FY 2000
can shape efforts to achieve the Agency's strategic goals and objectives in the coming years.
This "Overview and Analysis" (which addresses requirements for a "Management's Discussion and Analysis" of
the audited financial statements component of the Fiscal Year 2000 Annual Report)1 is intended to provide a "big
1 Because the Fiscal Year 2000 Annual Report consolidates a number of specific reports, several
components of the "Management's Discussion and Analysis" are presented in greater detail elsewhere in
EPA's FY 2000 Annual Financial Statements
Page 5
-------
picture" view of EPA's performance and fiscal accountability over the year. In particular it describes the results
achieved under the Agency's goals and objectives, reviews EPA's financial accomplishments, and summarizes
actions EPA has taken or plans to take to address management problems. In addition it discusses significant
factors that might affect future Agency operations. This section is supplemented and supported by the more
comprehensive, detailed information provided in the remaining sections of the Fiscal Year 2000 Annual Report.
FY 2000 RESULTS
Summary of Performance Results
During FY 2000 EPA and its partners made significant contributions to the establishment of a cleaner, healthier
environment. As illustrated by the performance highlights that follow, in FY 2000 at least 91 percent of the
American public served by community water systems received water meeting all health-based drinking water
standards in effect since 1994. More of the American public breathed cleaner air, the result of significant
reductions in harmful air pollutants. Food was safer, due to reduced use of high-risk pesticides and registration
of reduced-risk pesticide ingredients. Completed construction at Superfund sites and cleanup and redevelopment
of brownfields sites resulted in cleaner, safer, healthier communities.
In FY 2000 EPA met 80 percent (51) of the 64 annual performance goals (APGs) for which data are provided in
this report.2 EPA also made significant progress toward the 13 APGs that were not achieved in FY 2000, and for
these APGs the Agency is on track to meet its long-term goals and objectives.
During FY 2000 new performance data also became available for several of the 13 FY 1999 APGs for which
there were delayed reporting cycles or targets set beyond FY 1999. For example, an additional 1.3 million people
are living in residences with healthier indoor air. EPA also exceeded, by over 20 percent, its goal of documenting
that controls are in place at hazardous waste facilities, helping to ensure that communities are protected from
harmful pollutants. In summary EPA can now report achievement of 81 percent (50) of the 62 APGs for which
the Agency has FY 1999 performance data. Delays in reporting cycles and targets set beyond FY 1999 continue
to affect seven FY 1999 APGs.
Tables presenting EPA's detailed FY 2000 APG results are included in Section II at the end of each goal chapter.
EPA continues to improve its performance measurement capabilities and will modify some APGs in FY 2001
and FY 2002 to reflect more outcome-oriented measures and better performance data.
Highlights of FY 2000 Performance
EPA's FY 2000 accomplishments reflect a variety of activities and initiatives. They represent progress made
toward achieving the Agency's strategic goals; accomplishments that cut across individual goals, programs, or
media; and achievements in financial management.
this report. In particular EPA's mission statement and long-range goals appear at the front of the report,
and an EPA organization chart is included as Appendix A. For a discussion of the Agency's
performance goals, objectives, and results, see Section II. Management accomplishments and challenges
are discussed in Section III. Financial statements, along with a discussion of systems, controls, and legal
compliance, are presented in Section IY.
2 EPA committed to a total of 73 APGs in its FY 2000 Annual Plan. Data for eight of these
APGs will not be available until FY 2001 and beyond, and one APG has a target year that falls beyond
FY 2000.
Page 6
EPA's FY 2000 Annual Financial Statements
-------
Accomplishments Under Strategic Goals
EPA issued a final rule for passenger vehicles (including sport utility vehicles) that will significantly
reduce emissions of nitrogen oxides (NOJ, a primary contributor to urban smog, by nearly 3 million
tons per year by 2030. (Goal 1)
EPA issued three final Maximum Achievable Control Technology (MACT) standards and proposed eight
new standards that, when fully implemented, will reduce hazardous air emissions by an estimated 62,000
tons each year. Combined, all the MACT standards issued to date will reduce emissions by more than
1.5 million tons each year. (Goal 1)
Phase II of the Acid Rain Program, which began in 2000, now requires reductions in sulfur dioxide
(S02) emissions from more than 2,500 electric utility units (gas-fired, oil-fired, and coal-fired) and
reductions in year-round NOx emissions from approximately 750 coal-fired units. (Goal 1)
Ninety-one percent of the population served by community drinking water systems received drinking
water meeting all health-based standards that were in effect as of 1994, up from 83 percent since that
time. (Goal 2)
For the first time approximately 253 million Americans have access to annual consumer confidence
reports on the quality and safety of their drinking water, as a result of the new Consumer Confidence
Report rule. More than 100 million Americans are able to read their water quality reports online. (Goal
2)
Implementation of Clean Water Action Plan activities resulted in the environmental improvement
projects now under way in 324 high-priority watersheds. (Goal 2)
Another 2 million people received the benefits of secondary treatment of wastewater in 2000, bringing
the total number of people served by secondary wastewater treatment facilities to 181 million and
achieving secondary treatment or better for nearly all of the population served by publicly owned
treatment works. (Goal 2)
EPA registered 16 reduced-risk pesticide active ingredients and reviewed 1,838 new chemical pre-
manufacture notices for hazards to human health and the environment. (Goals 3 and 4)
EPA reassessed 121 pesticide tolerances to ensure they met the Food Quality Protection Act-mandated
standard of a "reasonable certainty of no harm." (Goal 3)
EPA implemented various risk-reduction steps such as restricting use, lowering or revoking tolerance
levels, and phasing out or canceling certain uses for the pesticides azinphos methyl, methyl parathion,
and chlorpyrifos. (Goal 3)
Four hundred sixty-nine companies have committed to make screening-level hazard data on
approximately 2,155 chemicals available by 2005. (Goal 4)
Since the Superfund program began, EPA has completed construction at 757 private and federally
owned sites to protect human health and the environment. During FY 2000 the Agency exceeded its
target for Superfund constructions completed. (Goal 5)
Through the third quarter of FY 2000 EPA's Brownfields Program provided grants to communities and
states, leveraging $2.8 billion in cleanup and redevelopment funds, generating an estimated 7,400 jobs
benefitting disadvantaged communities, and funding more than 2,000 site assessments of potentially
contaminated sites. The Brownfields Program was named one of the 10 winners of the "Innovations in
EPA's FY 2000 Annual Financial Statements
Page 7
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Government Awards, 2000" granted by Harvard University's John F. Kennedy School of Government,
the Ford Foundation, and the Council for Excellence in Government. (Goal 5)
• Availability of water and sewer services in the U.S.-Mexican border area has significantly improved.
Thirty-six projects certified by the Border Environment Cooperation Commission are under construction
or have been completed. (Goal 6)
• Working in partnership with businesses, schools, state and local governments, and other organizations,
EPA is on track to meet its FY 2000 target for reducing greenhouse gas emissions from projected levels
by more than 58 million metric tons of carbon equivalent. (Goal 6)
• Reductions in domestic use of ozone-depleting hydrochlorofluorocarbons and domestic production and
import of newly produced chlorofluorocarbons and halons are on track to meet targets set by the Clean
Air Act Amendments for FY 2000. (Goal 6)
• EPA demonstrated a mid-size-chassis research vehicle that achieved 72 miles per gallon (gasoline
equivalent) using a state-of-the-art diesel engine and a patented, EPA-invented hybrid drivetrain. (Goal
8)
• The Mid-Atlantic Integrated Assessment successfully demonstrated the monitoring designs and
indicators developed from EPA's Ecological Research Strategy, resulting in the first statistically valid
assessments of regional environmental conditions. (Goal 8)
• Enforcement actions brought by EPA reduced or prevented the emission and discharge of 334 million
pounds of pollutants and required treatment of an additional 1.3 billion pounds of contaminated soils,
sediments, or water; sixty-one percent of these enforcement actions required facilities to improve
environmental management practices, which will reduce the likelihood of future violations. EPA's
enforcement augments the efforts of states and tribes. Nationally states conduct the large majority of all
federally related inspections and formal enforcement actions. (Goal 9)
• During FY 2000 an additional 430 companies made use of EPA's audit and self-disclosure policies,
disclosing and correcting violations at 2,200 facilities. (Goal 9)
• EPA drafted its first strategic plan for investing in human resources, "Strategy for Human Capital," to
focus management attention on human resource issues facing the Agency. (Goal 10)
Accomplishments Across Goals and Programs
• The Office of Children's Health Protection developed the Children's Health "Valuation Handbook to assist
Agency economists in addressing children's health risks when they conduct cost-benefit analyses of
regulatory options.
• EPA joined the Department of Housing and Urban Development, the Department of Health and
Human Services, and other federal departments and agencies in an interagency strategy to eliminate
childhood lead poisoning as a major public health problem by 2010.
• Two hundred twenty-eight facilities became charter members of the new National Environmental
Performance Track Program, created to motivate and reward performance that exceeds federal
environmental requirements.
• EPA expanded regulatory flexibility under Project XL to identify areas for improving federal
environmental programs and policies and approved an additional 35 proposals, bringing the total number
of projects being implemented to 50.
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EPA's FY 2000 Annual Financial Statements
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• To advance "smart growth" in communities, EPA provided funding, research, and technical assistance,
as well as support for a national information sharing network.
• EPA created new web sites to expand public access to information about environmental permitting
reforms and participation in EPA's voluntary partnership programs.
• In spring 2000 the Interagency Working Group on Environmental Justice released the Integrated Federal
Interagency "Environmental Justice Action Agenda to ensure that coordinated federal initiatives and resources
are targeted to environmentally and economically distressed communities.
• EPA's National Environmental Justice Advisory Council published Environmental Justice in the Permitting
Process. The first in a series, this report identifies essential factors to be considered in siting new
pollution-generating facilities to ensure protection of all citizens.
FY 2000 Performance Issues
Despite their best efforts, EPA and its partners were not able to meet all planned targets for FY 2000 APGs. In
most cases the Agency does not expect the shortfall in meeting these APGs to compromise progress toward
achieving the long-range goals and objectives.
For example, EPA changed the focus of underground storage tank compliance from simply having the required
equipment to operating that equipment properly. As a result, states' reporting of compliance rates based on
operational compliance led to a lower overall compliance figure but a better measure of environmental progress.
In another case an extension of the public comment period delayed completion of the Exposure Factors
Handbook, designed to provide guidance for assessing risks to children exposed to environmental contaminants,
but permitted increased public involvement. Similarly, although EPA fell well short of its target for reassessing
pesticide tolerances, the Agency made progress in developing a scientific approach to assessing cumulative risk
which involved considerable stakeholder input and scientific peer review. Once implemented this approach will
expedite Agency efforts to reassess pesticide tolerances.
In all EPA and its partners did not meet 13 of the 73 FY 2000 APGs. These APGs are associated with seven of
EPA's ten strategic goals. The results tables included in Section II provide more complete information and show
that the Agency made significant progress toward these goals.
Strengthening Program Integrity Through Improved Management
Over the past decade EPA made substantial progress toward resolving programmatic and administrative issues
that had the potential to affect the Agency's ability to achieve its mission. One of the most significant
accomplishments is the progress the Agency has made in addressing General Accounting Office (GAO)
concerns regarding the Superfund program. In FY 1990 GAO designated Superfund a high-risk area, citing
recurring management problems that heightened the risk of fraud, waste, abuse, and mismanagement. After 10
years, in its January 2001 report, High-Risk Series: An Update, GAO removed the Superfund program from the
high-risk list, indicating that EPA had made significant progress in addressing this long-standing management
challenge and demonstrated a continuing commitment to these efforts.
Over the next several years EPA faces a number of management challenges, including two that the GAO January
2001 high-risk update identified as government-wide high-risk areas. The first issue, strategic human capital
management, is characterized by what GAO regards as inadequate efforts to meet current and emerging needs in
the areas of human capital planning, recruitment, and development. The second issue, information security, was
first designated a government-wide high risk area in FY 1997. Despite federal agencies' ongoing efforts to
correct security deficiencies, GAO believes that critical government operations and assets continue to be
vulnerable.
EPA's FY 2000 Annual Financial Statements
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In its January 2001 report, Major Management Challenges and Program Risks: Environmental Protection Agemy, GAO
identified two additional management challenges specific to EPA: (1) improving environmental and performance
information to set priorities and measure results and (2) strengthening EPA's working relationships with the
states. EPA's Office of Inspector General (OIG) shares GAO concerns regarding both the high-risk issues and
the management challenges. Section II, "GPRA Performance Results," specifically goal chapters 7 and 10, and
Section III, "Management Accomplishments and Challenges," present a further discussion of these issues.
EPA's OIG provides Congress with an annual list of EPA's key management challenges based on OIG audits
and also identifies candidate weaknesses for consideration during the Agency's annual assessment of management
controls under the Federal Managers Financial Integrity Act. Section III includes OIG's statement on the
Agency's most serious management and performance challenges and its assessment of Agency progress. OIG
identified several additional areas it believes EPA should address in a timely manner to ensure the Agency can
accomplish its environmental mission and achieve effective management. These issues include accountability,
managerial cost accounting, quality of laboratory data, EPA's use of assistance agreements to accomplish its
mission, the backlog of National Pollutant Discharge Elimination System Permits, and results-based information
technology project management. Goal chapters 2, 7, and 10 in Section II and Section III provide further
discussion of these issues.
Recognizing that one of the most critical challenges facing government today is preserving the public's trust in
the integrity of government programs, EPA places a high priority on addressing GAO and OIG issues as well as
issues identified by the Office of Management and Budget (OMB) and through internal Agency reviews and
assessments. Section III contains a full discussion of the Agency's material weaknesses and major management
challenges and provides a summary of corrective action strategies under way to resolve the issues. In addition to
goal chapters 2, 7, and 10 identified above, goal chapters 5, 6, and 9 discuss Agency efforts to address major
management challenges that may affect the achievement of EPA's goals and objectives.
ADVANCING EPA'S WORK
Strengthening State and Tribal Partnerships
Many of the advances in environmental protection made over the past year, highlighted in the list of
accomplishments above and reflected in the chapters that follow, would not have been possible without the
participation and support of the states. EPA and the states consulted extensively throughout the development of
EPA's revised Strategic Plan, which was issued in September 2000, and the Agency worked closely with members
of the Environmental Council of the States (ECOS) to facilitate state input on the goals, objectives, and text of
the Plan.
During FY 2000 EPA and the states continued to strengthen their partnership to protect human health and the
environment through the National Environmental Performance Partnership System (NEPPS). Under NEPPS
EPA and states work together closely on all aspects of planning, priority-setting, and results-based management,
including performance measurement, through the use of core performance measures (CPMs) to evaluate progress
toward mutual program goals. CPMs are a limited number of program performance measures developed by EPA
and ECOS to present a meaningful picture of each state's environmental quality and program effectiveness.
CPMs are closely aligned with EPA's GPRA measures and similarly contain a mix of environmental indicator,
outcome, and output measures. (Those CPMs associated with the Agency's APGs are noted in the tables for goal
chapters 1, 2, and 5 in Section II of this report.) Thirty-four states and their EPA regional offices documented
their partnership efforts with Performance Partnership Agreements.
In March 2000 EPA formally reaffirmed its commitment to the NEPPS principles of flexibility, innovation, and
partnership. To demonstrate this commitment EPA designated leaders from each region and national program
office to provide a broad, Agency-wide perspective on how EPA and states can improve all aspects of NEPPS.
EPA also finalized new grant regulations that lay the groundwork for negotiation of Performance Partnership
Grants (PPGs). PPGs enable states as well as tribes to use grant funds flexibly to meet their specific
environmental needs.
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EPA's FY 2000 Annual Financial Statements
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EPA has been working closely with State Environmental Commissioners to determine how EPA might better
incorporate state priorities into EPA's planning and budgeting work and improve the Agency's understanding of
the particular environmental challenges facing each state. In spring 2000 EPA Regional Administrators were
asked to discuss state priorities with the Commissioners so that this information could inform the Agency's
planning and budgeting work. EPA is now working with ECOS to develop an ongoing process to facilitate the
receipt and consideration of state input into national priority-setting processes.
Over the past 10 years GAO has worked with EPA and the states to identify areas of concern, make
recommendations, and track Agency progress in resolving the long-standing challenges associated with the
EPA-state relationship. GAO concerns have centered around some fundamental disagreements between EPA
and the states over respective roles, priorities among state environmental programs, and the appropriate degree of
federal oversight. GAO believes EPA has taken positive steps in some areas that have improved cooperation
with the states, resulting in more effective and efficient environmental protection.
EPA has also worked closely with tribal governments to identify priorities for Indian country, to improve
management of environmental issues, and to develop tribal capacity to implement environmental programs.
EPA's Indian Program involves significant cross-Agency and multimedia activities designed to ensure that our
trust responsibility to federally recognized tribes is carried out. The Agency is committed to assuring protection
of the environment and human health in Indian country in a manner that is consistent with the government-to-
government relationship and that conserves cultural use of natural resources. The new PPG regulations
mentioned above will expand the benefits of NEPPS, enabling tribes as well as states to use grant funds flexibly
to meet their specific environmental needs. During FY 2000 EPA and tribes also made major advances toward
strengthening their government-to-government relationship. For example EPA sponsored the 5th National Tribal
Annual Conference on Environmental Management in Lincoln City, Oregon. The meeting brought tribes from
across the nation together with a number of federal agencies to address a wide range of environmental issues.
The growing partnership between tribes and EPA was further demonstrated this year through the Agency's
enhanced and extensive consultation with tribes on water quality standards in Indian country.
EPA has also worked with tribes to address a number of cross-media concerns. For example the Agency
initiated training for tribal enforcement officials interested in obtaining or enhancing their federal inspection
credentials. The development of accredited staff expands the Agency's ability to address priority issues. In
addition FY 2000 saw the creation of the first Tribal Science Council as part of EPA's Science Advisory Board.
This new collaborative body will enable tribes and EPA more effectively to address long-standing issues in
Indian country, such as the need to further the science surrounding subsistence fishing and other exposure
pathways.
Improving Results-Based Management
In FY 2000 EPA completed its first full planning and accountability cycle under GPRA with the March 2000
submission of its first Annual Performance Report, presenting the results of EPA's FY 1999 performance to
Congress and the public. In a series of 10 goal meetings, senior Agency managers met with the Deputy
Administrator to discuss the FY 1999 results and the lessons they prompted, mid-year performance toward FY
2000 APGs, progress toward long-term strategic goals, and work under way to improve performance
measurement. In addition senior managers discussed the broader lessons learned from the Agency's experience
with GPRA implementation to date and improvements to be made for the future. The discussion revealed that
GPRA has had a positive impact on the culture of the Agency, specifically in helping managers to define success
and the results of EPA's work. The focus on priority-setting and results has helped the Agency relate resources
to accomplishments, find new ways to meet goals despite resource reductions, and address important data issues
and the Agency's ability to measure results.
To further improvements in EPA's performance measurement, the Agency formed a performance measurement
improvement team that conducted workshops with program offices to promote development of more outcome-
oriented goals and measures. EPA applied many of the lessons learned from this effort in developing the
framework for its revised Strategic Plan, which was issued in September 2000. The Agency is committed to
developing APGs and performance measures that focus on outcomes; linking performance with resources more
EPA's FY 2000 Annual Financial Statements Page 11
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closely; using information generated through planning, budgeting, analysis, and accountability activities to inform
management decisions; and communicating the results of its efforts clearly to Congress and the public.
Developing Program Evaluation Capabilities
While performance measurement generally describes what a program achieved—outputs or outcomes—during a
given period, program evaluation can help explain these results. Program evaluation identifies areas needing
improvement, better strategies for achieving established goals, and ways to improve data collection or
measurement of program results. Performance measurement alone cannot always answer these questions.
To further improve its ability to assess progress, EPA has taken steps over the past year to increase the number
and improve the quality of program evaluation activities within the Agency. EPA's OIG has reorganized and
created an Office of Program Evaluation to conduct evaluations of EPA's programs. During FY 2000 EPA's
Program Evaluation Network—comprising EPA managers and staff with expertise in and responsibilities for
program evaluation—continued to meet and to share information. In spring 2000 EPA presented two 1-day
training sessions focusing on the fundamentals of program evaluation. The 77 headquarters and regional staff
who participated in the training will continue to help build EPA's ability to conduct evaluations, improving the
Agency's ability to assess progress toward its environmental goals. In FY 2000 the Agency also solicited program
and regional office proposals for limited central funding of program evaluations. Four studies were selected for
funding, including the Assessment of the Water Quality Standards process conducted under Goal 2.
