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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Fiscal 2005 and 2004 Financial
Statements for the Pesticides
Re registration and Expedited
Processing Fund
Report No. 2007-1-00001
October 10, 2006
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Report Contributors: Paul Curtis Carol Kwok
Wanda Whitfield Ethel Lowery
Bill Samuel Christina Nelson
Sabrina Berry Demetrios Papakonstantinou
Sheree Brice Cynthia Poteat
Diane Forrest Phil Weihrouch
Abbreviations
EPA U.S. Environmental Protection Agency
FIFRA Federal Insecticide, Fungicide, and Rodenticide Act
FMFIA Federal Managers' Financial Integrity Act
IFMS Integrated Financial Management System
OIG Office of Inspector General
OMB Office of Management and Budget
PRIA Pesticide Registration Improvement Act
WFC Washington Finance Center
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2007-1-00001
October 10, 2006
Catalyst for Improving the Environment
Why We Did This Audit
The Food Quality Protection Act
requires that we perform an
annual audit of the Pesticides
Reregistration and Expedited
Processing Fund (known as
FIFRA) financial statements.
Background
The U.S. Environmental
Protection Agency (EPA) is
responsible for reassessing the
safety of older pesticide
registrations against modern
health and environmental testing
standards. To expedite this
reregistration process, Congress
authorized EPA to collect fees
from pesticide manufacturers.
The fees are deposited into the
FIFRA Fund. Each year, the
Agency prepares financial
statements that present financial
information about the Fund,
along with information about
EPA's progress in reregistering
pesticides.
Fiscal 2005 and 2004 Financial Statements for
the Pesticides Reregistration and Expedited
Processing Fund
Opinion
We rendered an unqualified, or clean, opinion on EPA's Pesticides
Reregistration and Expedited Processing Fund Financial Statements for fiscal
2005 and 2004, meaning that they were fairly presented and free of material
misstatement.
Internal Control Reportable Conditions Noted
During fiscal 2005, EPA's Washington Finance Center recorded adjusting and
correcting entries for FIFRA collections in the Integrated Financial
Management System (IFMS) without adequately documenting the errors,
corrections, or modifications.
Compliance With Laws and Regulations Noted
We tested compliance with those laws and regulations that could either
materially affect the FIFRA Fund financial statements or that we considered
significant to the audit. The objective of our audit, including our tests of
compliance with applicable laws and regulations, was not to provide an opinion
on overall compliance with such provisions. Accordingly, we do not express
such an opinion. We did not identify any noncompliances that would result in a
material misstatement to the audited financial statements.
What We Recommend
For further information, contact
our Office of Congressional and
Public Liaison at (202) 566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2007/
20061010-2007-1 -00001 .pdf
We recommend that the Director, Washington Finance Center, Office of the
Chief Financial Officer, adequately document adjusting and correcting entries
entered in IFMS in accordance with the EPA Comptroller Policy Announcement
No. 93-02, Policies for Documenting Agency Financial Transactions.
Washington Finance Center officials agreed with our recommendation, and
began corrective action to better document adjusting and correcting entries in
IFMS.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
October 10, 2006
MEMORANDUM
SUBJECT: Fiscal 2005 and 2004 Financial Statements for the Pesticides Reregi strati on
and Expedited Processing Fund
Report No. 2007-1-00001
This is our report on the audit of the U.S. Environmental Protection Agency's (EPA's)
Fiscal 2005 and 2004 Financial Statements for the Pesticides Reregi strati on and Expedited
Processing Fund, conducted by the EPA Office of Inspector General (OIG). This report
contains findings that describe the problems the OIG has identified and corrective actions
the OIG recommends. The report represents the opinion of the OIG and does not
necessarily represent the final EPA position. Final determinations on matters in this report
will be made by EPA managers in accordance with established audit resolution procedures.
The estimated cost of this report - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time - is $208,916.
Action Required
Your response to the draft report adequately addresses the findings and recommendation in
this report. Therefore, we will close this report upon issuance and no further response to
this report is necessary. We have no objections to the further release of this report to the
public. The report will be available at http://www.epa.gov/oig.