DATA QUALITY
EPA's FY 2000 performance data can be characterized as acceptably reliable and complete. In terms of data
reliability, a significant number of APGs are Agency counts of administrative or programmatic outputs and are
not subject to wide margins of error. In cases where counts involve major EPA data systems, however, the data
are subject to Agency-wide data quality standards and periodically audited for accuracy and completeness. The
Resource Conservation and Recovery Act Information System (RCRAInfo), for example, adjusted the baseline
number of facilities in the database after receiving new data from authorized states, thereby improving the
reliability of the reported performance data. Performance data for several APGs are obtained by voluntary
reporting, modeling, or extrapolating. The degree to which the quality of the data is affected by these data
gathering techniques has not been quantified in most cases, although the reliability of the data can be estimated at
least qualitatively. States and other external sources provide much of the data EPA uses to develop its
performance data. For the more significant EPA databases, protocols are in place to check the data for errors.
To a large degree, however, EPA must rely on the quality assurance/quality controls in place at the primary data
source to ensure data accuracy.
Three EPA databases have been identified as Agency management weaknesses in FY 2000. These are the Permit
Compliance System, RCRAInfo, and the Safe Drinking Water Information System. The Agency is implementing
specific corrective action strategies for each of these databases and has established milestones for data quality
improvements. As a result the quality of the performance data from these databases can be expected to improve
significantly in the future.
EPA has taken several important steps to improve its data quality management. The Agency recently reorganized
its information management activities into one office. It has adopted six new data standards to promote
consistency in reporting and data integration. In addition the Agency is implementing a Central Data
Exchange—a single portal for states and the regulated community reporting environmental information to EPA.
These steps will help to improve the efficiency and reliability of EPA's data as well as detect and correct errors.
In addition, with the goal of significantly improving data quality, EPA is allowing greater public access to Agency
data, including enforcement and compliance information.
All of the Agency's 73 FY 2000 APGs are accounted for in the tables of results presented in each goal chapter in
Section II. (These 73 APGs were first reported in the FY 2000 Final Annual Plan. They have since been revised
to reflect final budget decisions and FY 1999 performance and presented in EPA's FY 2001 budget justification
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EPA's FY 2000 Annual Financial Statements
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to Congress.) In the case of APGs for which performance data are not yet available, the tables indicate when the
Agency will have the data necessary to report performance.
FINANCIAL ANALYSIS
EPA's Financial Statements
EPA's financial statements reflect the range of the Agency's financial activities over the course of a fiscal year
and present a snapshot of its financial position at the end of that fiscal year. They are the culmination of many
thousands of transactions and financial records, and on their accuracy and reliability EPA bases its assurance to
the public that the Agency manages resources efficiently, effectively, and productively. EPA's OIG performs an
annual audit of the full set of financial statements to determine whether the picture they present is a fair and
accurate one, based on generally accepted accounting principles. When an agency's financial statements receive
an unqualified or "clean" opinion from the auditors, this signals to the public the auditors' reasonable assurance
of the agency's fiscal health at year's end. When auditors are unable to make a full assessment of financial
statements because there are elements they cannot evaluate, they will render a qualified audit opinion. In such a
case, auditors report that the statements represent an agency's financial circumstances fairly with the exception of
individual elements that cannot be assessed. When auditors are unable to render an opinion on a set of financial
statements because they are unable to make any kind of evaluation, they typically issue a disclaimer.
The auditors' annual check on financial management is fundamental to good management, and EPA recognizes it
as an important indicator of the Agency's ability to account for taxpayer dollars and manage for results. EPA
also values the resource information summarized in its financial statements as a basis for cost-benefit and trends
analyses concerning the environmental results envisioned in EPA's strategic goals. For these reasons, no annual
report of EPA's accomplishments would be complete without the inclusion of audited financial statements or
some equivalent.
In response to process control concerns raised in the audit of EPA's FY 1999 financial statements, the Office of
the Chief Financial Officer has worked closely with OIG to strengthen Agency financial management processes
and financial statement preparation. EPA has analyzed in greater detail than ever before every element of its
financial statements. EPA also framed new policies and instituted new procedures, improved quality control
across the entire range of the financial statements, made selective use of automation in new areas, adopted new
methodologies, and strengthened information security. EPA is pleased to report that this collaboration has
enabled the Agency to achieve a "clean" audit opinion on its FY 2000 financial statements.
Budget Authority for FY 1997-FY 2000
Budget authority is the authority provided by law to
incur financial obligations, such as awarding contracts
or grants. For FY 2000 EPA received a total of $8.3
billion in budget authority. The "Budget Authority by
Fiscal Year" chart provides a comparison of EPA's
total budget authority for FY 1997 through FY 2000.
OMB issues EPA's budget authority in many
accounts, consistent with appropriation law. The
"Budget Authority" chart depicts the Superfund and
State and Tribal Assistance Grants (STAG) accounts
and characterizes other major accounts—such as the
Environmental Programs and Management account
and the Science and Technology account—under "All
Other." The Superfund category is a net amount in
that it reflects transfers of Superfund authority to
other accounts as directed by Congress.
Budget Authority hy Fiscal Year
| STAG Q All Other ¦superfund
t 5
o
m 4
3
2
1
0
1997
1998
1999
2000
EPA's FY 2000 Annual Financial Statements
Page 13
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FY 2000 Obligations
An obligation is a legal responsibility on the part of the government to make a disbursement at a later date. For
example an obligation is recognized when the government awards a contract. The actual costs associated with
the contract are recognized when the contractor delivers the requested goods or services.
The "FY 2000 Obligations by Goal" table presents data for each goal by appropriation. Obligations in this table
are not the same as "costs," which are reported in Section IY under the Statement of Net Costs. Obligation
totals in this table also differ from Agency financial statements because the obligation totals include EPA's
Superfund transfer to other federal agencies. Each of the goal chapters that follow in Section II presents the total
obligations for that goal in comparison to Agency's total obligations for FY 2000.
FY 2000 Obligations by Goal
(Dollars in Millions)
G-l
G-2
G-3
G-4
G-5
G-6
G-7
G-8
G-9
G-10
Reimbursable
t+Other
Total
Appropriation
^STAG
203
3098
0
94
64
52
0
0
71
0
0
0
3582
"Vll Other
340
526
75
177
296
178
139
261
285
381
270
0
2928
superfund
0
0
0
0
1563
0
3
3
15
57
123
700
2464
TOTAL
543
3624
75
271
1923
230
142
264
371
438
393
700
8974
+STAG = State and Tribal Assistance Grants
++Other = Payment from General Revenues to the Hazardous Substance
Superfund
FY 2000 Expenses
Expenses are EPA's costs for services rendered or activities performed. In
FY 2000 EPA spent $7.9 billion using current and prior year appropriation
authority. Of this amount 75.8 percent was spent on contracts, inter-agency
agreements (TAGs), and grants. FY 2000 expenses are also displayed by
strategic goal in the Statement of Net Costs in Section IY.
Superfund Financial Trends
The Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), enacted in 1980, formally established the Superfund Program and the Hazardous Substance
Response Trust Fund, now known as the Hazardous Substance Superfund (Trust Fund). Although CERCLA
has not been reauthorized since 1995, the Superfund Program continues to
operate each year by way of annual Congressional appropriations from
general fund transfer.
The Trust Fund, administered by the Bureau of Public Debt, U.S.
Department of the Treasury (Treasury), is the primary financing source for
the Superfund Program. For FY 2000 Treasury reports that the Trust Fund
received approximately $1.2 billion in receipts from the revenue sources
shown in the accompanying chart.
The Superfund Program's authority to tax expired on December 31, 1995.
Consequently the major revenue sources for the Trust Fund are cost
FY 2000 EPA Expenses
FY 2000 Superfund Trust Fund
Revenue Sources
General Fund Transfer
59.7%
Imrestmoril
Income
201%
Fines & Penalties
0.1%
Page 14
EPA's FY 2000 Annual Financial Statements
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recoveries; interest, fines, and penalties; income from Trust Fund investments; and general fund transfer. Due to
diminishing revenues EPA has increased its efforts to conserve existing Trust Fund balances and replenish the
Trust Fund with all eligible revenues. To accomplish these goals EPA has:
Revised the indirect cost rate methodology
for Superfund cost recovery to reflect the
full costs of Superfund cleanup.
Recovered $230.4 million during FY 2000
as a result of accelerated efforts to pursue
collection of cost recovery settlements and
judgments.
Reemphasized its "enforcement first"
philosophy to compel Potentially
Responsible Parties (PRPs) to clean up
contaminated sites. By having PRPs
perform cleanups, EPA can reduce related
response and legal enforcement costs,
resulting in cost savings to both taxpayers
and the Trust Fund.
Cumulative Superfund Costs Recovered
FY 1995 - FY 2000
3000 i-
2500
2000
-------
to change and require responses from EPA solid and hazardous waste programs. In the absence of cleaner
processes and better controls, air and water emissions would tend to increase in response to this growth. Larger
homes increase energy demands and can lead to growth in greenhouse gas emissions. Changes in producer and
consumer behavior are also likely to influence the Agency's ability to achieve its objectives, for example, in the
area of food safety.
Several technology changes might have significant impacts, both positive and negative, on the environment.
Development and adoption of clean technology, such as hydrogen fuel cells, could reduce energy consumption
and greenhouse gas emissions. Biotechnology, including the development of genetically modified organisms,
might yield crops that can thrive without the use of fertilizers and pesticides. However, researchers continue to
investigate the interaction of genetic engineering and other technologies with environmental factors. EPA's
pesticide and industrial chemical programs may need to respond to advances in biotechnology.
The Internet and information technology are transforming public sector processes and the ways that agencies
interact with their constituents and relate to one another. Government agencies at all levels are using technology
to be more accessible, efficient, and responsive to their constituents. Prompted by the expectations of a citizenry
that is growing accustomed to conducting business online, businesses seeking to reduce costs in a technology-
driven marketplace, and Congressional efforts to reduce reporting burden, agencies are using the Internet and
information technology to streamline processes, improve services, and integrate information. As e-commerce
becomes fully entrenched in the everyday lives of the public, EPA will need to deliver customer services that will
require integration across multiple departments and levels of government.
Clearly these and other social, economic, and technological trends and developments will influence the Agency's
ability to achieve its goals and objectives.
LOOKING AHEAD
EPA learned from its FY 1999 experience—through both the work it accomplished and the challenges it
faced—and has made significant progress during FY 2000 in applying the principles of results-based
management. The Agency advanced its efforts to set quantifiable, attainable goals and targets; to forecast
external factors that might have an impact on program planning; to measure performance results more precisely;
and to analyze more accurately the relationships among costs, activities, and results.
In setting future goals and targets EPA will focus on delivering environmental and human health outcomes and
developing meaningful performance measures where possible. The Agency will strive to develop APGs that
reflect progress made toward meeting long-term goals and that are more closely linked to environmental
outcomes. For example APGs currently in place under the air pollution control program for ozone, particulate
matter, and other pollutants enable EPA and states to measure actual improvements in air quality, rather than
progress in program activities such as permits issued. EPA is making similar progress in the area of compliance
and enforcement. For example during FY 2000 EPA established a baseline to measure the average length of
time it takes for significant violators to return to compliance or enter into enforceable plans and agreements.
Building on this effort, in FY 2001 the Agency will be able to assess its progress in decreasing the percentage of
facilities that remain in significant noncompliance after 2 years.
As part of its performance assessment improvement effort, the Agency will continue to work with states to
improve the CPMs that have been negotiated through NEPPS, both to realize improvements in its ability to
measure outcomes and to maintain the close alignment of NEPPS and GPRA performance measures. EPA and
states are particularly committed to increasing significantly the ratio of environmental outcome to output CPMs.
To measure environmental improvements and assess progress accurately, EPA and its partners need quality
environmental information and the analytical tools to understand it. The Agency is working to ensure that it
keeps pace with the rapid advances in information technology and can meet the growing demand for reliable
environmental information. EPA is developing an Information Plan that assesses the Agency's environmental
direction, establishes a framework for identifying and addressing information needs, and matches information
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EPA's FY 2000 Annual Financial Statements
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and technology resources to those needs. In addition the Plan will establish processes for addressing data needs
and identify potential data collection efficiencies and opportunities to leverage information resources. These
initiatives will also support EPA's efforts to improve its trend data, so that the Agency may better assess progress
toward long-term goals and provide a context for assessing annual results.
Collaboration with the Agency's federal, state, and tribal partners and with interested stakeholders will be critical
to the success of these efforts. EPA will continue to depend on strong, effective partnerships to ensure progress
toward the Agency's goals for protection of the environment and human health.
The chapters that follow in Section II present EPA's FY 2000 progress toward each of the Agency's 10 long-term
goals. Each chapter discusses the Agency's accomplishments, research contributions, and program evaluations,
as well as the impact of FY 2000 results on the FY 2001 Annual Plan. As appropriate, chapters also discuss the
Agency's progress in addressing significant management problems. Tables provided at the end of each chapter
present information on the APGs that support each long-term goal. The chapters and tables together help to
describe the results EPA and its federal, state, tribal, and local agency partners achieved during FY 2000 and to
explain how these results will shape the Agency's future planning and performance.
EPA's FY 2000 Annual Financial Statements
Page 17
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PRINCIPAL
FINANCIAL
STATEMENTS
EPA's FY 2000 Annual Financial Statements
Page 19
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CONTENTS
Financial Statements
Consolidating Balance Sheet
Consolidated Statement of Net Cost by Goal
Consolidating Statement of Net Cost
Consolidating Statement of Changes in Net Position
Combined Statement of Budgetary Resources
Combined Statement of Financing
Consolidated Statement of Custodial Activity
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balances with Treasury
Note 3. Cash
Note 4. Investments
Note 5. Accounts Receivable
Note 6. Other Assets
Note 7. Loans Receivable, Net - Non-Federal
Note 8. Inventory and Property Received in Settlement
Note 9. General Plant, Property and Equipment
Note 10. Debt
Note 11. Custodial Liability
Note 12. Other Liabilities
Note 13. Leases
Note 14. Pensions and Other Actuarial Benefits
Note 15. Cashout Advances and Deferrals, Superfund
Note 16. Unexpended Appropriations
Note 17. Amounts Held by Treasury
Note 18. Commitments and Contingencies
Note 19. Grant Accrual
Note 20. Environmental Cleanup Costs
Note 21. Superfund State Credits
Note 22. Superfund Preauthorized Mixed Funding Agreements
Note 23. Income and Expenses from Other Appropriations
Note 24. Custodial Non-Exchange Revenues
Note 25. Statement of Budgetary Resources
Note 26. Adjustments
Note 27. Unobligated Balances
Note 28. Obligated Balance, Net - End of Period
Note 29. Difference in Outlays between Statement of Budgetary Resources and SF-133
Note 30. Statement of Financing
Note 31. Beginning Unobligated Balances - All Other Statement of Budgetary Resources
Note 32. Change in Accounting for Trust Funds
Note 33. Costs Not Assigned to Goals
Note 34. Transfers-in and out, Statement of Changes in Net Position
EPA's FY 2000 Annual Financial Statements
Page 21
-------
Notes to Financial Statements (continued)
Note 35. Imputed Financing
Note 36. Change in Accounting for Cashout Interest, Superfund
Supplemental Information Requested by OMB
Required Supplemental Information
Deferred Maintenance (Unaudited)
Intra-governmental Assets (Unaudited)
Intra-governmental Liabilities (Unaudited)
Supplemental Statement of Budgetary Resources (Unaudited)
Working Capital Fund Supplemental Balance Sheet (Unaudited)
Working Capital Fund Supplemental Statement of Net Cost (Unaudited)
Working Capital Fund Supplemental Statement of Changes in Net Position (Unaudited)
Working Capital Fund Supplemental Statement of Budgetary Resources (Unaudited)
Working Capital Fund Supplemental Statement of Financing (Unaudited)
Required Supplemental Stewardship Information
Annual Stewardship Information (Unaudited)
Page 22
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Consolidating Balance Sheet
As of September 30, 2000
(Dollars in Thousands)
Superfund
All
Combined Intra-
-agency Consolidated
Trust Fund
Others
Totals Eliminations
Totals
ASSETS
Intragovemmental:
Fund Balance with Treasury (Note 2)
$ 37,397 !
J 11,059,256
$ 11,096,653 $
0
$ 11,096,653
Investments (Note 4)
3,960,313
1,593,357
5,553,670
0
5,553,670
Accounts Receivable, Net (Note 5)
40,671
34,371
75,042
(4,191)
70,851
Other (Note 6)
21.789
7.452
29.241
C6.510)
22.731
Total Intragovemmental
4,060,170
12,694,436
16,754,606
(10,701)
16,743,905
Accounts Receivable, Net (Note 5)
617,039
87,895
704,934
0
704,934
Loans Receivables, Net - Non Federal (Note 7)
0
89,128
89,128
0
89,128
Cash (Note 3)
0
48
48
0
48
Inventory and Property Received in Settlement, Net
5,086
347
5,433
0
5,433
(Note 8)
General Property, Plant and Equipment, Net (Note 9)
13,581
473,028
486,609
0
486,609
Other (Note 6)
750
1,712
2,462
0
2,462
Total Assets
$ 4,696,626 !
J 13,346,594
$ 18,043,220 $
(10,701)
$ 18,032,519
LIABILITIES
Intragovemmental:
Accounts Payable
$ 75,467 !
J 1,506
$ 76,973 $
0
$ 76,973
Debt (Note 10)
0
37,922
37,922
0
37,922
Accrued Liabilities
51,748
50,580
102,328
(4,191)
98,137
Custodial Liability (Note 11)
0
102,469
102,469
0
102,469
Other (Note 12)
8,848
28,849
37,697
(6,510)
31,187
Total Intragovemmental
136,063
221,326
357,389
(10,701)
346,688
Accounts Payable
46,066
84,956
131,022
0
131,022
Pensions and Other Actuarial Liabilities (Note 14)
6,637
27,036
33,673
0
33,673
Environmental Cleanup Costs (Note 20)
0
15,499
15,499
0
15,499
Accrued Liabilities
145,358
631,909
777,267
0
777,267
Cashout Advances and Deferrals, Superfund (Note 15)
372,586
0
372,586
0
372,586
Commitments and Contingencies (Note 18)
5,000
2,950
7,950
0
7,950
Other (Note 12)
63,024
200,510
263,534
0
263,534
Total Liabilities
774,734
1,184,186
1,958,920
(10,701)
1,948,219
NET POSITION
Unexpended Appropriations (Note 16)
0
10,119,838
10,119,838
0
10,119,838
Cumulative Results of Operations
3,921,892
2,042,570
5,964,462
0
5,964,462
Total Net Position
3,921,892
12,162,408
16,084,300
0
16,084,300
Total Liabilities and Net Position $ 4.696.626 $ 13.346.594 $ 18.043.220 $ (10,701) $ 18.032.519
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements Page 23
-------
Environmental Protection Agency
Consolidated Statement of Net Cost by Goal
For the Year Ended September 30, 2000
(Dollars in Thousands)
Clean and Better
Clean Safe Safe Prevent Waste Global
Air Water Food Pollution Management Risks
COSTS:
Intragovemmental $ 74,193 $ 153,480 $ 23,286 $ 37,685 $ 414,860 $ 34,480
With the Public 462,922 3,209,971 80,003 231,151 1,478,910 179,880
Total Costs 537,115 3,363,451 103,289 268,836 1,893,770 214,360
Less:
Earned Revenues 219 5,794 21,247 4,180 336,253 6,939
Total Revenue
219
5,794
21,247
4,180
336,253
6,939
Management Cost Allocation
55,155
75,785
22,444
35,815
139,392
16,236
NET COST OF
OPERATIONS :
S 592.051
1 3.433.442 1
104.486 1
300.471 J
! 1.696.909 1
223.657
Detailed descriptions of the above Goals are provided in EPA's FY2000 Annual Report, Section II — GPRA
Performance Results by Strategic Goal.
Page 24
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Consolidated Statement of Net Cost by Goal
For the Year Ended September 30, 2000
(Dollars in Thousands)
Right Not
to Sound Credible Effective Assigned Consolidated
Know Science Deterrent Management to Goals* Totals
COSTS:
Intragovernmental !
With the Public
| 27,229 $
114,439
49,203 5
286,882
£ 69,713
317,423
$ 139,354 $
339,874
120,149 $
25,346
1,143,632
6,726,801
Total Costs
141,668
336,085
387,136
479,228
145,495
7,870,433
Less:
Earned Revenues
338
1,490
495
1,694
3,335
381,984
Total Revenue
338
1,490
495
1,694
3,335
381,984
Management Cost Allocation
23,447
31,613
77,647
(477,534)
0
0
NET COST OF
OPERATIONS :
S 164.777 1
366.208 5
f 464.288
0 1
142.160 1
7.488.449
* See Note 33.
Detailed descriptions of the above Goals are provided in EPA's FY2000 Annual Report, Section II — GPRA
Performance Results by Strategic Goal.
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements
Page 25
-------
Environmental Protection Agency
Consolidating Statement of Net Cost
For the Year Ended September 30, 2000
(Dollars in Thousands)
Superfund All Combined Intra-agency Consolidated
Trust Fund Others Totals Eliminations Totals
COSTS:
Intragovernmental
$ 373,311
$ 787,415 $
1,160,726 $
(17,094) $
1,143,632
With the Public
1,259,464
5,467,337
6,726,801
0
6,726,801
Expenses from Other Appropriations (Note 23)
31,270
(31,270)
0
0
0
Total Costs
1,664,045
6,223,482
7,887,527
(17,094)
7,870,433
Less:
Earned Revenues
307,200
91,878
399,078
(17,094)
381,984
Total Revenue
307,200
91,878
399,078
(17,094)
381,984
NET COST OF OPERATIONS
$ 1,356,845
$ 6,131,604 $
7,488,449 $
0 $
7,488,449
The accompanying notes are an integral part of these statements.
Page 26
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Consolidating Statement of Changes in Net Position
For the Year Ended September 30, 2000
(Dollars in Thousands)
Superfund All Combined Intra-agency Consolidated
Trust Fund Others Totals Eliminations Totals
Net Cost of Operations 5
J 1,356,845 }
f 6,131,604 5
J 7,488,449 $
0 $
7,488,449
Financing Sources (Other Than Exchange Revenues):
Appropriations Used
0
6,632,631
6,632,631
0
6,632,631
Taxes and Non-Exchange Interest (Note 17)
240,808
260,272
501,080
0
501,080
Other Non-Exchange Revenue
1,192
12,958
14,150
0
14,150
Imputed Financing (Note 35)
32,063
168,659
200,722
0
200,722
Trust Fund Appropriations Received (Note 17)
700,000
(700,000)
0
0
0
Income from Other Appropriations (Note 23)
31,270
(31,270)
0
0
0
Transfers-In (Note 34)
9,707
63,730
73,437
(48,725)
24,712
Transfers-Out (Note 34)
(122,935)
(990)
(123,925)
48,725
(75,200)
Net Results of Operations before Trust Fund and
Cashout Interest Accounting Changes
(464,740)
274,386
(190,354)
0
(190,354)
Cumulative Effect of Trust Fund Accounting Change
on Prior Years' Net Results of Operations (Note 32)
2,656,831
91,596
2,748,427
0
2,748,427
Cumulative Effect of Accounting Change for Cashout
Interest on Prior Years' Net Results of Operations
(Note 36)
85,382
0
85,382
0
85,382
Net Results of Operations
2,277,473
365,982
2,643,455
0
2,643,455
Increases/(Decreases) in Unexpended Appropriations
(2,656,831)
42,874
(2,613,957)
0
(2,613,957)
Change in Net Position
(379,358)
408,856
29,498
0
29,498
Net Position - Beginning of Period
4,301,250
11,753,552
16,054,802
0
16,054,802
Net Position - End of Period 5
J 3,921,892 }
f 12,162,408 5
J 16,084,300 $
0 $
16,084,300
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements Page 27
-------
Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Year Ended September 30, 2000
(Dollars in Thousands)
Superfund
Trust Fund
All
Others
Combined
Totals
Budgetary Resources
Budget Authority
Unobligated Balances, Beginning of Period (Note 31)
Net Transfers, Prior Period Balances
Spending Authority from Offsetting Collections
Adjustments (Note 26)
Total Budgetary Resources
Status of Budgetary Resources
Obligations Incurred
Unobligated Balances Available - Apportioned (Note 27)
Unobligated Balances Not Available (Note 27)
Total, Status of Budgetary Resources
Outlays
Obligations Incurred
Less: Spending Authority from Offsetting Collections and Adjustments
Subtotal
1,346,470
482,872
0
123,161
199,372
1,701,337
449,538
1,000
1,701,337
(324,821)
6,920,006
1,674,675
(977)
311,272
27,847
8,266,476
2,157,547
(977)
434,433
227,219
2,151,875 $ 8,932,823 $ 11,084,698
7,158,665
1,644,998
129,160
$ 8,860,002
2,094,536
130,160
2,151,875 $ 8,932,823 $ 11,084,698
7,158,665
(420,189)
1,376,516 6,738,476
8,860,002
(745,010)
8,114,992
Obligated Balance, Net - Beginning of Period
Less: Obligated Balance, Net - End of Period (Note 28)
2,433,861
(2,283,790)
9,153,233
(9,289,444)
11,587,094
(11,573,234)
Total Outlays
$ 1,526,587 $ 6,602,265 $ 8,128,852
Page 28
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Combined Statement of Financing
For the Year Ended September 30, 2000
(Dollars in Thousands)
Superfund All Combined
Trust Fund Others Totals
Obligations and Nonbudgetary Resources
Obligations Incurred $
1,701,337 $
7,158,665 $
8,860,002
Less: Spending Authority for Offsetting Collections and Adjustments
Earned Reimbursements
Collected
(108,997)
(230,981)
(339,978)
Receivable from Federal Sources
13,324
20,720
34,044
Change in Unfilled Customer Orders (Decreases)/Increases
(17,846)
(54,653)
(72,499)
Transfers from Trust Funds
(9,642)
(46,358)
(56,000)
Recoveries of Prior Year Obligations
(201,660)
(111,767)
(313,427)
Financing Imputed for Cost Subsidies (Note 35)
32,063
168,659
200,722
Income from Other Appropriations (Note 23)
31,270
(31,270)
0
Transfers-In/(Out) of Nonmonetary Assets
39
0
39
Exchange Revenue Not in the Entity's Budget
(215,449)
(3,088)
(218,537)
Total Obligations as Adjusted and Nonbudgetary Resources
1,224,439
6,869,927
8,094,366
Resources that Do Not Fund Net Cost of Operations
Change in Amount of Goods, Services, and Benefits Ordered but Not
Yet Provided - (Increases)/Decreases
143,536
(74,345)
69,191
Change in Unfilled Customer Orders, etc.
17,846
53,227
71,073
Costs Capitalized on the Balance Sheet - (Increases)/Decreases
General Plant, Property and Equipment
(3,827)
(107,711)
(111,538)
Purchases of Inventory
0
(68)
(68)
Adjustments to Costs Capitalized on the Balance Sheet
0
153
153
Collections that Decrease Credit Program Receivables or Increase
Credit Program Liabilities
0
5,014
5,014
Adjustment for Trust Fund Outlays that Do Not Affect Net Cost
(38,090)
(652,268)
(690,358)
Total Resources that Do Not Fund Net Costs of Operations
119,465
(775,998)
(656,533)
Components of Costs that Do Not Require or Generate Resources
Depreciation and Amortization
3,654
20,651
24,305
Bad Debt Related to Uncollectible Non-Credit Reform Receivables
3,075
1,518
4,593
Revaluation of Assets and Liabilities
0
(165)
(165)
Loss on Disposition of Assets
(813)
0
(813)
Other Expenses Not Requiring Budgetary Resources
45
3,409
3,454
Total Costs That Do Not Require Resources
5,961
25,413
31,374
Financing Sources Yet to be Provided (Note 30)
6,980
12,262
19,242
Net Costs of Operations $^^i356J845 $^^131^604 $^^^^488^449^
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements
Page 29
-------
Environmental Protection Agency
Consolidated Statement of Custodial Activity
For the Year Ended September 30, 2000
(Dollars in Thousands)
Revenue Activity:
Sources of Collections:
Fines and Penalties 76,850
Other $ 18.418
Total Cash Collections 95,268
Accrual Adjustment (8,678)
Total Custodial Revenue 86,590
Disposition of Collections:
Transferred to Others (General Fund) 97,730
Increases/(Decreases) in Amounts To Be Transferred ('11,140')
Total Disposition of Collections 86 590
Net Custodial Revenue Activity $ 0
Page 30
The accompanying notes are an integral part of these statements.
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Notes to Financial Statements
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Basis of Presentation
These consolidating financial statements have been prepared to report the financial position and results of
operations of the Environmental Protection Agency (Agency) for the Hazardous Substance Superfund (Superfund)
Trust Fund and All Other Funds, as required by the Chief Financial Officers Act of 1990 and the Government
Management Reform Act of 1994. The reports have been prepared from the books and records of the Agency in
accordance with "Form and Content for Agency Financial Statements," specified by the Office of Management
and Budget (OMB) in Bulletin 97-01, and the Agency's accounting policies which are summarized in this note. In
addition to the guidance in Bulletin 97-01, the Statement of Net Cost has been prepared by the EPA strategic
goals. These statements are therefore different from the financial reports also prepared by the Agency pursuant to
OMB directives that are used to monitor and control the Agency's use of budgetary resources.
B. Reporting Entities
The Environmental Protection Agency was created in 1970 by executive reorganization from various components
of other Federal agencies in order to better marshal and coordinate Federal pollution control efforts. The Agency
is generally organized around the media and substances it regulates — air, water, land, hazardous waste, pesticides
and toxic substances. For FY 2000, the reporting entities are grouped as Hazardous Substance Superfund and All
Other Funds.
Hazardous Substance Super find
In 1980, the Hazardous Substance Superfund, commonly referred to as the Superfund Trust Fund, was
established by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)
to provide resources needed to respond to and clean up hazardous substance emergencies and abandoned,
uncontrolled hazardous waste sites. The Superfund Trust Fund financing is shared by Federal and state
governments as well as industry. The Agency allocates funds from its appropriation to other Federal agencies to
carry out the Act. Risks to public health and the environment at uncontrolled hazardous waste sites qualifying for
the Agency's National Priorities List (NPL) are reduced and addressed through a process involving site assessment
and analysis, and the design and implementation of cleanup remedies. Throughout this process, cleanup activities
may be supported by shorter term removal actions to reduce immediate risks. Removal actions may include
removing contaminated material from the site, providing an alternative water supply to people living nearby, and
installing security measures. NPL cleanups and removals are conducted and financed by the Agency, private
parties, or other Federal agencies. Superfund includes the Treasury collections and investment activity. The
Superfund Trust Fund is accounted for under Treasury symbol number 8145.
All Other Funds
All Other Funds include Trust Fund appropriations, General Fund appropriations, Revolving Funds, Special
Funds, the Agency Budgetary Clearing accounts, Deposit Funds, General Fund Receipt accounts, the
Environmental Services Special Fund Receipt Account, the Miscellaneous Contributed Funds Trust Fund, and
General Fund appropriations transferred from other Federal agencies as authorized by the Economy Act of 1932.
Trust Fund appropriations are to the Leaking Underground Storage Tank (LUST) Trust Fund and the Oil Spill
Response Trust Fund. General Fund appropriations are to State and Tribal Assistance Grants (STAG), Science
and Technology (S&T), Environmental Programs and Management (EPA/1), Office of Inspector General (IG),
Buildings and Facilities (B&F), and Payment to the Hazardous Substance Superfund. General Fund
appropriations that no longer receive current appropriations but have unexpended authority are the Program and
EPA's FY 2000 Annual Financial Statements
Page 31
-------
Research Operations (PRO), and Energy, Research and Development. Revolving Funds include the FIFRA
Revolving Fund and Tolerance Revolving Fund, which receive no direct appropriations; however, they do collect
fees from public industry as a source of reimbursement for the services provided. In addition to FIFRA and
Tolerance, a Working Capital Fund (WCF) was established and designated as a franchise fund to provide
computer operations support and postage service for the Agency. A Special Fund was established to collect the
Exxon Valdez settlement as a result of the Exxon Valdez oil spill. All Other Funds are as follows:
The LUST Trust Fund was authorized by the Superfund Amendments and Reauthorization Act of 1986 (SARA)
as amended by the Omnibus Budget Reconciliation Act of 1990. The LUST appropriation provides funding to
respond to releases from leaking underground petroleum tanks. The Agency oversees cleanup and enforcement
programs which are implemented by the states. Funds are allocated to the states through cooperative agreements
to clean up those sites posing the greatest threat to human health and environment. Funds are used for grants to
non-state entities including Indian tribes under Section 8001 of the Resource Conservation and Recovery Act.
The program is financed by a 0.1 cent a gallon tax on motor fuels, which will expire in 2005, and is accounted for
under Treasury symbol number 8153.
The Oil Spill Response Trust Fund was authorized by the Oil Pollution Act (OPA) of 1990. The Oil Spill
Response Trust Fund was established in FY 1993 and monies were appropriated to the Oil Spill Response Trust
Fund. The Agency is responsible for directing, monitoring and providing technical assistance for major inland oil
spill response activities. This involves setting oil prevention and response standards, initiating enforcement
actions for compliance with OPA and Spill Prevention Control and Countermeasure requirements, and directing
response actions when appropriate. The Agency carries out research to improve response actions to oil spills
including research on the use of remediation techniques such as dispersants and bioremediation. Funding of oil
spill cleanup actions is provided through the Department of Transportation under the Oil Spill Liability Trust
Fund and reimbursable funding from other Federal agencies. The Oil Spill Response Trust Fund is accounted
for under Treasury symbol number 8221.
The State and Tribal Assistance Grants (STAG) appropriation provides funds for environmental programs and
infrastructure assistance including capitalization grants for State revolving funds and performance partnership
grants. Environmental programs and infrastructure supported are Clean and Safe Water; Capitalization grants for
the Drinking Water State Revolving Funds; Clean Air; Direct grants for Water and Wastewater Infrastructure
needs, Partnership grants to meet Health Standards, Protect Watersheds, Decrease Wetland Loss, and Address
Agricultural and Urban Runoff and Storm Water; Better Waste Management; Preventing Pollution and Reducing
Risk in Communities, Homes, Workplaces and Ecosystems; and Reduction of Global and Cross Border
Environmental Risks. STAG is accounted for under Treasury symbol 0103.
The Science and Technology (S&T) appropriation finances salaries; travel; science; technology; research and
development activities including laboratory and center supplies; certain operating expenses; grants; contracts;
intergovernmental agreements; and purchases of scientific equipment. These activities provide the scientific basis
for the Agency's regulatory actions. In FY 2000, Superfund research costs were appropriated in Superfund and
transferred to S&T to allow for proper accounting of the costs. Scientific and technological activities for
environmental issues include Clean Air; Clean and Safe Water; Americans' Right to Know About Their
Environment; Better Waste Management; Preventing Pollution and Reducing Risk in Communities, Homes,
Workplaces, and Ecosystems; and Safe Food. The Science and Technology appropriation is accounted for under
Treasury symbol 0107.
The Environmental Programs and Management (EPA/1) includes funds for salaries; travel; contracts; grants and
cooperative agreements for pollution abatement, control and compliance activities; and administrative activities of
the operating programs. Areas supported from this appropriation include Clean Air; Clean and Safe Water;
Preventing Pollution and Reducing Risk in Communities, Homes, Workplaces, and Ecosystems; Better Waste
Management, Restoration of Contaminated Waste Sites and Emergency Response; Reduction of Global and
Cross Border Environmental Risks; Americans' Right to Know About Their Environment; Sound Science,
Improved Understanding of Environmental Risk, and Greater Innovation to Address Environmental Problems; a
Page 32
EPA's FY 2000 Annual Financial Statements
-------
Credible Deterrent to Pollution and Greater Compliance with the Law; and Effective Management. The
Environmental Programs and Management appropriation is accounted for under Treasury symbol 0108.
The Office of Inspector General appropriation provides funds for audit and investigative functions to identify
and recommend corrective actions on management and administrative deficiencies that create the conditions for
existing or potential instances of fraud, waste and mismanagement. Additional funds for audit and investigative
activities associated with the Superfund Trust Fund and the Leaking Underground Storage Tank Trust Fund are
appropriated under those Trust Fund accounts and are transferred to the Office of Inspector General account.
The audit function provides contract audit, internal and performance audit, and financial and grant audit services.
The Office of Inspector General appropriation is accounted for under Treasury symbol 0112 and includes
expenses incurred and reimbursed from the appropriated trust funds being accounted for under Treasury symbols
8145 and 8153.
The Buildings and Facilities appropriation provides for the construction, repair, improvement, extension,
alteration, and purchase of fixed equipment or facilities that are owned or used by the Environmental Protection
Agency. The Buildings and Facilities appropriation is accounted for under Treasury symbol 0110.
The Payment to the Hazardous Substance Superfund appropriation authorizes appropriations from the General
Fund of the Treasury to finance activities conducted through Hazardous Substance Superfund. Payment to the
Hazardous Substance Superfund is accounted for under Treasury symbol 0250.
The Asbestos Loan Program was authorized by the Asbestos School Hazard Abatement Act of 1986 to finance
control of asbestos building materials in schools. Funds have not been appropriated for this Program since FY
1993. For FY 1993 and FY1992, the program was funded by a subsidy appropriated from the General Fund for
the actual cost of financing the loans, and by borrowing from Treasury for the unsubsidized portion of the loan.
The Program fund disbursed the subsidy to the Financing fund as loans were made, and disbursed administrative
expenses to the providers. The Financing fund received the subsidy payment, borrowed from Treasury and
disbursed loans and collects the asbestos loans. The Asbestos Loan Program is accounted for under Treasury
symbol 4322 for loans receivable and loan collections on post FY 1991 loans; and under Treasury symbol 2917
for pre FY 1992 loans receivable and loan collections.
The Program and Research Operations appropriation provides salaries and travel associated with administering
the operating programs within the Environmental Protection Agency. It incorporated personnel, compensation
and benefit costs and travel, exclusive of the Hazardous Substance Response Trust Fund, the Leaking
Underground Storage Tank Trust Fund, the Office of Inspector General and the Oil Spill Response Trust Fund.
In fiscal year 1996, Congress restructured the Agency's accounts. The Program and Research Operations
appropriation was eliminated. Activity remaining from prior fiscal year appropriations is accounted for under
Treasury symbol 0200. Unexpended authority for the Program and Research Operations appropriation was
canceled at the end of the fiscal year.
The FIFRA Revolving Fund was authorized by the Federal Insecticide, Fungicide and Rodenticide Act
Amendments of 1998, as amended by the Food Quality Protection Act of 1996. Fees are paid by industry to
offset costs of accelerated reregistration, expedited processing of pesticides, and establishing tolerances for
pesticide chemicals in or on food and animal feed. The FIFRA Revolving Fund is accounted for under Treasury
symbol number 4310.
The Tolerance Revolving Fund was authorized in 1963 for the deposit of tolerance fees. Fees are paid by
industry for EPA to establish tolerances of pesticide chemicals in or on food and animal feed. Effective January
2, 1997, fees collected are now being deposited in the Reregistration and Expedited Processing Revolving Fund
(4310). The fees collected prior to this date are accounted for under Treasury symbol number 4311.
The Working Capital Fund (WCF) includes two activities: computer support services and postage. WCF derives
revenue from these activities based upon fee for services. WCF's customers currently consist solely of Agency
program offices. Accordingly, revenue generated by WCF and expenses recorded by the program offices for use
EPA's FY 2000 Annual Financial Statements
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of such services, along with the related advances/liabilities, are eliminated on consolidation. The WCF is
accounted for under Treasury symbol 4565.