TO:
James B. Gulliford
Assistant Administrator for Prevention,
Pesticides and Toxic Substances
Lyons Gray
Chief Financial Officer
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If you or your staff have any questions, please contact me at (202) 566-0847 or
roderick.bill@epa.gov, or Paul Curtis at (202) 566-2523 or curtis.paul@epa.gov.
Sincerely,
-—fii+HAr^RoJeri ck
Acting Inspector General
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Fiscal 2005 and 2004 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
Table of C
Inspector General's Report on the Fiscal 2005 and 2004
Financial Statements for the Pesticides Reregistration
and Expedited Processing Fund
Opinion on the FIFRA Fund Financial Statements 1
Evaluation of Internal Controls 2
Tests of Compliance with Laws and Regulations 4
Overview Section of the Financial Statements 4
Prior Audit Coverage 4
Recommendation 5
Agency Response and OIG Evaluation 5
Status of Recommendation and Potential Monetary Benefits 6
Appendices
A FYs 2005 and 2004 FIFRA Reregistration Fund
Financial Statements
B Full Text of Agency Response
C Distribution
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Inspector General's Report on the
Fiscal 2005 and 2004 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
The Administrator
U.S. Environmental Protection Agency
We have audited the Pesticides Reregistration and Expedited Processing Fund (known as the
FIFRA fund) balance sheet as of September 30, 2005 and 2004, and the related statements of net
cost, changes in net position, budgetary resources, and financing for the year then ended. These
financial statements are the responsibility of the U.S. Environmental Protection Agency's
(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 (OMB)
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.
In our opinion, the financial statements present fairly the assets, liabilities, net position,
budgetary resources, financing activities, and reconciliation of net costs to budgetary obligations
of the FIFRA fund, as of and for the years ended September 30, 2005 and 2004, in accordance
with accounting principles generally accepted in the United States of America.
Throughout fiscal 2005, employees' payroll costs were transferred from the FIFRA fund to the
Environmental Programs and Management appropriation. These costs were transferred in order
to keep FIFRA's obligations and disbursements within budgetary and cash limits. As funds are
available, employees charged their time directly to FIFRA. As funds become limited, these
employees' payroll costs are transferred to the Environmental Programs and Management
appropriation. At the end of fiscal 2005, about 186 Full-Time Equivalents were charged directly
to the FIFRA fund. Due to year-end unfunded payroll liabilities associated with those employees
charging FIFRA, the FIFRA fund assets were not sufficient to cover the unfunded liabilities of
the fund. As a result, the FIFRA fund will either have to obtain additional funding or such
unfunded liabilities will have to be paid from other EPA appropriations.
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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 preparation of the financial statements and Required
Supplementary Stewardship Information 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.
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; and
any other laws, regulations, and Government-wide policies identified by OMB.
We did not test all internal controls relevant to operating objectives as broadly defined by the
Federal Managers' Financial Integrity Act (FMFIA) 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 controls that might be reportable conditions or material weaknesses. Because of inherent
limitations in any internal control structure, losses, noncompliance, or misstatements could occur
and not be detected. Also, projecting our evaluation of internal controls to future periods is
subject to the risk that controls may become inadequate because of changes in conditions, or the
degree of compliance with such controls may deteriorate.
With respect to internal controls related to performance measures presented in the Overview and
Analysis (which addresses requirements for a Management Discussion and Analysis) in the fiscal
2005 and fiscal 2004 FIFRA Reregi strati on Fund Financial Statements, 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 controls over reported performance measures and,
accordingly, we do not express an opinion on internal controls.
While we did not find evidence of material errors in the reporting under Reregi strati on Program
Performance Measure Two, we did find indications of internal control weaknesses. For a
number of the actions we sampled under this measure, either the documentation was not in the
product jacket at the time we reviewed the files, or the date of the action differed from the date
showing in the report from the Office of Pesticide Programs Information Network we were given
to support the numbers of actions reported under the performance measure. While the scope of
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our audit did not include examination of the reasons for these deficiencies, we suggest that the
Office of Pesticide Programs review its internal controls related to this measure to determine if
improvements are needed.
Material Weaknesses
Material weaknesses, as defined by OMB Bulletin No. 01-02, 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, including the performance measures reported for
the Fund, may occur and not be detected in a timely manner by employees in the normal course
of performing their assigned functions. We noted one matter discussed below involving
operations that we consider to be a reportable condition, although it is not believed to be a
material weakness.