The Exxon Valdez Settlement Fund has funds available to carry out authorized environmental restoration
activities. Funding is derived from the collection of reimbursements under the Exxon Valdez settlement as a
result of the oil spill. The Exxon Valdez Settlement fund is accounted for under Treasury symbol number 5297.
Appropriations transferred to the Agency from other Federal agencies include funds from the Appalachian
Regional Commission and the Department of Commerce, which provide economic assistance to state and local
developmental activities; the Agency for International Development which provides assistance on environmental
matters at international levels; and from the General Services Administration, which provides funds for rental of
buildings, and operations, repairs, and maintenance of rental space. The transfers appropriations are accounted
for under Treasury symbols 0200, 1010, 1021, 2050, and 4542.
Clearing Accounts include the Budgetary suspense account, Deposit in Transit differences, Unavailable Check
Cancellations and Overpayments, and Undistributed and Letter of Credit differences. Clearing accounts are
accounted for under Treasury symbols 3875 and 3880.
Deposit funds include Fees for Ocean Dumping, Nonconformance Penalties, Suspense and payroll deposits for
Savings Bonds, and State and City Income Taxes Withheld. Deposit funds are accounted for under Treasury
symbols 6050, 6264, 6265, 6266, 6275, 6500, and 6875.
General Fund Receipt Accounts include Hazardous Waste Permits; Miscellaneous Fines, Penalties and
Forfeitures; General Fund Interest; Interest from Credit Reform Financing Accounts; Fees and Other Charges
for Administrative and Professional Services; and Miscellaneous Recoveries and Refunds. General Fund Receipt
accounts are accounted for under Treasury symbols 0895, 1099, 1435, 1499, 2410, 3200, and 3220.
The Environmental Services Receipt account was established for the deposit of fee receipts associated with
environmental programs, including radon measurement proficiency ratings and training, motor vehicle engine
certifications, and water pollution permits. Receipts in this special fund will be appropriated to the S&T
appropriation and to the EPM appropriation to meet the expenses of the programs that generate the receipts.
Environmental Services are unavailable receipts accounted for under Treasury symbol 5295.
The Miscellaneous Contributed Funds Trust Fund includes gifts for pollution control programs that are usually
designated for a specific use by the donor and deposits from pesticide registrants to cover the costs of petition
hearings when such hearings result in unfavorable decisions to the petitioner. Miscellaneous Contributed Funds
Trust Fund is accounted for under Treasury symbol 8741.
The accompanying financial statements include the accounts of all funds described in this note. The expense
allocation methodology is a financial statement estimate that presents EPA's programs at full cost. Superfund
may charge some costs directly to the fund and charge the remainder of the costs to the All Other Funds in the
Agency-wide appropriations. These amounts are presented as Expenses from Other Appropriations on the
Statement of Net Cost and as Income from Other Appropriations on the Statement of Changes in Net Position
and the Statement of Financing.
The Superfund Trust Fund is allocated general support services costs (such as rent, communications, utilities,
mail operations, etc.) that were initially charged to the Agency's S&T and EPM appropriations. During the year,
these costs are allocated from the S&T and EPM appropriations to the Superfund Trust Fund based on a ratio of
direct labor hours, using budgeted or actual full-time equivalent personnel charged to these appropriations, to the
total of all direct labor hours. Agency general support services cost charges to the Superfund Trust Fund may
not exceed the ceilings established in the Superfund Trust Fund appropriation. The related general support
services costs charged to the Superfund Trust Funds was $56.3 million for FY 2000.
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EPA's FY 2000 Annual Financial Statements
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C. Budgets and Budgetary Accounting
Super fund
Congress adopts an annual appropriation amount to be available until expended for the Superfund Trust Fund.
A transfer account for the Superfund Trust Fund has been established for purposes of carrying out the program
activities. As the Agency disburses obligated amounts from the transfer account, the Agency draws down monies
from the Superfund Trust Fund at Treasury to cover the amounts being disbursed.
All Other Funds
Congress adopts an annual appropriation amount for the LUST Trust Fund and for the Oil Spill Response Trust
Fund to remain available until expended. A transfer account for the LUST Trust Fund has been established for
purposes of carrying out the program activities. As the Agency disburses obligated amounts from the transfer
account, the Agency draws down monies from the LUST Trust Fund at Treasury to cover the amounts being
disbursed. The Agency draws down all the appropriated monies from the Treasury's Oil Spill Liability trust fund
to the Oil Spill Response Trust Fund when Congress adopts the appropriation amount. Congress adopts an
annual appropriation for STAG, Buildings and Facilities, and for Payments to the Hazardous Substance
Superfund to be available until expended; adopts annual appropriation for S&T, EPM and for the Office of
Inspector General to be available for two fiscal years. When the appropriations for the General Funds are
enacted, Treasury issues a warrant to the respective appropriations. As the Agency disburses obligated amounts,
the balance of funds available to the appropriation is reduced at Treasury.
The Asbestos Loan Program is a commercial activity financed by a combination from two sources: one for the
long term cost of the loan and another for the remaining non-subsidized portion of the loan. The long term costs
are defined as the net present value of the estimated cash flows associated with the loans. The portion of each
loan disbursement that does not represent long term cost is financed under a permanent indefinite borrowing
authority established with the Treasury. The annual appropriation bill limits the amount of obligations that can
be made for direct loans. A permanent indefinite appropriation is available to finance the costs of subsidy re-
estimates that occur after the year in which the loan is disbursed. No appropriation was adopted by Congress for
FY 2000; therefore, there was no new financing available to the Asbestos Loan Program for FY 2000.
Funding of the FIFRA and the Tolerance Revolving Funds is provided by fees collected from industry to offset
costs incurred by the Agency in carrying out these programs. Each year the Agency submits an apportionment
request to OMB based on the anticipated collections of industry fees.
Funding of the WCF is provided by fees collected from other Agency appropriations collected to offset costs
incurred for providing the Agency administrative support for computer support services and postage.
Funds transferred from other Federal agencies is funded by a non expenditure transfer of funds from the other
Federal agencies. As the Agency disburses the obligated amounts, the balance of funding available to the transfer
appropriation is reduced at Treasury.
Clearing accounts, Deposit accounts, and Receipt accounts receive no budget. The amounts are recorded to the
Clearing and Deposit accounts pending further disposition. Amounts recorded to the Receipt accounts capture
amounts receivable to or collected for the General Fund of the U.S. Treasury.
D. Basis of Accounting
Superfund and All Other Funds
Transactions are recorded on an accrual accounting basis and on a budgetary basis (where budgets are issued).
Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is
EPA's FY 2000 Annual Financial Statements
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incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal
constraints and controls over the use of Federal funds. All interfund balances and transactions have been
eliminated.
E. Revenues and Other Financing Sources
Super fund
The Superfund receives most funding needed to support the program through appropriations that may be used
within statutory limits, for operating and capital expenditures (primarily equipment). Additional financing for the
Superfund Trust Fund is obtained through reimbursements from other Federal agencies, from States for State
Cost Share, and from potentially responsible parties (PRPs) for future costs. Revenues collected through cost
recovery are deposited with the Trust fund at Treasury.
All Other Funds
The majority of All Other Funds appropriations receive funding needed to support programs through
appropriations, which may be used, within statutory limits, for operating and capital expenditures. Under Credit
Reform provisions, the Asbestos Loan Program received funding to support the subsidy cost of loans through
appropriations which may be used with statutory limits. The Asbestos Direct Loan Financing fund, an off-
budget fund, receives additional funding to support the loan disbursements through collections from the
Program fund for the subsidized portion of the loan and through borrowing from Treasury for the non-
subsidized portion. The last year Congress provided appropriations for this fund was 1993, accordingly, no new
funding has been available for this program. The FIFRA and the Tolerance Revolving Funds receive funding,
which is now deposited with the FIFRA Revolving Fund, through fees collected for services provided. The
FIFRA Revolving Fund also receives interest on invested funds. The WCF receives revenue through fees
collected for services provided to Agency program offices. Such revenue is eliminated with related Agency
program expenses on Consolidation. The Exxon Valdez Settlement Fund received funding through
reimbursements.
Appropriations are recognized as Other Financing Sources when earned, i.e., when goods and services have been
rendered without regard to payment of cash. Other revenues are recognized when earned, i.e., when services
have been rendered.
F. Funds with the Treasury
Superfund and All Other Funds
The Agency does not maintain cash in commercial bank accounts. Cash receipts and disbursements are handled
by Treasury. The funds maintained with Treasury are Appropriated Funds, Revolving Funds and Trust Funds.
These funds have balances available to pay current liabilities and finance authorized purchase commitments.
G. Investments in U.S. Government Securities
Superfund and All Other Funds
Investments in U.S. Government securities are maintained by Treasury and are reported at amortized cost net of
unamortized discounts. Discounts are amortized over the term of the investments and reported as interest
income. Investments are held to maturity, unless they are needed to finance operations of the fund.
H. Securities Received in Settlement
Superfund
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EPA's FY 2000 Annual Financial Statements
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During FY 1993 and FY 1996, the Agency received marketable equity securities, valued at a total $5,146
thousand of which $5,127 thousand are still held, from a company in settlement of Superfund cost recovery
actions. The Agency records marketable securities at cost as of the date of receipt. Marketable securities are held
by Treasury and reported at their cost value in the financial statements until sold.
I. Accounts Receivable and Interest Receivable
Superfund
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), as amended by the
Superfund Amendments and Reauthorization Act (SARA), provides for the recovery of costs from potentially
responsible parties (PRPs). However, cost recovery expenditures are expensed when incurred since there is no
assurance that these funds will be recovered.
It is the Agency's policy to record accounts receivable from PRPs for Superfund site response costs when a
consent decree, judgment, administrative order, or settlement is entered. These agreements are generally
negotiated after site response costs have been incurred. It is the Agency's position that until a consent decree or
other form of settlement is obtained, the amount recoverable should not be recorded.
The Agency also records accounts receivable from states for a percentage of Superfund site remedial action costs
incurred by the Agency within those states. As agreed to under Superfund State Contracts (SSCs), cost sharing
arrangements under SSCs may vary according to whether a site was privately or publicly operated at the time of
hazardous substance disposal and whether the Agency response action was removal or remedial. SSC agreements
are usually for 10% or 50% of site remedial action costs. States may pay the full amount of their share in
advance, or incrementally throughout the remedial action process. Allowances for uncollectible state cost share
receivables have not been recorded, because the Agency has not had collection problems with these agreements.
All Other Funds
The majority of receivables for All Other Funds represent interest receivable for Asbestos and FIFRA and both
accounts receivable and interest receivable to the General Fund of the Treasury.
J. Loans Receivable
All Other Funds
Loans are accounted for as receivables after funds have been disbursed. Loans receivable resulting from
obligations on or before September 30, 1991, are reduced by the allowance for uncollectible loans. Loans
receivable resulting from loans obligated on or after October 1, 1991, are reduced by an allowance equal to the
present value of the subsidy costs associated with these loans. The subsidy cost is calculated based on the
interest rate differential between the loans and Treasury borrowing, the estimated delinquencies and defaults net
of recoveries offset by fees collected and other estimated cash flows associated with these loans.
K. Appropriated Amounts Held by Treasury
Superfund and All Other Funds
For the Superfund and LUST Trust Funds, and for amounts appropriated to the Office of Inspector General
from the Superfund and LUST Trust Funds, cash available to the Agency that is not needed immediately for
current disbursements remains in the respective Trust Funds managed by Treasury. At the end of FY 2000
approximately $2.7 billion remained in the Treasury managed Superfund Trust Fund and approximately $86.2
million remained in the LUST Trust Fund to meet the Agency's disbursement needs.
EPA's FY 2000 Annual Financial Statements
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L. Advances and Prepayments
Super fund and All Other Funds
Advances and prepayments represent funds advanced or prepaid to other entities both internal and external to the
Agency for which a budgetary expenditure has not yet occurred.
M. Property, Plant, and Equipment
Super fund and All Other Funds
The Fixed Assets Subsystem (FAS) implemented in FY 1997 maintains EPA-held personal and real property
records. The FAS automatically generates depreciation entries monthly based upon the acquisition date.
Purchases of EPA-held and contractor-held personal equipment are capitalized if the equipment is valued at $25
thousand or more and has an estimated useful life of at least two years. Prior to implementing FAS, depreciation
was taken on a modified straight-line basis over a period of six years depreciating 10% the first and sixth year,
and 20% in years two through five. All EPA-held personal equipment purchased before the implementation of
FAS was assumed to have an estimated useful life of five years. New acquisitions of EPA-held personal
equipment are depreciated using the straight-line method over the specific assets' useful lives, ranging from two
to 15 years.
Real property consists of land, buildings, and capital and leasehold improvements. Real property, other than
land, is capitalized when the value is $75 thousand or more. Land is capitalized regardless of cost. Buildings are
valued at an estimated original cost basis, and land is valued at fair market value. Depreciation for real property
is calculated using the straight-line method over the specific assets' useful lives, ranging from 10 to 102 years.
Leasehold improvements are amortized over the lesser of their useful lives or the unexpired lease terms. In
addition to property and improvements not meeting the capitalization criteria, expenditures for minor alterations,
and repairs and maintenance are expensed as incurred.
N. Liabilities
Super fund and All Other Funds
Liabilities represent the amount of monies or other resources that are likely to be paid by the Agency as the result
of a transaction or event that has already occurred. However, no liability can be paid by the Agency without an
appropriation or other collection of revenue for services provided. Liabilities for which an appropriation has not
been enacted are classified as unfunded liabilities and there is no certainty that the appropriations will be enacted.
Liabilities of the Agency, arising from other than contracts, can be abrogated by the Government acting in its
sovereign capacity.
O. Borrowing Payable to the Treasury
All Other Funds
Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos direct loans described in
part B and C of this note. Periodic principal payments are made to Treasury based on the collections of loans
receivable.
P. Interest Payable to Treasury
All Other Funds
The Asbestos Loan Program makes periodic interest payments to Treasury based on its debt to Treasury. At the
end of FY 2000, there was no outstanding interest payable to Treasury since payment was made through
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EPA's FY 2000 Annual Financial Statements
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September 30.
Q. Accrued Unfunded Annual Leave
Super fund and All Other Funds
Annual, sick and other leave is expensed as taken during the fiscal year. Sick and other leave earned but not
taken is not accrued as a liability. Annual leave and compensation time in lieu of overtime earned but not taken
as of the end of the fiscal year are accrued as an unfunded liability. Accrued unfunded leave is included in the
Statement of Financial Position as a component of "Other Liabilities-Governmental." As of September 30, 2000,
the unfunded leave liability for the Superfund Trust Fund was $19.6 million and for All Other Funds was $93.2
million.
R. Retirement Plan
Superfund and All Other Funds
The majority of the Agency's employees participate in the Civil Service Retirement System (CSRS), to which the
Agency contributes 8.51% and employees contribute 7.40% (as of January 1, 2000) of base pay.
On January 1, 1987, the Federal Employees Retirement System (FERS) went into effect pursuant to Public Law
99-335. Most employees hired after December 31, 1983, are automatically covered by FERS and Social Security.
Employees hired prior to January 1, 1984, were allowed to either join FERS and Social Security or remain in
CSRS. A primary feature of FERS is that it offers a savings plan to the Agency employees which automatically
contributes 1 percent of pay and matches any employee contribution up to an additional 4 percent of pay. For
most employees hired after December 31, 1983, the Agency also contributes the employer's matching share for
Social Security.
With the issuance of "Accounting for Liabilities of the Federal Government" (SFFAS-5), which was effective for
the FY 1997 financial statements, accounting and reporting standards were established for liabilities relating to
the Federal employee benefit programs (Retirement, Health Benefits and Life Insurance). SFFAS-5 requires that
employing agencies recognize the cost of pensions and other retirement benefits during their employees' active
years of service. SFFAS-5 requires that the Office of Personnel Management, as administrator of the Civil
Service Retirement and Federal Employees Retirement Systems, the Federal Employees Health Benefits Program,
and the Federal Employees Group Life Insurance Program, provides EPA with the "Cost Factors" to compute
EPA's liability for each program.
S. Cost Accounting
Superfund and All Other Funds
EPA has designated the Goals, Objectives and Sub-objectives of the Agency's Strategic Plan prepared under the
Government Performance and Results Act (GPRA) as the Agency's "products and services." Under the GPRA
structure, each expenditure from obligations made using new obligational authority (NOA) in FY 1999 forward is
made at the Goal, Objective, Sub-objective level that is part of the Program Results Code (PRC). EPA's senior
management made the decision not to "recast" resources under the old Program Element (PE) structure to the
GPRA structure. However, the program offices where these PEs were obligated and disbursed cross walked the
expenses to the appropriate Goal(s). Most of the PEs can be traced directly to a Goal and in those cases where
PEs crossed Goals, the allocation of expenses was done on a reasonable and consistent basis.
Program Performance Grants (PPGs) allow state and interstate agencies to combine two or more environmental
program grants into one grant. PPGs are performance based and the States are accountable for performance but
not for detailed accounting as to how funds are spent. These grants may cover several Goals. EPA grant project
officers in discussion with States align the grant work plan with the GPRA structure. Accounting at the Goal
EPA's FY 2000 Annual Financial Statements
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level is based on expected performance as outlined in the work plan. Adjustments are made to the accounting
only if the actual performance varies materially from the grant work plan.
Activities occurring in Goal 10 are for the administrative functions necessary for a federal agency to support its
complex and wide reaching programs. These activities are not directly charged to the Agency's environmental
programs. For the Statement of Net Cost by Goal, the costs in Goal 10 are allocated to Goals 1 thru 9 based on
the total Full Time Equivalents (FTE) within each Goal. The Goal 10 agency-wide costs are allocated based on
the total FTE in each of the Goals; costs associated with regional support are allocated based on Regional FTE in
each Goal.
Note 2. Fund Balances with Treasury
Fund Balances with Treasury as of September 30, 2000, consists of the following (in thousands):
Entity
Assets
Non-Entity
Assets
Total
Trust Funds:
Superfund
$ 37,397
$ o
$ 37,397
LUST
1,300
0
1,300
Oil Spill
3,106
0
3,106
Revolving Funds:
FIFRA
5,442
0
5,442
Tolerance
22
0
22
Working Capital
52,509
0
52,509
Appropriated Funds
10,913,47
0
10,913,471
Other Fund Types
76.338
7.068
83.406
Total
$ 11.089.58
$ 7.068
$ 11.096.653
Entity fund balances include balances that are available to pay current liabilities and to finance authorized
purchase commitments. Also, entity assets, Other Fund Types consist of the Environmental Services Receipt
account. The Environmental Services Receipt account is a special fund receipt account. Upon Congress
appropriating the funds, EPA will use the receipts in the Science and Technology appropriation and the
Environmental Programs and Management appropriation.
The non-entity Other Fund Type consist of deposit funds. The deposit funds are awaiting documentation for the
determination of proper accounting disposition.
Note 3. Cash
In All Others, as of September 30, 2000, Cash consisted of imprest funds totaling $48 thousand.
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EPA's FY 2000 Annual Financial Statements
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Note 4. Investments
As of September 30, 2000, investments consisted of the following:
Amounts for Balance
Superfund
Intragovernmental
Securities:
N on-Marketable
All Others
Intragovernmental
Securities:
N on-Marketable
Unamortized
(Premium) Interest Investments,
Cost Discount Receivable Net
Market
Value
: 4.126.450 $ 166.180 $ 43 $ 3.960.313 $ 3.960.313
1.669.665 $ 76.334 J 26 $ 1.593.357 $ 1.593.357
CERCLA, as amended by SARA, authorizes EPA to recover monies to clean up Superfund sites from
responsible parties (RP). Some RPs file for bankruptcy under Title 11 of the U.S. Code. In bankruptcy
settlements, EPA is an unsecured creditor and is entitled to receive a percentage of the assets remaining after
secured creditors have been satisfied. Some RPs satisfy their debts by issuing marketable securities in the
reorganized company. The Agency does not intend to exercise ownership rights to these securities, and instead
will convert these securities to cash as soon as practicable.
Note 5. Accounts Receivable
The Accounts Receivable for September 30, 2000, consist of the following:
Intragovernmental Assets:
Accounts & Interest Receivable
Total
Governmental Assets:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance for Doubtful
Total
Superfund All Others
40.671
40.671
88,209
883,938
(355.108)
617.039
34.371
34.371
0
155,581
(67.686)
87.895
Accounts receivable due from other Federal agencies are considered fully collectible.