Reportable Conditions
OMB Bulletin No. 01-02 defines reportable conditions as matters that come 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 controls that could adversely affect
the organization's ability to meet the objectives defined on the previous page.
For fiscal 2005, we identified a weakness in the Agency's documentation of adjustments to the
Integrated Financial Management System (IFMS) entries. EPA's Washington Finance Center
(WFC) recorded adjusting and correcting entries in IFMS, the Agency's accounting system,
without adequately documenting the errors, corrections, or modifications. During our analysis of
FIFRA collections recorded in WFC, we found four adjustments to entries in IFMS totaling
$794,200 that were not supported by sufficient documentation, such as schedules of collections
or IFMS screen prints. These entries also did not contain evidence of supervisory review or
approval on the adjustments.
We recognize that the Agency already has a policy in place that requires adequate documentation
of adjusting and correcting entries entered in IFMS. However, the frequency and dollar amount
of noncompliance with this policy indicates the need for management attention.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 01-02 requires us to compare material weaknesses disclosed during the audit
with those material weaknesses reported in the Agency's FMFIA report that relate to the
financial statements and identify material weaknesses disclosed by audit that were not reported
in the Agency's FMFIA report.
For reporting under FMFIA, material weaknesses are defined differently than they are 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.
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Our audit did not disclose any material weaknesses, nor were any reported by the Agency as part
of the Integrity Act process.
Tests of Compliance with Laws and Regulations
As part of obtaining reasonable assurance about whether the Agency's financial statements are
free of material misstatement, we tested compliance with those laws and regulations that could
either materially affect the FIFRA financial statements, or that we considered significant to the
audit. The objective of our audit, including our tests of compliance with applicable laws and
regulations, was not to provide an opinion on overall compliance with such provisions.
Accordingly, we do not express such an opinion. However, we did not identify any
noncompliances that would result in a material misstatement to the audited financial statements.
Overview Section of the Financial Statements
Our audit work related to the information presented in Management's Overview and Analysis of
the Pesticides Program included comparing the overview information with information in EPA's
principal financial statements for consistency. We did not identify material inconsistencies
between the information presented in the two documents.
Our audit work also included obtaining an understanding of the design of significant internal
controls relating to the existence and completeness assertions of the performance measures in the
Overview. 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.
We reviewed supporting documentation for each of the five performance measures listed in
Management's Overview and Analysis of the Pesticides Programs, and did not note any
significant discrepancies. While we did not find evidence of material errors in the reporting
under Reregi strati on Program Performance Measure Two, we did find indications of internal
control weaknesses, as discussed earlier under the Evaluation of Internal Controls.
Prior Audit Coverage
In the audit performed in fiscal 2004, we reported the following two reportable conditions:
¦ We could not assess the adequacy of the automated controls.
¦ We identified a weakness in the Agency's preparation and quality control of the Financial
Statements and footnotes.
EPA has made progress toward replacing IFMS. However, until EPA implements the planned
replacement automated accounting system that addresses past issues, we will continue to disclose
a reportable condition concerning documentation of the current accounting system and its
automated application processing controls {Audit of EPA's Fiscal 2005 and 2004 Consolidated
Financial Statements Audit Report, Audit Report 2006-1-00015). In addition, EPA recognizes
the importance of properly reviewing the Financial Statements, including the footnotes,
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supplemental information, and overview, prior to release or submittal for audit. EPA
strengthened its quality control and review procedures for the final statements documents.
We recommend that the Director, Washington Finance Center, Office of the Chief Financial
Officer, adequately document adjusting and correcting entries entered in IFMS in accordance
with the EPA Comptroller Policy Announcement No. 93-02, Policies for Documenting Agency
Financial Transactions.
The Agency agreed with our recommendation, and began corrective action to improve
documentation of adjusting and correcting entries in IFMS. WFC updated its desk procedures to
include the maintenance of adequate source documentation when adjusting and correcting entries
are made to transactions already entered in IFMS. In addition, WFC staff will include an
adjustment control sheet to document the reason for the adjustments and corrections, and a
separate staff person will be assigned to review and approve the transactions.
The Agency's full response to the draft report is in Appendix B.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
September 26, 2006
Recommendation
Agency Response and OIG Evaluation
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Status of Recommendation and
Potential Monetary Benefits
Rec.