The Allowance for Doubtful Accounts is determined on a specific identification basis as a result of a case-by-case
review of receivables at the regional level, and a reserve on a percentage basis for those not specifically identified.
The Accounts Receivable amount above includes a Superfund penalty amount of $638.6 thousand that was
applied and posted late in FY 2000. The agency believes that collection of this amount is not likely. Had the
penalty been applied earlier in the year, the Allowance for Doubtful Accounts would have been adjusted upward
by $479 thousand to account for the low likelihood of collection.
EPA's FY 2000 Annual Financial Statements
Page 41
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Note 6. Other Assets
Other Assets for September 30, 2000, consist of the following
Superfund All
Trust Fund Others
Combined Intra-agency Consolidated
Totals Eliminations Totals
Intragovernmental Assets:
Advances to Federal Agencies
$ 15,279 J
; 7,409
$ 22,688 }
f 0 $
Advances to Working Capital Fund
6,510
0
6,510
(6,510)
Advances for Postage
0
43
43
0
Total Intragovernmental Assets
TTT
Cs
OO
! 7,452 :
$ 29,241 5
5 (6,510) $
Governmental Assets:
Travel Advances
$ (18) J
; (916)
$ (934) }
f 0 $
Letter of Credit Advances
0
599
599
0
Grant Advances
0
1,945
1,945
0
Other Advances
767
75
842
Bank Card Payments
1
0
1
Deposit on Returnable Containers
0
(2)
(2)
0
Prepaid Rent
0
11
11
0
Total Governmental Assets
$ 750 5
> 1,712 :
$ 2,462 ^
5 0 $
22,688
0
43
22,731
(934)
599
1,945
842
1
(2)
n
2,462
Note 7. Loans Receivable, Net - Non-Federal
Asbestos Loan Program loans disbursed from obligations made prior to FY 1992 are net of an allowance for
estimated uncollectible loans, if an allowance was considered necessary. Loans disbursed from obligations made
after FY 1991 are governed by the Federal Credit Reform Act. The Act mandates that the present value of the
subsidy costs (i.e., interest rate differentials, interest subsidies, anticipated delinquencies, and defaults) associated
with direct loans be recognized as an expense in the year the loan is made. The net present value of loans is the
amount of the gross loan receivable less the present value of the subsidy.
An analysis of loans receivable and the nature and amounts of the subsidy and administrative expenses associated
entirely with Asbestos Loan Program loans as of September 30, 2000, is provided in the following sections.
Direct Loans Obligated Prior to FY 1992
Direct Loans Obligated After FY 1991
Total
Loans
Receivable,
Gross
$ 58,114
46,909
$ 105.023
Allowance*
$ 0
(15,895)
$ (15.895)
Value of
Assets Related
to Direct Loans
$ 58,114
31,014
$ 89.128
* Allowance for Pre-Credit Reform loans (Prior to FY 1992 ) is the Allowance for Estimated
Uncollectible Loans and the Allowance for Post Credit Reform Loans (After FY 1991) is the Allowance
for Subsidy Cost (present value).
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EPA's FY 2000 Annual Financial Statements
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Subsidy Expenses for Post Credit Reform Loans:
Interest Expected Fee
Differential Defaults Offsets Total
Direct Loan Subsidy Expense
2,640
0
0 $ 2.640
Note 8. Inventory and Property Received in Settlement, Net
The Inventory and Related Property at September 30, 2000, consisted of the following:
Superfund All Other
Operating Materials and Supplies Held for Use in Normal Operations
$ 0 $
306
Securities Received in Settlement
5,086
41
Total
$ 5.086 $
347
The securities represent assets received during a bankruptcy proceeding. The Agency does not intend to exercise
ownership rights related to these securities, and instead will convert these securities to cash as soon as practicable.
Note 9. General Plant, Property and Equipment
Superfund property, plant and equipment, consists of personal property items held by contractors and the
Agency. EPA also has property funded by various other Agency appropriations. The property funded by these
appropriations are presented in the aggregate under "All Others" and consists of real, EPA-Held and Contractor-
Held personal, and capitalized-leased property.
Purchases of EPA-Held and Contractor-Held personal property are capitalized if the equipment is valued at!
thousand or more and has an estimated useful life of at least two years. Software is capitalized if the purchase
price is $100 thousand or more for a revenue generating activity, such as the Working Capital Fund, and has an
estimated useful life of at least two years. The Agency depreciates EPA-Held personal property using a straight-
line method over the asset's useful life ranging from two to 15 years. Contractor-Held personal property is
depreciated over five years using a modified straight-line method. Real property, other than land, is capitalized
when the value is $75 thousand or more and is depreciated using the straight-line method over the specific asset's
useful life ranging from 10 to 102 years. Land is capitalized regardless of cost. Leasehold improvements are
amortized over the lesser of their useful lives or the unexpired lease term.
As of September 30, 2000, Plant, Property and Equipment consisted of the following:
Superfund
All Others
Acquisition Accumulated Net Book Acquisition Accumulated Net Book
EPA-Held
Equipment
Software
Contractor-Held
Equipment
Land and
Buildings
Capital Leases
Total
Value Depreciation Value
24,733
0
8,814
0
0
33,547
(16,313)
0
(3,653)
0
0
(19,966)
8,420
0
5,161
0
0
Value Depreciation Value
13,581
134,893
550
34,103
461,817
40,992
672,355
(86,883)
0
(27,551)
(73,430)
(11,463)
48,010
550
6,552
388,387
29,529
(199,327) $ 473,028
EPA's FY 2000 Annual Financial Statements
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Note 10. Debt
The Debt consisted of the following as of September 30, 2000:
Beginning Net Ending
All Others Balance Borrowing Balance
Other Debt:
Debt to Treasury $ 37.922 $ 0 $ 37.922
Classification of Debt:
Intra-governmental Debt $ 37.922
Total $ 37.922
Note 11. Custodial Lia bili ty
Custodial Liability represent the amount of net accounts receivable that, when collected, will be deposited to the
General Fund of the Treasury. Included in the custodial liability are amounts for fines and penalties, interest
assessments, repayments of loans, and miscellaneous other accounts receivable.
Note 12. Other Liabilities
The Other Liabilities, both intragovernmental and non-Federal, for September 30, 2000, are as follows:
Other Liabilities - Intragovernmental Covered by Not Covered by
Budgetary Resources Budgetary Resources Total
Superfund - Current
Employer Contributions & Payroll Taxes $ 2,900 $ 0 $ 2,900
Other Advances 1,681 0 1,681
Advances, HRSTF Cashout 2,414 0 2,414
Deferred HRSTF Cashout 437 0 437
Resources Payable to Treasury 61 0 61
Superfund - Non-Current
Unfunded FECA Liability 0 1,355 1.355
Total Superfund $ 7.493 $ 1 -355 I 8.848
All Other - Current
Employer Contributions & Payroll Taxes $ 12,690 $ 0 $ 12,690
WCF Advances 6,510 0 6,510
Other Advances 3,638 0 3,638
Liability for Deposit Funds (20) 0 (20)
Resources Payable to Treasury (33) 0 (33)
All Other - Non-Current
Unfunded FECA Liability 0 6,064 6.064
Total All Other $ 22.785 $ 6.064 $ 28.849
Page 44
EPA's FY 2000 Annual Financial Statements
-------
Other Liabilities - Non-Federal
Covered by
Not Covered by
Budgetary Resources
Budgetary Resources
Superfund - Current
Accrued Funded Payroll and Benefits
$ 7,499
$ o
Accrued Funded Annual Leave
5,777
0
Payroll Check Cancellation Liability
3
0
Unearned Advances, Non- Federal
30,192
0
Accrued Unfunded Annual Leave
0
19,553
Total Superfund
$ 43.471
$ 19.553
Other Liabilities - Non-Federal
Covered by
Not Covered by
Budgetary Resources
Budgetary Resources
All Other - Current
Accrued Funded Payroll and Benefits
$ 32,570
$ o
Withholdings Payable
25,278
0
Accrued Funded Annual Leave
320
0
Payroll Check Cancellation Liability
44
0
Unearned Advances, Non- Federal
4,729
0
Liability for Deposit Funds
6,833
0
Accrued Unfunded Annual Leave
0
93,151
All Other - Non-Current
Capital Lease Liability
0
37,585
Total All Other
$ 69.774
$ 130.736
Note 13. Leases
The Capital Leases as of September 30, 2000, consist of the following:
Capital Leases:
Total
7,499
5,777
3
30,192
19,553
63.024
Total
32,570
25,278
320
44
4,729
6,833
93,151
37,585
200.510
Summary of Assets Under Capital Lease: All Others
Land, Buildings and Personal Property $ 40.992
Accumulated Amortization $ 11.463
EPA has three capital leases for land and buildings housing scientific laboratories and/or computer facilities. All
of these leases include a base rental charge and escalator clauses based upon either rising operating costs and/or
real estate taxes. The base operating costs are adjusted annually according to escalators in the Consumer Price
Indices published by the Bureau of Labor Statistics (U.S. Department of Labor). EPA has one capital lease for a
xerox copier, at a net present value of $78 thousand, that expires in FY 2002. The three real property leases
terminate in fiscal years 2010, 2013 and 2025. The charges are expended out of the Environmental Programs
and Management (EPA/1) appropriation. The total future minimum lease payments of the capital leases are listed
below.
EPA's FY 2000 Annual Financial Statements
Page 45
-------
Future Payments Due:
All Others
Fiscal Year
2001 $ 6,314
2002 6,303
2003 6,295
2004 6,295
2005 6,295
After 5 Years 96,194
Total Future Minimum Lease Payments 127,696
Less: Imputed Interest (90,11 Is)
Net Capital Lease Liability $ 37.585
Liabilities not Covered by
Budgetary Resources (See Note 10) $ 37.585
Operating Leases:
The General Services Administration (GSA) provides leased real property (land and buildings) as office space for
EPA employees. GSA charges a Standard Level Users Charge that approximates the commercial rental rates for
similar properties.
EPA has five direct operating leases for land and buildings housing scientific laboratories and/or computer
facilities during FY 2000. In FY 2000 EPA also entered into a one year lease for the dockage of EPA's research
vessel 'Teter W. Anderson" and warehouse storage of equipment that expires May 31, 2001. Most of these
leases include a base rental charge and escalator clauses based upon either rising operating costs and/or real
estate taxes. The base operating costs are adjusted annually according to escalators in the Consumer Price
Indices published by the Bureau of Labor Statistics (U.S. Department of Labor). One of these leases, which
expired on September 30, 2000, was succeeded by a GSA lease agreement for the same space. Two of these
leases, which were to terminate during FY 2000, were extended to fiscal years 2002 and 2020. In fiscal year 1997
and 1998, EPA entered into two leases, which terminate in fiscal 2017 and 2003 respectively. The charges are
expended out of the EPM appropriation. The total minimum future costs of operating leases are listed below.
Total Land
Fiscal Year
Superfund
All Others
& Buildings
2001
$ o
$ 5,427
$ 5,427
2002
0
2,082
2,082
2003
0
84
84
2004
0
74
74
2005
0
74
74
Beyond 2006
0
994
994
Total Future Minimum
Lease Payments
$ 0
$ 8.735
$ 8.735
Note 14. Pension and Other Actuarial Liabilities
FECA provides income and medical cost protection to covered Federal civilian employees injured on the job,
employees who have incurred a work-related occupational disease, and beneficiaries of employees whose death is
attributable to a job-related injury or occupational disease. Annually, EPA is allocated the portion of the long
term FECA actuarial liability attributable to the entity. The liability is calculated to estimate the expected liability
for death, disability, medical and miscellaneous costs for approved compensation cases. The liability amounts
and the calculation methodologies are provided by DOL.
Page 46
EPA's FY 2000 Annual Financial Statements
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The FECA Actuarial Liability at September 30, 2000, consisted of the following:
Superfund
FECA Actuarial Liability
6.637
All Other
27.036
The FY 2000 present value of these estimates was calculated using a discount rate of 5.5 percent in years 1 and 2,
5.55 percent in year 3 and 5.6 percent in year 4 and thereafter. The estimated future costs are recorded as an
unfunded liability.
Note 15. Cashout Advances and Deferrals, Superfund
Cashouts are funds received by EPA, a state, or another Potentially Responsible Party under the terms of a
settlement agreement (e.g., consent decree) to finance response action costs at a specified Superfund site. Under
CERCLA Section 122(b)(3), cashout funds received by EPA are placed in site-specific, interest bearing accounts
known as special accounts and are used in accordance with the terms of the settlement agreement. Funds placed
in special accounts may be used without further appropriation by Congress.
Note 16. Unexpended Appropria tions
As of September 30, 2000, the Unexpended Appropriations consisted of the following:
Unexpended Appropriations:
Unobligated
Available
Unavailable
Undelivered Orders
Total
Superfund All Others
1,518,675
83,396
8.517.767
10.119.838
Total
1,518,675
83,396
8.517.767
10.119.838
Note 17. Amounts Held by Treasury
Amounts Held by Treasury for Future Appropriations consists of amounts held in trusteeship by the U.S.
Department of Treasury in the "Hazardous Substance Superfund Trust Fund" (Superfund) and the "Leaking
Underground Storage Tank Trust Fund" (LUST).
Superfund (Audited)
Superfund is supported primarily by an environmental tax on corporations, cost recoveries of funds spent to
clean up hazardous waste sites, and fines and penalties. Prior to December 31, 1995, the fund was also
supported by other taxes on crude and petroleum and on the sale or use of certain chemicals. The authority to
assess those taxes and the environmental tax on corporations also expired on December 31, 1995, and has not
been renewed by Congress. It is not known if or when such taxes will be reassessed in the future.
The following reflects the Superfund Trust Fund maintained by the U.S. Department of Treasury as of
September 30, 2000. The amounts contained in these statements have been provided by the Treasury and are
audited. Outlays represent amounts received by EPA's Superfund Trust Fund; such funds are eliminated on
consolidation with the Superfund Trust Fund maintained by Treasury.
EPA's FY 2000 Annual Financial Statements
Page 47
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EPA
Treasury
Combined
Undistributed Balances
Available for Investment
$ o
$ 1,986
$ 1,986
Unavailable for Investment
0
0
0
Total Undisbursed Balance
0
1,986
1,986
Interest Receivables
0
43
43
Investments, Net of Discounts
2.770.969
1.189.301
3.960.270
Total Assets
$ 2.770.969
$ 1.191.330
$ 3.962.299
Liabilities & Equity
Debt
$ o
$ o
$ o
Equity
2.770.969
1.191.330
3.962.299
Total Liability and Equity
$ 2.770.969
$ 1.191.330
$ 3.962.299
Receipts
Petroleum-Imported
$ o
$ 176
$ 176
Petroleum-Domestic
0
2
2
Crude and Petroleum
0
(561)
(561)
Certain Chemicals
0
2,166
2,166
Imported Substances
0
606
606
Corporate Environmental
0
2,679
2,679
Cost Recoveries
0
230,508
230,508
Fines & Penalties
0
725
725
Total Revenue
0
236,301
236,301
Appropriations Received
0
700,000
700,000
Interest Income
0
235.740
235.740
Total Receipts
0
1.172.041
1.172.041
Outlays
Transfers to EPA
1.628.891
(1.628.891s)
0
Total Outlays
1.628.891
(1.628.891s)
0
Net Income
$ 1.628.891
$ ('456.850s)
$ 1.172.041
LUST (Audited)
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. The following
represents LUST Trust Fund as maintained by the U.S. Department of Treasury. The amounts contained in
these statements have been provided by Treasury and are audited. Outlays represent appropriations received by
EPA's LUST Trust Fund; such funds are eliminated on consolidation with the LUST Trust Fund maintained by
Treasury.
Page 48
EPA's FY 2000 Annual Financial Statements
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EPA
Treasury
Combined
Undistributed Balances
Available for Investment $
0 1
f (725)
$ (725)
Unavailable for Investment
0
0
0
Total Undisbursed Balance
0
(725)
(725)
Taxes Receivable
0
221
221
Interest Receivables
0
26
26
Investments, Net of Discounts
86.283
1.506.348
1.592.631
Total Assets $
86.283 1
5 1.505.870
$ 1.592.153
Liabilities & Equity
Accrued Liabilities $
0 1
f 2,892
$ 2,892
Equity
86.283
1.502.978
1.589.261
Total Liability and Equity $
86.283 1
5 1.505.870
$ 1.592.153
Receipts
Highway TF Tax $
0 1
f 172,659
$ 172,659
Airport TF Tax
0
16,380
16,380
Inland TF Tax
0
612
612
Audit Adjustment
0
(1.710)
(1.710)
Gross Revenue
0
187,941
187,941
Less: Reimbursement to
General Fund
0
(6,625)
(6,625s)
Net Revenue
0
181,316
181,316
Interest Income
0
78.956
78.956
Net Receipts
0
260.272
260.272
Outlays
Transfers to EPA
65.718
(65.718)
0
Total Outlays
65.718
(65.718)
0
Net Income $
65.718 1
5 194.554
$ 260.272
Note 18. Commitments and Contingencies
EPA is a party in various administrative proceedings, legal actions and claims brought by or against it. These
include:
Various personnel actions, suits, or claims brought against the Agency by employees and others.
Various contract and assistance program claims brought against the Agency by vendors, grantees and
others.
The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to include the
collection of fines and penalties from responsible parties.
Claims against recipients for improperly spent assistance funds which may be settled by a reduction of
future EPA funding to the grantee or the provision of additional grantee matching funds.
EPA's FY 2000 Annual Financial Statements
Page 49
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Superfund
Under CERCLA fl06(a), EPA issues administrative orders that require parties to clean up contaminated sites.
CERCLA fl06(b) allows a party that has complied with such an order to petition EPA for reimbursement from
the Fund of its reasonable costs of responding to the order, plus interest. To be eligible for reimbursement, the
party must demonstrate either that it was not a liable party under CERCLA f 107(a) for the response action
ordered, or that the Agency's selection of the response action was arbitrary and capricious or otherwise not in
accordance with law.
There are currently nine CERCLA fl06(b) administrative claims and four pending lawsuits. If the claimants are
successful, the total losses on the administrative and judicial claims could amount to approximately $32.6 million
and $5.7 million, respectively. The Environmental Appeals Board has not yet issued final decisions on the
administrative claims; therefore, a definite estimate of the amount of the contingent loss cannot be made. The
claimants' chance of success in all nine of these outstanding claims is characterized as reasonably possible. The
claimants' chance of success in three of the four pending lawsuits is also reasonably possible. The outcome of
the remaining lawsuit is considered remote.
There are a number of outstanding CERCLA fl06(a) cleanup orders where the recipients of the orders have not
yet completed the ordered response actions. Each such recipient could potentially file a claim with EPA for
reimbursements under CERCLA fl06(b) of its costs of responding to the order once it has completed the
ordered actions.
EPA is responsible to indemnify response action contractors (CERCLA f 119) for legal costs that will eventually
exceed, or have exceeded, the deductible specified in the current indemnification agreements. Such payments by
the United States would be recoverable government response costs. EPA has only one claim, which is
considered remote.
EPA contractors have submitted response action contractor claims. No claims were material.
All Other
There were no material litigation, asserted or unasserted claims or assessments involving all other appropriated
funds of the Agency.
Judgement Fund
In cases that are paid by the U.S. Treasury Judgement Fund, the Agency must recognize the full cost of a claim
regardless of who is actually paying the claim. Until these claims are settled or a court judgement is assessed and
the Judgement Fund is determined to be the appropriate source for the payment, claims that are probable and
estimable must be recognized as an expense and liability of the agency. For these cases, at the time of settlement
or judgement, the liability will be reduced and an imputed financing source recognized. See Interpretation of
Federal Financial Accounting Standards No. 2, Accounting for Treasury Judgement Fund Transactions.
As of September 30, 2000, $5 million of Superfund related claims and $2.9 million of All Other funds' claims
were accrued as contingent liabilities under these criteria.
In addition, EPA is party to certain pending litigation upon which EPA believes it has a reasonable legal position.
$336.1 million ofjudgement Fund claims in addition to the above accrued amounts are pending.
In the opinion of EPA's management and General Counsel, the ultimate resolution of any legal actions still
pending will not materially affect EPA's operations or financial position.
Page 50
EPA's FY 2000 Annual Financial Statements
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Note 19. Grant Accrual
The EPA has revised the methodology for calculating the accrued grant expense for the fiscal year 2000 financial
statements. The methodology uses a model based upon historical grant obligations and the related payment
incurred the succeeding years. The model calculates a "what should be disbursed amount" vs. the actual
disbursements made in the year. The accrual amount is derived from the results of this model combined with an
additive factor which considers the ratio of accruals to disbursements for the last two fiscal years. The accrual
for Superfund is $43.0 million and the All Other grant accrual is $507.6 million. In the Statement of Net Cost by
Goal, the grant accrual amounts are included in "Not Assigned to Goals."
Note 20. Environmental Cleanup Costs
EPA has four sites that require clean up stemming from its activities. Three of these sites will be paid from the
Treasury Judgement fund amounting to $32 thousand. EPA estimates that clean up on the remaining site will be
approximately $10 thousand. EPA also holds title to a site in Edison, New Jersey, which was formerly an Army
Depot. While EPA did not cause the contamination, the Agency could potentially be liable for a portion of the
cleanup costs. However, it is expected that the Department of Defense and the General Services Administration
will bear all or most of the cost of remediation.
Accrued Cleanup Cost
EPA has fourteen sites that will require future clean up associated with permanent closure. The estimated cost
will be approximately $15.5 million. Since the cleanup costs associated with permanent closure are not primarily
recovered through user fees, EPA has elected to recognize the estimated total cleanup cost as a liability upon
implementation and record changes to the estimate in subsequent years. The FY 2000 estimate for unfunded
cleanup costs decreased by $128 thousand from the FY 1999 estimate. There was an increase of approximately
$1.3 million for funded cleanup costs for FY 2000. EPA also could be potentially liable for cleanup costs at a
GSA-leased site; however, the amounts are not known. Of the $15.5 million in estimated cleanup costs,
approximately $10.9 million represents the estimated expense to close the current RTP research facility. These
costs will be incurred within the next three years. The remaining amount represents the future decontamination
and decommissioning costs of EPA's other research facilities.
Note 21. Superfund State Credits
Authorizing statutory language for Superfund and related Federal regulations require States to enter into
Superfund State Contracts (SSCs) when EPA assumes the lead for a remedial action in their State. The SSC
defines the State's role in the remedial action and obtains the State's assurance that they will share in the cost of
the remedial action. Under Superfund's authorizing statutory language, States will provide EPA with a ten
percent cost share for remedial action costs incurred at privately owned or operated sites, and at least fifty percent
of all response activities (i.e., removal, remedial planning, remedial action, and enforcement) at publicly operated
sites. In some cases, States may use EPA approved credits to reduce all or part of their cost share requirement
that would otherwise be borne by the States. Credit is limited to State site-specific expenses EPA has determined
to be reasonable, documented, direct out-of-pocket expenditures of non-Federal funds for remedial action. Once
EPA has reviewed and approved a State's claim for credit, the State must first apply the credit at the site where it
was earned. The State may apply any excess/remaining credit to another site when approved by EPA. As of
September 30, 2000, total remaining State credits have been estimated at $12.6 million.
Note 22. Superfund Prea uthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, potentially responsible parties (PRPs) agree to
perform response actions at their sites with the understanding that EPA will reimburse the PRPs a certain
percentage of their total response action costs. EPA's authority to enter into mixed funding agreements is
provided under Section 111(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA) of 1980. Under Section 122(b)(1) of CERCLA, as amended by the Superfund Amendments and
EPA's FY 2000 Annual Financial Statements
Page 51
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Reauthorization Act (SARA) of 1986, a PRP may assert a claim against the Superfund Trust Fund for a portion
of the costs they incurred while conducting a preauthorized response action agreed to under a mixed funding
agreement. As of September 30, 2000, EPA had 12 outstanding preauthorized mixed funding agreements with
obligations totaling $40.2 million. A liability is not recognized for these amounts until all work has been
performed by the PRP and has been approved by EPA for payment. Further, EPA will not disburse any funds
under these agreements until the PRP's application, claim, and claims adjustment processes have been reviewed
and approved by EPA.
Note 23. Income and Expenses from other Appropriations
The Statement of Net Cost reports program costs that include the full costs of the program outputs and consist
of the direct costs and all other costs that can be directly traced, assigned on a cause and effect basis, or
reasonably allocated to program outputs.
During Fiscal Year 2000, EPA had three appropriations which funded a variety of programmatic and non-
programmatic activities across the Agency, subject to statutory requirements. The Environmental Programs and
Management (EPA/1) appropriation was created to fund personnel compensation and benefits, travel,
procurement, and contract activities. Two prior year appropriations, Program and Research Operations (PRO)
and Abatement Control and Compliance (AC&C) generated expenses. PRO funded travel, personnel
compensation and benefits. AC&C funded procurement and contract activities.
All of the expenses from EPM, PRO and AC&C were distributed among EPA's two Reporting Entities:
Superfund and All Others. This distribution is calculated using a combination of specific identification of
expenses to Reporting Entities, and a weighted average that distributes expenses proportionately to total
programmatic expenses.
As illustrated below, this estimate does not impact the net effect of the Statement of Net Costs.
Income From Expenses From
Other Appropriations Other Appropriations
Superfund $ 31,270 $ (31,270)
All Others (31210) 31.270
Total $ 0 $ 0
Note 24. Custodial Non-Exchange Revenues
EPA uses the accrual basis of accounting for the collection of fines, penalties and miscellaneous receipts.
Collectibility by EPA of the fines and penalties is based on the responsible parties' willingness and ability to pay.
Fines, Penalties and Other Misc Revenue (EPA) $ 86.590
Accounts Receivable for Fines, Penalties and
Other Miscellaneous Receipts
Accounts Receivable
Less: Allowance for Doubtful Accounts
Total
Note 25. Statement of Budgetary Resources
A reconciliation of budgetary resources, obligations incurred, and outlays, as presented in the audited Statement
of Budgetary Resources, to amounts included in the Budget of the United States Government for the year ended
September 30, 2000, is as follows:
Net Effect
$ 0
0
$ 0
$ 154,803
52,336
$ 102.467
Page 52
EPA's FY 2000 Annual Financial Statements
-------
Budgetary Obligations
Resources Incurred
Superfund
Statement of Budgetary Resources
Adjustments to Unliquidated Obligations,
Unfilled Customer Orders and Other
Budget of the United States Government
All Other
Statement of Budgetary Resources
Less: Funds Reported by Other Federal
Entities
Adjustments to Unliquidated Obligations,
Unfilled Customer Orders and Other
Budget of the United States Government
2,151,875
(328)
2,151,547
8,932,823
(24,778)
66,618
8.974.663
1,701,337
(1,744)
1,699,593
7,158,665
(23,835)
67,907
7.202.737
Outlays
1,526,587
1,000
1,527,587
6,602,265
(24,545)
57
Note 26. Adjustments
For the Superfund Trust Fund this amount represents recoveries of prior year obligations of $201,660 thousand
less $2,288 thousand in canceled authority. For All Others, this amount represents recoveries of prior year
obligations of $111,767 thousand and $615 thousand of other adjustments to beginning unobligated balances,
less rescinded authority of $28,848 thousand, and $55,687 thousand in canceled authority.
Note 27. Unobligated Balances Available
The Superfund Trust Fund has an unobligated balance of $449,538 thousand in unexpired authority and $1
million in expired authority. All Others has an unobligated balance of $1,644,998 thousand in unexpired
authority and $129,160 thousand in expired authority. The unexpired authority is available to be apportioned by
the Office of Management and Budget for new obligations at the beginning of FY 2001. Expired authority is
available for upward adjustments of obligations incurred as of the end of the fiscal year.
Note 28. Oblige ted Balance, Net -End of Period
Undelivered Orders, unpaid, at the end of the period are $2,091,767 thousand for the Superfund Trust Fund and
$8,657,913 thousand for All Others.
Note 29. Difference in Outlays Between Statement ofBudgetary Resources and SF-133
Outlays between the Statement ofBudgetary Resources and the SF-133 differ by $1 million for Superfund, due to
an advance that was refunded and reported on the SF-133 last year but not recorded and reported on the
Statement of Budgetary Resources until this year.
Note 30. Sta tement of Financing
Increases in Unfunded Liabilities relate to changes in unfunded annual leave, environmental liabilities, contingent
liabilities and the Federal Employees Compensation Act (FECA) special benefit fund. For Superfund and All
Others, the changes totaled $7.0 million and $12.3 million, respectively and are reflected in Financing Sources
Yet to Be Provided.
EPA's FY 2000 Annual Financial Statements
Page 53
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Note 31. Beginning Unobligated Balances - All Other Statement of Budgetary Resources
All Others in the Statement of Budgetary Resource contained some previously canceled funds in the beginning
unobligated balance brought forward from FY 1999. The amounts from canceled funds were approximately
$16.2 million. These balances have been eliminated this year in the Adjustments on the Statement of Budgetary
Resources.
Note 32. Change in Accounting for Trust Funds
During FY 2000, in compliance with Statement of Federal Financial Accounting Standard No. 7 (Accounting for
Revenue and Other Financing Sources), the U. S. Standard General Ledger Board issued definitive guidance for
trust fund accounting and added new Standard General Ledger accounts to further distinguish trust fund
transactions from other funds. The EPA implemented these changes for all trust funds. These changes eliminate
the use of Unexpended Appropriations and Appropriations Used for trust funds, and indicate the inclusion of
only the Cumulative Results of Operations account in Net Position for trust funds.
The changes affect transactions in this manner: In lieu of increases to Unexpended Appropriations, amounts
appropriated or transferred to the trust funds are recorded in new accounts as Trust Fund Financing Sources-
Transfers In. Amounts transferred out no longer decrease Unexpended Appropriations, but are recorded in new
accounts as Trust Fund Financing Sources -Transfers Out. These new accounts are reported on the Statement of
Changes in Net Position as Other Financing Sources, and are closed out at year end to Cumulative Results of
Operations. Expenditures from trust funds are still reported as expenses or purchases of capital assets and
reflected in budgetary expenditures, but are no longer reported as increases to Appropriations Used and decreases
to Unexpended Appropriations.
The cumulative effect of these changes on the accounts was to move all prior year's balances in Unexpended
Appropriations for trust funds into Cumulative Results of Operations. This cumulative effect is reported on a
separate line on the Statement of Changes in Net Position this fiscal year. The decreases to Unexpended
Appropriations for trust funds are detailed below:
Superfund All Other
Hazardous Substance Superfund No-Year Trust Fund $ 2,607,783 $ 0
Superfund Annual Funds 49,048 0
Leaking Underground Storage Tank Trust Fund 0 81,830
Oil Spill Response Trust Fund 0 9,690
Miscellaneous Contributed Funds Trust Fund 0 76
Totals $2.656.831 $91.596
Note 33. Costs Not Assigned to Goals
On the Statement of Net Cost by Goal, $145.5 million in gross costs were not assigned to goals. This amount
was comprised of a $106.4 million increase to the year-end grant accruals, $15.2 million in unfunded expenses,
$19.9 million in depreciation expenses that were not assigned, $3.0 million in bad debt expense, and $1 million in
miscellaneous expenses.
Note 34. Transfers-in and out, Statement of Changes in Net Position
The consolidated amounts shown as transfers-in on the Statement of Changes in Net Position are comprised of
transfers from other Federal agencies in accordance with applicable legislation. The consolidated amounts shown
as transfers-out are nonexpenditure transfers to other Hazardous Substance Superfund allocation agency funds,
such as HHS and Labor.
Page 54
EPA's FY 2000 Annual Financial Statements
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Note 35. Imputed Financing
In accordance with Statement of Federal Financial Accounting Standard No. 5 (Liabilities of the Federal
Government), Federal agencies must recognize the portion of employees' pensions and other retirement benefits
to be paid by the Office of Personnel Management (OPM) trust funds. Theses amounts are recorded as imputed
costs and imputed financing for the agency. Each year the OPM provides federal agencies with cost factors to
calculate these imputed costs and financing that apply to the current year. These cost factors are multiplied by
the current year's salaries or number of employees, as applicable, to provide an estimate of the imputed financing
that the OPM trust funds will provide for each agency.
Note 36. Change in Accounting for Cashout Interest, Super fund
Per an agreement dated October 3, 1996 between the Office of Management and Budget (OMB) and the EPA,
the EPA is allowed additional budget authority for interest earnings on Cashout (Special Account) collections for
Superfund. The authority for interest earnings had previously been classified as Cashout Advances and
Deferrals, Superfund, on the Consolidating Balance Sheet and as Spending Authority from Offsetting
Collections on the Combined Statement of Budgetary Resources . In FY 2000, the beginning balance for interest
earnings on Special Accounts was reclassified from Cashout Advances and Deferrals, Superfund to Net Position
on the Consolidating Balance Sheet for Superfund. The change is consistent with guidance from OMB to treat
the interest as permanently appropriated and is consistent with definitive guidance for trust fund accounting
issued by the U. S. Standard General Ledger Board. This change is also in compliance with Statement of
Federal Financial Accounting Standard No. 7 (Accounting for Revenue and Other Financing Sources).
For FY 2000, interest earnings that became available during the fiscal year are recorded in Trust Fund Financing
Sources - Transfers In for EPA, and are then eliminated against Treasury's Transfers-Out in the consolidation of
the Treasury and EPA funds. The current year's earnings are included as Budget Authority on the Combined
Statement of Budgetary Resources for Superfund.
The amount available as of September 30, 2000 for Cashout Interest authority is as follows:
Superfund
Cashout Interest reclassified from Cashout Advances and
Deferrals, Superfund, October 1, 1999
Cashout Interest Authority Accrued FY 2000
Less: FY 2000 Drawdown of Authority
$ 85,382
21,670
(780)
$ 106,272
Total
EPA's FY 2000 Annual Financial Statements
Page 55
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Environmental Protection Agency
Required Supplemental Information
As of September 30, 2000
(Dollars in Thousands)
(Unaudited)
Deferred Maintenance
The EPA classifies properly, plant, and equipment as follows: 1) EPA-Held Equipment, 2) Contractor-Held
Equipment, 3) Land and Buildings, and, 4) Capital Leases. The condition assessment survey method of
measuring deferred maintenance is utilized. The Agency adopts requirements or standards for acceptable
operating condition in conformance with industry practices. No deferred maintenance was reported for any of
the four categories.
In tragovemmental Assets
Intragovernmental amounts represent transactions between all federal departments and agencies and are reported
by trading partner (entities that EPA did business with during FY 2000).
EPA confirmed its investment balances with the Bureau of the Public Debt, the Department of the Treasury. In
addition, EPA sent out requests to trading partners to reconcile and confirm intragovernmental receivables and
advances. Data was received from the Department of Defense, Department of Energy, and Tennessee Valley
Authority. (The Department of Defense includes the Navy, Army, and Air Force.) The U.S. Army Corps of
Engineers was not able to give us detailed data to be able to reconcile asset balances.
Trading Investments AccountsReceivable Other
Partner
Code
Agency
Superfund All Other Superfund All Other
$ 0$ 0$ 0$ 43$ 65$ 7,409
355 146
04 Government Printing Office $ 0 $ 0 $
12 Department of Agriculture
13 Department of Commerce
14 Department of Interior
15 Department of Justice
17 Department of the Navy
18 U. S. Postal Service
19 Department of State
20 Department of the Treasury 3,960,313 1,593,357
21 Department of the Army
31 US Nuclear Regulatory
7,798
222
Commission
47 General Services
20
Administration
57 Department of the Air Force
12
223
58 Federal Emergency
Management Agency
61 Consumer Product Safety
1,205
Commission
64 Tennessee Valley Authority
8
607
Page 56
EPA's FY 2000 Annual Financial Statements
-------
Trading Investments AccountsReceivable Other
Partner
Code Agency Superfund All Other Superfund All Other Superfund All Other
68 EPA (between Superfund
and All Other) 4^91 6,510
69 Department of
Transportation 10,378
75 Department of Health and
Human Services
415
86
Department of Housing and
Urban Development
943
93
Federal Mediation and
Conciliation Service
19
96
US Army Corps of Engineer
1,022
15,850
97
US Department of Defense
10,769
1,217
00
Unassiened 0 0
8.136
13.346
(636)
Total
$3,960,313 $1,593,357
$40,671
$34,371
$21,789
$7.452
In tragovemmental Liabilities
EPA received a few requests for intragovernmental liabilities reconciliation from trading partners. EPA was able
to confirm balances with the National Science Foundation (49), the Office of Personnel Management (24), the
Department of the Treasury (20), and the Department of Labor (16). However, some agencies' requests did not
have the data (such as interagency agreement numbers) that EPA needed to do the research.
Trading Accounts Payable Accrued Liabilities Other Liabilities
Partner
Code Agency Superfund All Other Superfund All Other Superfund All Other
03 Library of Congress $ 0 $ 0 $ 11 $ 181 $ 0 $ 0
04 Government Printing Office 4 16 61 988
11 Executive Office of the
President 40
12 Department of Agriculture 39 876 711 1,615
13 Department of Commerce 1,021 393 2,286 152
14 Department of Interior 901 3,440 2,711 36
15 Department of Justice 617 5,896 186 578
16 Department of Labor 2,258 73 24 1,355 6,064
17 Department of the Navy 355
18 United States Postal Service 9
19 Department of State 5 1,152
20 Department of the Treasury 13 3,014 742 2,945
21 Department of the Army 2 503
24 Office of Personnel
Management 56 488 1,865 8,162
31 US Nuclear Regulatory
Commission 19 20
33 Smithsonian Institution 33
EPA's FY 2000 Annual Financial Statements
Page 57
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Trading Accounts Payable Accrued Liabilities Other Liabilities
Partner
Code Agency Superfund All Other Superfund All Other Superfund All Other
47 General Services
Administration 4,618 23,935
49 National Science Foundation 10 234
56 Central Intelligence Agency 37
57 Department of the Air Force
1,256
58 Federal Emergency
Management Agency 15,395 6
59 National Foundation on the
Arts and the Humanities 5
63 National Labor Relations
Board \
64 Tennessee Valley Authority 1 112 50
68 EPA (between Superfund
and All Others) 4,191 6,510
69 Department of
Transportation 1,558 364
72 Agency for International
Development
73 Small Business
Administration 34
75 Department of Health and
Human Services 51,841 8,791 6,440
80 National Aeronautics and
Space Administration 231
86 Department of Housing and
Urban Development 2,922
88 National Archives &
Records Administration \
89 Department of Energy 490 4,032 14
91 Department of Education 3
95 Independent Agencies 28 11
96 US Army Corps of
Engineers 1,202 694 21,357 1,136 314
97 Office of the Secretary of
Defense 339 140 715 830 52
00 Unassigned 1.889 656 f!91 1.189 1.483 QX
Total $75.467 $1.506 $51.748 $50.580 $8.848 $28.849
For other intragovernmental liabilities, $37,922 thousand in Debt and $102,469 thousand in Custodial Liability is
assigned to the Department of the Treasury (trading partner Code 20).
Page 58
EPA's FY 2000 Annual Financial Statements
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In tragovemmental Revenues and Costs
EPA's intragovernmental earned revenues are not reported by trading partners because they are below OMB's
threshold of $500 million.