No.
Page
No.
RECOMMENDATIONS
Subject
Status1
Action Official
Planned
Completion
Date
Adequately document adjusting and correcting
entries entered in IFMS in accordance with the
EPA Comptroller Policy Announcement No. 93-02,
Policies for Documenting Agency Financial
Transactions.
Director,
Washington Finance Center,
Office of the
Chief Financial Officer
May 2006
POTENTIAL MONETARY
BENEFITS (in $000s)
Claimed
Amount
Agreed To
Amount
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
FYs 2005 and 2004 FIFRA REREGISTRA TION FUND
FINANCIAL
STATEMENTS
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TABLE OF CONTENTS
Overview and Analysis of the Pesticide Program
Principal Financial Statements
i
EPA's FY 2005 Annual FIFRA Financial Statements
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OVERVIEW AND ANALYSIS
OF THE PESTICIDE PROGRAM
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EPA's FY 2005 Annual FIFRA Financial Statements
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OVERVIEW AND ANALYSIS OF THE PESTICIDE PROGRAM
The Agency's Office of Pesticide Programs (OPP) was established pursuant to the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) to protect public health and the environment.
The law requires the Agency to balance public health and environmental concerns with the expected
economic benefits derived from pesticides. The guiding principles of the pesticide program are to
reduce risks from pesticides in food, the workplace, and other exposure pathways and to prevent
pollution by encouraging the use of new and safer pesticides.
In accordance with FIFRA and the Federal Food, Drug, and Cosmetic Act (FFDCA), the
pesticide program administers the Revolving Fund for Certification and Other Services (Tolerance
Fund) and the Pesticides Reregi strati on and Expedited Processing Fund (FIFRA Fund). As of 1996,
fees for both tolerance and reregi strati on are deposited to the FIFRA account, which is available to
the EPA without further appropriation.
Tolerance Program Description
As part of its authority to regulate pesticides, EPA is responsible for setting "tolerances." If
the pesticide is being considered for use on a food or feed crop or as a food or feed additive, the
applicant must petition EPA for establishment of a tolerance (or exemption from a tolerance) under
authority of the FFDCA. A tolerance is the maximum legal limit of a pesticide residue on food
commodities and animal feed. Tolerances are set at levels that ensure that the public is protected
from health risks posed by eating foods that have been treated with pesticides in accordance with
label directions.
In 1954, Congress authorized the collection of fees for the establishment of tolerances for raw
agricultural commodities (Section 408 of FFDCA). Congress, however, did not authorize the
collection of fees for food additive tolerances (Section 409 of FFDCA). EPA, therefore, does not
collect fees for food additive tolerances. The Agency also does not collect fees for Agency-initiated
actions such as the revocation of tolerances for previously canceled pesticides. Fees collected from
tolerances for raw agricultural commodities were deposited to the U.S. Treasury General Fund until
1963 when Congress established the Tolerance Fund.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregi strati on activities. Passage of the Food Quality Protection Act (FQPA) of 1996 requires
tolerances to be reassessed as part of the reregi strati on program. Effective January 1997, all fees
related to tolerance activities were deposited in the FIFRA Fund. With passage of the Pesticide
Registration Improvement Act (PRIA) of 2003, no additional tolerance petition fees will be deposited
to the FIFRA Fund through FY 2008.
2
EPA's FY 2005 Annual FIFRA Financial Statements
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Pesticide Reregistration Program Description
As part of its authority to regulate pesticides, EPA is responsible for re-registering existing
pesticides. The FIFRA legislation, requiring the registration of pesticide products, was originally
passed in 1947. Since then, health and environmental standards have become more stringent and
scientific analysis techniques much more precise and sophisticated. In the 1988 amendments to
FIFRA (FIFRA '88), Congress mandated the accelerated reregistration of all products registered prior
to November 1, 1984. The amendments established a statutory goal of completing reregistration
eligibility decisions (REDs) by 1997. The legislation allows for various time extensions which can
extend the deadline by three years or more. The statutory requirement for the completion of
reregistration food-use (REDs) is 2006, in conjunction with the new tolerance reassessment program.
For the non-food-use active ingredient REDs, the current legal deadline under PRIA for completion
of reregistration is October 3, 2008.