Superfund All Others
Intragovernmental Earned Revenue ($2,249) $63,240
Associated Costs to generate Above Revenue
(Budget Functional Classification 300) (2,249) 63,240
EPA's FY 2000 Annual Financial Statements
Page 59
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Environmental Protection Agency
Required Supplemental Information
Supplemental Statement of Budgetary Resources
As of September 30, 2000
(Dollars in Thousands)
Unaudited
Budgetary Resources:
Budget Authority
Unobligated Balances - Beginning of
the Period
Net Transfers, Prior Year Balance
Spending Authority from Offsetting
Collections
Adjustments
Total Budgetary Resources
Environmental Miscellaneous Consolidated
Programs & Science & LUST All All
STAG Management Technolog FIFRA Trust Fund Others Others
$ 3,469,250
1,265,880
0
13,489
52,088
1,899,021 $ 647,500 $
0 $ 70,000 $ 834,235 $ 6,920,006
219,803
0
48,345
(1,730)
159,175 11,552
0 0
45,490 18,593
(4,434) (2,228)
3,570
0
42
1,472
14,695
(977)
185,313
(17,321)
1,674,675
(977)
311,272
27,847
S 4.800.707 S 2.165.439 S 847.731 S 27.917 S 75.084 S 1.015.945 S 8.932.823
Status of Budgetary Resources:
Obligations Incurred $ 3,582,074
Unobligated Balances - Available 1,218,633
Unobligated Balances-Not Available 0
1,894,522 $ 667,581 $ 23,321 $ 70,753
171,276 154,864 4,596 4,245
920,414 $ 7,158,665
91,384 1,644,998
99,641
25,286
0
86
4,147
129,160
Total Status of Budgetary Resources $4,800,707 $ 2,165,439 $ 847,731 $27,917 $ 75,084 $ 1,015,945 $ 8,932,823
Outlays:
Obligations Incurred
Less: Spending Authority from
Offsetting Collections and
Obligated Balance, Net - Beginning
of the Period
Less: Obligated Balance, Net - End
of the Period
$ 3,582,074 $ 1,894,522 $ 667,581 $ 23,321 $ 70,753
86,462
7,570,173
7,874,156
75,206 49,444 16,366
2,108
796,486 511,949 (926) 79,306
750,109 500,950 1,544 83,976
920,414 $ 7,158,665
190,603 420,189
196,245 9,153,233
78,709 9,289,444
Total Oudays
; 3,191,629
1,865,693 $ 629,136 $ 4,485 $ 63,975
847,347 $ 6,602,265
Page 60
EPA's FY 2000 Annual Financial Statements
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Environmental Protection Agency
Required Supplemental Information
Working Capital Fund
Supplemental Balance Sheet
As of September 30, 2000
(Dollars in Thousands)
ASSETS Unaudited
Intragovernmental:
Fund Balance With Treasury $ 52,509
Accounts Receivable, Net 28,702
Other 47
Total Intragovernmental 81,258
Inventory and Related Property, Net 46
General Property, Plant and Equipment, Net 9,646
Other 1_
Total Assets $ 90,951
LIABILITIES
Intragovernmental:
Other $ 47.555
Total Intragovernmental 47,555
Accounts Payable 2,578
Other 19.034
Total Liabilities 69,167
NET POSITION
Cumulative Results of Operations 21.784
Total Net Position 21,784
Total Liabilities and Net Position $ 90,951
EPA's FY 2000 Annual Financial Statements
Page 61
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Environmental Protection Agency
Required Supplemental Information
Working Capital Fund
Supplemental Statement of Net Cost
For the Year Ended September 30, 2000
(Dollars in Thousands)
COSTS:
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenues
Net Cost of Operations
Unaudited
$ 8,154
114,718
122,872
(117,079)
$ 5,793
Page 62
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Required Supplemental Information
Working Capital Fund
Supplemental Statement of Changes in Net Position
For the Year Ended September 30, 2000
(Dollars in Thousands)
Unaudited
Net Cost of Operations $ 5,793
Financing Sources (Other Than Exchange Revenues):
Imputed Financing 5,397
Transfers-In 439
Transfers-Out (439)
Net Results of Operations (396)
Prior-Period Adjustments (8,961)
Net Change in Cumulative Results of Operations (9,357)
Net Position - Beginning of the Period 31,141
Net Position - End of the Period $ 21,784
EPA's FY 2000 Annual Financial Statements
Page 63
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Environmental Protection Agency
Required Supplemental Information
Working Capital Fund
Supplemental Statement of Budgetary Resources
For the Year Ended September 30, 2000
(Dollars in Thousands)
Budgetary Resources
Unobligated Balances, Beginning of the Period
Spending Authority from Offsetting Collections
Total Budgetary Resources
Status of Budgetary Resources
Obligations Incurred
Unobligated Balances Available
Total, Status of Budgetary Resources
Outlays
Obligations Incurred
Less: Spending Authority from Offsetting Collections and
Adjustments
Subtotal
Obligated Balance, Net - Beginning of the Period
Less: Obligated Balance, Net - End of the Period
Unaudited
$ 6,941
136,065
143j" '<¦
121,186
21,820
143,006
121,186
(136,065)
(14,879)
30,124
(30.688)
Total Outlays
(15.443s)
Page 64
EPA's FY 2000 Annual Financial Statements
-------
Environmental Protection Agency
Required Supplemental Information
Working Capital Fund
Supplemental Statement of Financing
For the Year Ended September 30, 2000
(Dollars in Thousands)
Obligations and Nonbudgetary Resources Unaudited
Obligations Incurred $ 121,186
Less: Spending Authority for Offsetting Collections and Adjustments
Earned Reimbursements
Collected (116,923)
Receivable from Federal Sources (236)
Change in Unfilled Orders - (Decreases)/Increases (18,906)
Financing Imputed for Cost Subsidies 5,397
Exchange Revenue not in the Entity's Budget 66
Total Obligations as Adjusted and Nonbudgetary Resources (9,416)
Resources that Do Not Fund Net Cost of Operations
Change in Amount of Goods, Services and Benefits Ordered but
Yet Received or Provided - (Increases)/Decreases (2,488)
Change in Unfilled Customers Orders, etc. - Increases/(Decreases) 18,907
Costs Capitalized on the Balance Sheet
General Plant, Property and Equipment (9,102)
Purchases of Inventory (93)
Prior Period Adjustments of Capitalized Assets 3,127
Total Resources that Do Not Fund Net Costs of Operations 10,351
Components of Costs of Operations that Do Not Require
or Generate Resources
Depreciation and Amortization 4,767
Total Costs That Do Not Require Resources 4,767
Financing Sources Yet to be Provided 91_
Net Costs of Operations $ 5,793
EPA's FY 2000 Annual Financial Statements
Page 65
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Environmental Protection Agency
Required Supplemental Stewardship Information
For the Year Ended September 30, 2000
(Dollars in Thousands)
INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT:
Public and private sector institutions have long been significant contributors to our nation's environment and
human health research agenda. EPA's Office of Research and Development, however, is unique among
scientific institutions in this country in combining research, analysis, and the integration of scientific information
across the full spectrum of health and ecological issues and across both risk assessment and risk management.
Science enables us to identify the most important sources of risk to human health and the environment, and by so
doing, informs our priority-setting, ensures credibility for our policies, and guides our deployment of resources.
It gives us the understanding and technologies we need to detect, abate, and avoid environmental problems.
Science provides the crucial underpinning for EPA decisions and challenges us to apply the best available science
and technical analysis to our environmental problems and to practice more integrated, more efficient, and more
effective approaches to reducing environmental risks.
Among the Agency's highest research priorities is a program to expand the understanding of near- and long-term
effects of the environment on children. Another priority is the Particulate Matter (PM) research program, which
focuses on review, implementation, and eventual attainment of the National Ambient Air Quality Standards
(NAAQS). For FY 2000, the full cost of the Agency's Research and Development activities totaled almost $601
million. Below is a breakout of the expenses (dollars in thousands):
The Agency makes significant investments in the Nations's drinking water and clean water infrastructure. The
investments are the result of three programs: The Construction Grant Program which is being phased out, and
two State Revolving Fund (SRF) programs.
Construction Grants Program: During the 1970s and 1980s, the Construction Grants Program was a source of
Federal funds, providing more than $60 billion of direct grants for the construction of public wastewater
treatment projects. These projects, which constituted a significant contribution to the nation's water
infrastructure, included sewage treatment plants, pumping stations, and collection and intercept sewers,
rehabilitation of sewer systems, and the control of combined sewer overflows. The construction grants led to the
improvement of water quality in thousands of municipalities nationwide.
Congress set 1990 as the last year that funds would be appropriated for Construction Grants. Projects funded in
1990 and prior will continue until completion. Beyond 1990, EPA shifted the focus of municipal financial
assistance from grants to loans that are provided by State Revolving Funds.
State Revolving Funds: The Environmental Protection Agency provides capital, in the form of capitalization
grants, to state revolving funds which state governments use to make loans to individuals, businesses, and
governmental entities for the construction of wastewater and drinking water treatment infrastructure. When the
loans are repaid to the state revolving fund, the collections are used to finance new loans for new construction
projects. The capital is reused by the states and is not returned to the Federal Government.
Programmatic Expenses
Allocated Expenses
FY 1998 FY 1999 FY 2000
507,828 543,777 541,117
53,322 58,728 59,523
INVESTMENT IN THE NATION'S INFRASTR UCTURE:
Page 66
EPA's FY 2000 Annual Financial Statements
-------
The Agency is also appropriated funds to finance the construction of infrastructure outside the Revolving Funds.
These are reported below as Other Infrastructure Grants.
The Agency's expenses related to investments in the Nation's Water Infrastructure are outlined below (dollars in
thousands):
FY 1998
FY 1999
FY 2000
Construction Grants
444,817
414,528
55,766
Clean Water SRF
1,109,017
925,744
1,564,894
Safe Drinking Water SRF
94,936
387,429
588,116
Other Infrastructure Grants
138,363
245,606
212,124
Allocated Expenses
187,649
213,117
266,299
STEWARDSHIP LAND
The Agency acquires title to certain land and land rights under the authorities provided in Section 104 (J)
CERCLA related to remedial clean-up sites. The land rights are in the form of easements to allow access to
clean-up sites or to restrict usage of remediated sites. In some instances, the Agency takes title to the land during
remediation and returns it to private ownership upon the completion of clean-up.
As of September 30, 2000, the Agency possesses the following land and land rights:
Superfund Sites with Easements
Beginning Balance 24
Additions 1
Withdrawals 0
Ending Balance 25
Superfund Sites with Land acquired
Beginning Balance 20
Additions 3
Withdrawals 0
Ending Balance 23
HUMAN CAPITAL
Agencies are required to report expenses incurred to train the public with the intent of increasing or maintaining
the nation's economic productive capacity. Training, public awareness, and research fellowships are components
of many of the Agency's programs, and are effective in achieving the Agency's mission of protecting public
health and the environment, but the focus is on enhancing the nation's environmental, not economic, capacity.
The Agency's expenses related to investments in the Human Capital are outlined below (dollars in thousands):
FY 1998 FY 1999 FY 2000
Training and Awareness Grants 39,131 46,630 49,265
Fellowships 11,084 10,239 9,570
Allocated Expenses 5,273 6,142 6,472
EPA's FY 2000 Annual Financial Statements
Page 67
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Appendix II
Agency's Response to the Draft Report
Audit Report 2001-1-00107
-------
-------
February 15, 2001
MEMORANDUM
SUBJECT: Response to Draft Audit Report on EPA's
Fiscal 2000 Financial Statements
FROM: Joseph L. Dillon /s/
Acting Comptroller
TO: Edward Gekosky
Divisional Inspector General
Financial Audit Division
Thank you for providing us the opportunity to comment on and provide our response
to the findings and recommendations made in the "Draft Audit Report on EPA's Fiscal 2000
Financial Statements." Attached is our response to specific audit findings and
recommendations. We will forward you our updates to your Attachment 4, "Status of Prior
Audit Report Recommendations," under separate cover.
One of the key issues in the draft audit report is, of course, grant accruals. Following
recent discussions with your office about the methodology used in calculating the accruals, we
provided revised accrual estimates and supporting documentation to your staff for review.
We are hopeful that we can resolve the issues concerning the estimates of grant accruals
before the final audit report is issued, which would necessitate a change to all related report
language, including the opinion. Consequently, we defer commenting until after a final
determination has been made.
We appreciate your consideration of our comments on your position papers, which
preceded the draft report. We also appreciate the cooperation of you and your staff in
resolving outstanding issues during the financial statement audit.
If you have any questions regarding our response, please contact Juliette McNeil,
Acting Director of the Financial Management Division, at 202-564-4905.
Attachment
-------
2
cc: Deputy Chief Financial Officer
Acting Assistant Administrator for
Administration and Resources Management (3101 A)
Acting Assistant Administrator for
Enforcement and Compliance Assurance (3204A)
-------
RESPONSE TO DRAFT AUDIT OF EPA'S FISCAL 2000
FINANCIAL STATEMENTS
EXECUTIVE SUMMARY
Agency General Comments'.
On Page iii of the Executive Summary, the report states:
"We also identified .... two other significant noncompliances ....
• Reconciliation of intra-governmental transactions and financial system
security were reported as significant noncompliances that fall short of the
OMB criteria for defining noncompliances as substantial."
We believe that most readers will not understand the difference between "significant"
and "substantial noncompliance." As a result, we suggest that the wording in the
Executive Summary be amended to delete the word "significant" within the context of
FFMIA. The revised wording could read:
"We also identified .... two other noncompliances
Reconciliation of intra-governmental transactions and financial system security
were reported as noncompliances, but they do not meet the OMB criteria for
substantial noncompliances."
We recommend that the OIG make similar wording changes in the "Inspector
General's Report on EPA's Fiscal 2000 Financial Statements" section of the report
and in Attachment 3. In addition, we believe that the discussion of both financial
system security and intra-governmental transactions should be moved under a separate
heading, entitled "Other Noncompliance Issues," in the Executive Summary, in the
main body of the report and in Attachment 3.
We agree that these are important issues that merit inclusion in the audit report. We
believe that these suggested changes would not diminish the auditor's findings or
conclusions in these areas but rather would make it easier for the reader to understand
and differentiate FFMIA substantial noncompliances from other noncompliances.
We continue to take financial system security very seriously and remain committed to
addressing the related security issues through the action steps listed in our November
2000 Remediation Plan.
-------
MATERIAL WEAKNESS
1 - Process For Preparing Financial Statements Did Not Produce An Unqualified
Opinion
Agency General Comments:
We appreciate the OIG's recognition of the significant improvements the Agency has
made in our process for preparing financial statements. OCFO believes strongly in the
principle of continuous improvement and we look forward to a close working
relationship with the OIG again in the future. Together we can build on our collective
achievements in improving the financial statements and can address evolving federal
requirements for financial statements.
The draft audit report contains a section entitled "A Routine Process is Needed." We
share in the OIG's view that ultimately the production and audit of financial statements
should be considered a "routine" process. However, the specific examples depicted
are few in number and, in some cases, reflect differences of professional judgement on
presentation rather than errors. We don't believe that these occurrences are numerous
enough or serious enough to warrant a Reportable Condition on the preparation
process. Rather, this discussion is more appropriate for inclusion in the management
letter.
RECOMMENDATIONS
1.1 We recommend the OCFO continue its aggressive efforts to improve the
preparation and presentation of the Agency's financial statements, in particular
to evaluate and make process improvements to the year-end closing process, and
system improvements to assist in the preparation of the financial statements.
Agency Comments:
We agree. We are pleased with the substantial progress made this year in preparing
quality financial statements in a timely manner. The improvements made this year are
the result of our completing the first phase of a two phase plan for improving the
Agency's financial statement process. During FY 2001, we plan to improve the
accounting model developed in FY 2000 and to evaluate automated options to speed
up the preparation of the financial statements. As part of our continuing effort to
revise and improve our process, we will also make additional revisions to the grant
accrual process. We look forward to OIG participation in this endeavor.
2
-------
Corrective Action
Target
Date
Contractor to present scope of possibilities for March 2001
automation of financial statements
Finish evaluation of recommendations for automation April 2001
of financial statements and develop implementation
plan, if appropriate
Initiate review of accounting model to determine March 2001
where improvements are needed
Review recommended improvements to accounting model May 2001
and develop plan for implementation, if appropriate
Initiate joint OCFO/OIG review of grant accrual process April 2001
to determine needed revisions and improvements
1-2. We also recommend that time frames for preparing the fiscal 2001 financial
statements be advanced substantively, with equivalent or better quality control
efforts, so there is more of a chance to resolve any problems that may be
identified late in the financial statement preparation process.
Agency Comments:
We agree with the goal of advancing the times frames for preparing the financial
statements as long as quality is not adversely affected. Our primary goal is to deliver
quality financial statements according to the milestones developed jointly with the
OIG. We will revisit the time frames in FY 2001 once the proposed improvements
discussed in the response to Recommendation 1-1 are in place.
Corrective Action Target
Date
Reach agreement with the OIG on time line for September 2001
key milestones for preparing and finalizing the
statements.
REPORTABLE CONDITIONS
2 - Continued Improvements Needed In Accounting for Capitalized Property
Agency General Comments:
3
-------
Page 2-2. Third Paragraph
The Audit Report stated: "We determined that year-end balances in FAS and the
IFMS general journal did not reconcile. For example, we found property that
was included in the IFMS but not in FAS, thus causing an imbalance in some
instances. FMD personnel adjusted some property items in the IFMS general
journal to match FAS because they believe the FAS is the best source of
Agency's property accountability. However, the FAS ending balances did not
match the 16th month IFMS general journal ending balance amount that was
used for the fiscal 2000 financial statements. This was done to ensure IFMS
general journal properly reflected the amount of capitalized...."
EPA response: The statement above that FMD personnel adjusted the IFMS general
journal to match FAS is not accurate. FMD did not make adjustments to the general
journal to match FAS during fiscal year 2000. This fact is also evidenced by OIG's
first sentence above that the year-end balance in FAS and the IFMS general journal did
not reconcile.
The audit report should also document the fact that FMOs also obtain supporting
documentation for and make adjustments to the IFMS general ledger for property
found in FAS, but not in the general ledger. This two-way reconciliation process
ensures that EPA's general journal accurately reflects balances for property that the
Agency owns and maintains. The reconciliation process provides the greatest internal
controls to limit the risk of fraud, waste and abuse by identifying those assets that the
Agency purchased but that were not recorded in FAS and vice versa. Although PMOs
do not always enter the property in FAS timely, the general journal and the
documentation maintained by FMOs can fully account for annual Agency property
transactions reflected on the Agency's financial statements. Also, FMOs continuously
monitor and follow up with PMOs regarding entering items not in FAS that were
disclosed during the reconciliation process.
However, we agree there are problems with property being recorded in the system
timely as evidenced by the large number of "found-on-station" and others items not
entered by PMOs, which were disclosed during FMOs' reconciliations. FMD and
FMSD will work diligently together to resolve this issue.
Page 2-3. Fifth Paragraph
The Audit Report stated: "The Agency accurately removed the cost of capital
improvements made since fiscal 1997; but, the fiscal 1996 net book value of the
initial property recorded in FAS was removed, even though notations were made
to the FAS records of the real property's original values. The on-top adjustment
did not consider the effects of the disposal on the property balance. As a result,
the disposal of real property was understated, which resulted in an
overstatement of the fiscal 1999 property balance."
4
-------
EPA Response: The transaction noted above, which involved $200,000, was
corrected in FY 2000. However, it had no effect on the balance sheet and did not
result in an overstatement of equity in fiscal year 1999 as the item disposed had a net
book value of zero.
RECOMMENDATIONS
2-1 Strengthen controls over FMO and PMO accountability to ensure that property
is timely and accurately recorded in FAS.
Agency Comments:
We agree in part with this recommendation. There are problems with property being
recorded in the system timely as evidenced by the large number of items not entered by
PMOs timely. FMD and FMSD will work diligently together to resolve this issue as
indicated by the action plans provided under recommendations 2-2 and 2-8 below.
However, we believe that adequate FMO controls and accountability currently do exist
as the result of the implementation of FAS, policies, procedures, the reconciliation
process and numerous training sessions in the past three years. Accountability over
the financial property accounting process is evidenced by FMOs' monthly
reconciliations and annual certifications that the reconciliations were complete and
accurate. Moreover, we were advised by Agency finance offices whose reconciliation
process was audited by EPA field auditors that no issues were disclosed during these
reviews.
2-2 Continue to conduct monthly FMO reconciliations of IFMS and FAS, and
ensure all property is entered into FAS within 1 month of the last reconciliation.
Agency Comments:
We agree with this recommendation. FMD and FMSD will develop procedures to
strengthen controls to ensure that property management officers enter property in FAS
within 1 month of the last reconciliation and will continuously monitor the new
process.
Corrective Action Target Date
Issue Joint PMO/FMO Property Reconciliation June 2001
Guidance
Joint PMO/FMO Quarterly Teleconferences Ongoing
to Monitor Reconciliation Process
2-3 Resolve the differences between the fiscal 1999 ending balance and the fiscal
2000 beginning balance for Contractor-held Property.
5
-------
Agency Comments:
We agree with this recommendation. We reviewed the auditor's work papers, which
listed 28 contracts that showed an FY 1999 ending balance different from the FY
2000 beginning balance. Essentially, there were four reasons for the differences:
Clerical errors such as items in wrong columns, mis-entered amounts, mis-
entered contract numbers. (An incorrectly entered contract number accounted
for the single largest difference.)
Failure of contractors with expired contracts to submit reports.
Follow-on contractors listing property as a beginning balance instead of as an
addition.
Incorrect reporting of previously reported items that were reclassified, such as
special test equipment or Superfund site-specific property.
To prevent this from happening in the future, OAM will have three checkpoints to
ensure that the information provided to OCFO is accurate:
Contracting Officers (who receive the contract property reports from the
contractor) will verify beginning and ending balances and resolve differences.
Operating Division property contact points (who summarize property reports
by operating Division) will test for accuracy.
The OAM Headquarters property staff will develop an automated program to
perform a final check of accuracy.
These steps will ensure that there will not be a recurrence of this problem.
Corrective Action Target Date
Develop a program to automatically March 2001
verify beginning and ending balances
before submitting data to OCFO.
Send a memo to all contracting officers and August 2001
property contact points reminding them of
their responsibility to verify beginning and
ending balances of property reports due from
contractors at October 31, 2001.
Verify data provided by contractors November 2001
before submitting final report to OCFO.
2-4 Revise the FMO year-end certification to include ending property balance
amount in FAS and IFMS reconciled as of September 30.
Agency Comments:
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We agree with this recommendation and will incorporate it in our year-end property
reconciliation instructions.
Corrective Action
Target Date
Revise Year end guidance
August 2001
2-5 Reclassify the contractor-held property to general ledger account 1770, and
include it on the financial statements with the acquisition value for contractor-
held property.
Agency Comments:
We agree with this recommendation.
Corrective Action Target Date
Reclassify above referenced transaction February 2001
2-6 Work diligently with Research Triangle Park's PMO to reconcile the $4 million
difference for the fiscal 2000 transfer of contractor-held property.
Agency Comments:
We agree with this recommendation. We will work with the RTP PMO and Office of
Acquisition Management (OAM) to obtain and provide to the OIG the documentation
to support the differences related to the transfer of property records from Lockheed
Martin to EPA. However, we disagree that this property is unaccounted for, as the
audit report asserts. The documentation to support the difference is maintained by the
respective contracting and property management officers in accordance with Agency
procedures.
Corrective Action Target Date
OCFO will assist in arranging to provide for the April 2001
OIG documentation to support the $4 million
difference
2-7 Reestablish in FAS the balances for each real property item at the original cost
estimate or acquisition value instead of its recorded fiscal 1996 net book value.
Agency Comments:
We believe that recording our real property at its net book value is an acceptable
Federal accounting practice. The Agency's real property costs at the time it was
recorded were based on cost estimates provided by an appraiser. Thus, the Agency
recorded this activity in accordance with the implementation guidance provided in the
Statement of Federal Financial Accounting Standards Number (SFFAS) Six,
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"Accounting for Property, Plant and Equipment." Paragraphs 40 and 41 of the
SFFAS state:
" 40 For existing general PP&E, if historical cost information necessary
to comply with the above recognition and measurement provisions has
not been maintained, estimates are required. Estimates shall be based on
41 Accumulated depreciation/amortization shall be recorded based on
the estimated cost and the number of years the PP&E has been in use
relative to its estimated useful life. Alternatively, the PP&E may be
recorded at its estimated net remaining cost and
depreciation/amortization charged over the remaining life based on the
net remaining cost."
We selected the option provided in the second sentence of paragraph 41 above as it
better accommodates our Agency's Fixed Asset Subsystem's functionalities. In
addition, we conferred with FASAB staff to confirm that our interpretation and
application of the standard to our real property balances were correct as original cost
documentation on the actual costs was not available. To provide you reasonable
assurance of this issue, we will write a letter to FASAB requesting a formal opinion.
Corrective Action Target Date
Forward Request for Clarification of FASAB March 2001
Standard
2-8 Undertake a comprehensive property study to review, make recommendations,
and propose corrective actions on:
• the Agency's monthly and year-end reconciliation process of FAS and
IFMS,
• the accountability and recording of personal and real property,
• transferring and recording of contractor-held property,
• financial statement preparation, and
• other areas as warranted to improve the accountability of the Agency's
property.
Agency Comments:
We partially agree with your recommendation and will initiate a study to rectify the
major issue of recording property timely. We believe that the other areas that you
recommend for study will be fully addressed by the corrective actions cited above.
As agreed to in response to earlier OIG audit recommendations, we have issued
advisory notices to property management officers to be more diligent in recording
property in FAS and in reconciling with the Agency's accounting system.
Unfortunately, these efforts have not been completely successful.
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Given the persistent nature of the weaknesses regarding capitalized property, we
believe that your recommendation to perform a comprehensive property study to
develop practical corrective actions is an appropriate strategy. Such a study will allow
us to fully investigate the problems with entering property timely and to develop
effective measures to improve accountability of the Agency's property. We would like
the OIG to participate in this effort.
Corrective Actions Target Date
FMSD and FMD will initiate a study on May 2001
timely recording of Agency
property
Complete study September 2001
3 - Further Improvements Needed In EPA's Process For Reviewing Unliquidated
Obligations
Agency Comments:
The "Draft Audit Report on EPA's Fiscal 2000 Financial Statements" made no new
recommendations. We concur with the draft report's summary of our position and of
the Agency's corrective actions.
4 - Additional Improvements Needed In EPA's Interagency Agreement Invoice
Approval Process
Agency Comments:
The "Draft Audit Report on EPA's Fiscal 2000 Financial Statements" made no new
recommendations. We appreciate the Report's recognition of Agency progress in
implementing corrective actions from earlier audit reports.
Please see response to recommendation 8 below, specifically on "Use of Appropriate
Costing Methodologies," for our comments on the use of the "first in first out"
accounting basis for charging costs.
5 - Improvement Needed In Documentation And Approval Of Journal Vouchers
5-1. [Appropriate Financial Reports and Analysis Branch personnel] Review EPA's
Comptroller Policy Announcement No. 93-02.
Agency Comments:
We agree with this recommendation. All FRAB staff have been directed to review the
Policy Announcement and to confirm with Branch management that they have
complied.
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Corrective Action
Target Date
Provide copies of PA 93-02 to FRAB Staff Completed
FRAB Staff certifies that they have reviewed PA 93-02 February 2001
5-2. [Appropriate Financial Reports and Analysis Branch personnel] Review and
approve all journal and standard voucher entries prior to entry into IFMS, and
assure that all the vouchers are properly documented prior to approval.
Agency Comments:
We agree with this recommendation.
6 - Timely Repayment Of Asbestos Loan Debt To Treasury Needed
6-1. Require the Director, LVFMC to develop a schedule for repaying its asbestos
loan debt to the Department of Treasury on an annual basis;
Agency Comments:
We agree with this recommendation.
Corrective Action Target Date
Develop a schedule for repaying the June 2001
asbestos debt.
6-2. Reduce the asbestos loan borrowing authority balance to zero.
Agency Comments:
We completed this action on February 8, 2001, with the first quarter transmission of
the FACTS II report to Treasury
7 - Automated Application Processing Controls For The Integrated Financial
Management System Could Not Be Assessed
Agency Comments:
We concur with the audit report's description of the current status of this issue.
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SUBSTANTIAL NONCOMPLIANCE WITH FEDERAL FINANCIAL
MANAGEMENT IMPROVEMENT ACT
8 - EPA Does Not Comply With The Managerial Cost Accounting Standard
8-1. Conduct a formal, aggressive education campaign to give key users of EPA
accounting information substantive knowledge on what the possibilities are for
cost accounting at EPA. This will include formally canvassing a user group to
determine their needs and desires; satisfy users where practicable; and define
and develop timely, reliable, and accurate cost reports that enable managers to
monitor the cost of their programs and outputs on an ongoing basis.
8-2. Develop an Agency-wide indirect cost rate and policy to more accurately
determine the full cost of Agency outputs.
8-3. Produce cost for each output (subobjective) at least annually for use during the
fiscal year. As part of the education and canvassing effort described in
Recommendation 1, determine whether key users want such information more
frequently than annually, and satisfy the key user needs for timing and
frequency.
8-4. Eliminate the use of costing methodologies that do not satisfy the requirements
of SFFAS No. 4 for consistency and reliability and implement viable alternatives.
Agency Comments:
OCFO believes we are in substantial compliance with the Managerial Cost Accounting
Standards and therefore a remediation plan under FFMIA is not required. The detailed
response below is organized into the same sections as presented in the draft report.
Determining Full Cost of EPA Activities. Since FY 1999, EPA has used a Program
Results Code (PRC) to account for all new obligation authority (NOA). The PRC
includes the Goal, Objective, Sub-objective, National Program Manager (NPM) and,
as appropriate, Major Program. The PRC provides the structure whereby all the costs
that benefit the activities in a particular Goal, Objective and Sub-objective, regardless
of the NPM or program office involved, are accumulated to show the cost of the
Agency's outputs. Most costs are charged directly to the PRC, but some "indirect
costs" are accumulated in distribution accounts and allocated to the appropriate PRCs.
EPA's Strategic Plan Structure has ten Goals, one of which, with its Objectives and
Sub-objectives, accumulates costs for "Effective Management." These accumulated
costs can be allocated to the Agency's outputs, if there is a need for this information.
However, as stated in SFFAS No. 4, "The standard does not require full cost reporting
in federal entities' internal reports or special purpose cost studies. Entity management
can decide on a case-by-case basis whether full cost is appropriate and should be used
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for internal reporting and special purpose cost studies." (page 36, 89) In addition, the
costs that remain in the Program Element (PE) Structure have been cross walked to
the PRC. This crosswalk provides the total cost of outputs that are in the PE structure
and allows us to combine those costs with the PRC costs, if needed.
As for identifying supporting services provided by other agencies, currently we are
only required to account for specific inter-entity costs such as Office of Personnel
Management (OPM) costs, which we provide in our external reporting. The Office of
Management and Budget (OMB) will be issuing further guidance on identifying other
types of inter-entity costs and how they should be handled by reporting entities.
With respect to the allocation of costs to PRCs, we do not agree that an "Agency-
wide indirect cost policy" is necessary. Our existing policy document PA 98-10,
"Accounting for Resources under the Government Performance and Results Act
(GPRA)," addresses the allocation of costs and the capturing of every NO A dollar,
including both direct and indirect costs, at the Sub-objective level.
In many instances where indirect costs are needed for specific purposes, we have
either completed or are developing indirect cost policy and accompanying rates. We
have already developed indirect costs rates for Superfund cost recovery and for the
Working Capital Fund. We are also helping develop indirect rates for use in setting
user fees and are developing indirect rates for reimbursable program costs.
We can agree with the concept of an indirect cost policy, but we firmly believe that
any such "policy" must be broad and flexible in consideration of the diverse nature of
EPA's component organization and activities. Accordingly, we are planning to
develop an "indirect cost policy" that will provide guidance to program offices when
they have a specific need for indirect cost rates.
Regular Reporting of Costs for Use by Management. There are numerous
standard reports, as well as ad hoc reports, available by PRC that program managers
can use to manage their programs. Reports are also available to managers for those
obligations and expenses still in the PE Structure. We did not produce a combined PE
and PRC report earlier in FY 2000 because of the intensive effort involved in
developing the crosswalk for the financial information for the Net Cost Statement in
the Financial Statements. Now that we have developed this PE crosswalk, OC is
developing an end-of-year report detailing disbursements by PRC that includes the PE
disbursements for FY 2000. We will also develop a combined PRC and PE 6-month
report, as well as an end-of-year disbursements report for FY 2001.
Use of Appropriate Costing Methodologies. We believe that our costing
methodologies satisfy SFFAS No. 4. Our Policy Announcement No. 98-10 identifies
the appropriate costing methodologies to use. The Cincinnati Financial Management
Center (CFMC) pays all Disbursement and Reimbursable IAGs. CFMC does use a
"First in, First out"-like process to temporarily charge payments pending confirmation
of appropriate charging by the project officer; however, there are valid reasons for
using this method.
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The reasons relate to an audit finding from approximately 1993 in which the auditors
stated that CFMC had an excessively large balance in its suspense account (where
OP AC bills are placed until the related IAG is identified). To remedy this, CFMC
began charging the IAG's on a FIFO-like basis initially, rather than placing them in the
suspense account. Project Officer Approval Forms are then sent to the project officer
for certification. If the returned Project Officer Approval Forms indicate that the
FIFO-like accounting was incorrect, CFMC backs out the entry it originally made and
changes it to match what the project officer reported.
The majority of the IAGs do not charge multiple PRCs so that CFMC's original
charging generally does not need to be changed when the Project Officer Approval
Form is received. Further, in the last two years when the OIG has audited to the PRC
level, testing of the disbursement transaction samples have not disclosed a single
occurrence of incorrect PRC charging.
The second area of discussion addresses Performance Partnership Grants (PPGs). The
draft audit report states that EPA has implemented PPG policy inconsistently. The
auditors believe that Project Officers have not always made the determinations based
on their close review of the work and that percentages established in Headquarters
have sometimes been the basis for the allocation.
In response, we followed up with the two regions where the OIG reported a problem
with the implementation of the PPG accounting policy. We understand that one of the
regions was able to satisfy the Regional auditors concerning how the Grant was cross
walked. The other Region only had problems related to certain Sub-objectives in the
Air Program, but these Sub-objectives did not cross Goals and therefor do not affect
the financial statements. The Region did an analysis of the grant in question and
provided this information to the regional auditors. The region will make changes if
appropriate.
Further, in FY 2000, staff from both the OCFO and OIG visited Regions 1 and 7 to
review the PPG process in those Regions. Both offices were satisfied that the process
in these Regions was acceptable. We intend to conduct additional quality assurance
work with PRC accounting during the coming months to ensure that the Agency is
following the Office of the Comptroller Policy Announcement No. 98-10.
Conclusion. Neither the draft audit report nor any other communication from OIG
presents us with audit evidence to support the statement made in the opening
paragraph, "The lack of sufficient cost information adversely impacts many facets of
EPA's operations, including budget formulation, program execution and cost
recovery." We agree that further improvements in cost accounting are desirable but
implementing managerial cost accounting is an evolutionary process that will
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continue to change and improvements and enhancements are on-going. We believe
such improvements can best be attained by OCFO and OIG working together in a
cooperative relationship.
OTHER NONCOMPLIANCE ISSUES WITH FFMIA
Agency Comments:
We recommend that this section be moved to a section entitled "Other Noncompliance
Issues," since the following two issues are not "substantial" noncompliance issues.
Please see our comments in the executive summary section.
9 - EPA Unable To Reconcile Intra-Governmental Transactions
Agency Comments:
We concur with the audit report's findings and conclusions. As indicated in the draft
report, OCFO continues to work with other federal agencies and to reconcile its
intragovernmental transactions.
10 - Despite Improvements, Financial System Security Plans Continue To Be
Noncompliant
Agency Comments:
As the audit report notes, OCFO continues to make progress in completing planned
corrective actions.
OTHER ISSUES
11- User Fees
Agency Comments:
We understand that the discussion of user fees will be removed from the audit report
(see Roland Cyr's February 6, 2001, email to Joe Dillon, "User Fee Issue in Draft
fiscal 2000 financial statement audit report") as a result of the Deputy Administrator's
January 19, 2001, memorandum to OMB requesting fee exceptions. We concur, of
course, with this action and have no further comment.
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Appendix III
Abbreviations
CFMC
Cincinnati Financial Management Center
EPA
Environmental Protection Agency
FAS
Fixed Assets Subsystem
FFMIA
Federal Financial Management Improvement Act
FMD
Financial Management Division
FMFIA
Federal Managers' Financial Integrity Act
FMOs
Financial Management Offices or Officers
GAD
Grants Administration Division
GAO
General Accounting Office
GMRAGovernment Management Reform Act
IAGs
Interagency Agreements
IFMS
Integrated Financial Management System
JFMIP
Joint Financial Management Improvement Project
LVFMC
Las Vegas Financial Management Center
NIST
National Institute of Science and Technology
OCFO
Office of the Chief Financial Officer
OEI
Office of Environmental Information
OIG
Office of Inspector General
OMB
Office of Management and Budget
PMO
Property Management Officer
RACF
Resource Access Controls Facility
RSSI
Required Supplemental Stewardship Information
SFFAS
Statement of Federal Financial Accounting Standards
Audit Report 2001-1-00107
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Audit Report 2001-1-00107
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Appendix IV
Report Distribution List
Administrator (1101 A)
Deputy Administrator (1101 A)
Chief Financial Officer (271 OA)
Inspector General (2410)
Assistant Inspectors General
Assistant Administrator for Administration and Resources Management (3101 A)
Assistant Administrator for Solid Waste and Emergency Response (5101)
Assistant Administrator for Enforcement and Compliance Assurance (2201 A)
General Counsel (231 OA)
Comptroller (2731 A)
Associate Administrator for Congressional and Intergovernmental Relations (1301 A)
Associate Administrator for Communications, Education, and Media Relations (1703 A)
Deputy Assistant Administrator for Environmental Information (2810A)
Director, Office of Policy and Resources Management, OARM (3102 A)
Director, Office of Administration (3201 A)
Director, Office of Acquisition Management (3801R)
Director, Office of Grants and Debarment (3901R)
Director, Office of Administration and Resources Management, Cincinnati, OH
Director, Office of Administration and Resources Management, RTP, NC
Director, Office of Technology Operations and Planning (2810A)
Director, Office of Site Remediation Enforcement (2271 A)
Director, Office of Emergency and Remedial Response (5201G)
Director, Annual Planning and Budget Division (2732A)
Director, Grants Administration Division (3903R)
Director, HQ and Desktop Services Division, OTOP (2832)
Director, Facilities Management and Services Division (3204R)
Director, Financial Management Division (2733R)
Director, Financial Services Division (2734R)
Director, National Technology and Services Division, OTOP, RTP, NC
Financial Management Officers at Regions 1 through 10, Cincinnati, Las Vegas,
and Research Triangle Park
Divisional Inspectors General for Audit
Chief, Financial Reports and Analysis Branch (2733R)
Chief, Program and Cost Accounting Branch (2733R)
Chief, Financial Systems Branch (2733R)
Chief, Financial Policies, Procedures and Compliance Branch (2733R)
Chief, Washington Financial Management Center (2734R)
Acting Chief, Security and Property Management Branch (3204R)
Audit Report 2001-1-00107
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Kathy Sedlak OBrien, Agency Audit Follow-up Coordinator (2724A)
Agency Followup Official (2710A)
Brigid Rapp, Audit Liaison for the Office of the Chief Financial Officer (271 OA)
Sandra Womack-Butler, Audit Liaison for the Office of Administration and Resources
Management (3102A)
Elizabeth Harris, Audit Liaison for the Office of Solid Waste and Emergency
Response (5103)
Tom Pastore, Audit Liaison for the Office of Administration (3201 A)
Jeff Worthington, Audit Liaison for the Office of Environmental Information (2812A)
Greg Marion, Audit Liaison for the Office of Enforcement and Compliance
Assurance (2201 A)
John Showman, Audit Liaison for the Grants Administration Division (3901R)
Pat Gilchriest, Audit Liaison for the Administrators Office (1104A)
A1 Demarcki, Audit Liaison for the Financial Management Division and the Financial
Services Division (2733R)
William Stewart, Audit Liaison for the Office of General Counsel (2311 A)
Roland Cyr, Audit Liaison for the Financial Audit Division (2422)
Audit Report 2001-1-00107
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Please visit our web site to view and download this audit report at:
http://www.epa.gov/oigearth
To obtain a copy of this report, please contact:
U.S. Environmental Protection Agency
Office of Inspector General
Financial Audit Division
Mail Code 2422
1200 Pennsylvania Avenue, NW
Washington, DC 20460
Telephone: 202-260-1397
FAX: 202-260-1398
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