Congress authorized the collection of two kinds of fees to supplement appropriated funds for
the reregistration program: an annual maintenance fee and a one-time reregistration fee.
Maintenance fees are assessed on registrants of pesticide products and were structured to collect
approximately $14 million per year. Reregistration fees are assessed on the manufacturers of the
active ingredients in pesticide products and are based on the manufacturer's share of the market for
the active ingredient. In fiscal years 1992 through 1999, approximately 14% of the maintenance fees
collected, up to $2 million each year, were used for the expedited processing of old chemical and
amended registration applications. Fees are deposited into the FIFRA Revolving Fund. By statute,
excess monies in the FIFRA Fund may be invested. Waivers and/or refunds are granted for minor
use pesticides, antimicrobial pesticides, and small businesses.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregistration activities. Passage of the FQPA of 1996 implemented the following changes in the
Pesticide Reregistration Program: reauthorized collection of maintenance fees through 2001 to
complete the review of older pesticides to ensure they meet current standards (increased annual fees
from $14 million to $16 million per year for 1998, 1999, and 2000 only) and required all tolerances
(over 9,700) to be reassessed by 2006. EPA's 2002 appropriations bill extended authority to collect
maintenance fees by one year for the amount of $17 million and the FY 2003 appropriations extended
the authority to collect fees again by one year in the amount of $21.5 million. Passage of PRIA in FY
2004 extended the authority to collect maintenance fees through FY 2008 (with annual fee amounts at
$26 million in FY 2004; $27 million in FY 2005-2006; $21 million in FY 2007; and $15 million in
FY 2008).
The reregistration process is being conducted through reviews of groupings of similar active
ingredients called cases. There are five major phases of reregistration:
~ Phase 1 - Listing of Active Ingredients. EPA publishes lists of active ingredients and asks
registrants whether they intend to seek reregistration. (Completed in FY 1989)
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EPA's FY 2005 Annual FIFRA Financial Statements
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~ Phase 2 - Declaration of Intent and Identification of Studies. Registrants notify EPA if they
intend to reregister and identify missing studies. (Completed in FY 1990)
~ Phase 3 - Summarization of Studies. Registrants submit required existing studies.
(Completed in FY 1991)
~ Phase 4 - EPA Review and Data Call-Ins (DCIs). EPA reviews the studies, identifies and
"calls-in" missing studies by issuing a DCI. A "DCI" is a request to a pesticide registrant for
scientific data to assist the Agency in determining the pesticide's eligibility for reregi strati on.
(Completed in FY 1994)
~ Phase 5 - Reregi strati on Decisions. EPA reviews all studies and issues a Reregi strati on
Eligibility Decision (RED) for the active ingredient(s). A "RED" is a decision by the Agency
defining whether uses of a pesticide active ingredient are eligible or ineligible for
reregi strati on. The registrant complies with the RED by submitting product specific data and
new labels. EPA reregisters or cancels the product. Pesticide products are re-registered,
based on a RED, when it meets all label requirements. This normally takes 14 to 20 months
after issuance of the RED.
Research Program Description
Pesticide research continues to focus on providing scientifically-valid, cost-effective, and low-
burden methods for evaluating risks associated with pesticide use, manufacture, and release into the
environment. Research efforts in FY 2005 focused on developing new and revised human health
exposure and effects tools (methods, models, and data) to improve EPA's understanding of the key
factors influencing real-world exposures to pesticides and the potential effects that may result from
these pesticide exposures on infants and children (age-related differences and activity patterns) and
other highly-exposed groups. EPA also continued efforts to develop a systematic approach for
determining the cumulative risk for a given set of exposure conditions and for classes of pesticides
with common mode of action. Using this approach, EPA started with less complex scenarios (e.g.,
risk from aggregate exposure to a single chemical or a class of pesticides with a common mode of
action) and continues to build towards the more complex scenarios, including consideration of
different temporal dimensions of exposure and susceptibility.
The FY 2005 research addressed risks that would result from both agricultural and residential
exposures. Special emphasis was placed on addressing exposure and effects science issues regarding
children's health, including the special susceptibilities of infants and children exposed to pesticides
and other toxins. Results from this work will support human and environmental risk assessments.
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EPA's FY 2005 Annual FIFRA Financial Statements
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Enforcement and Compliance Assurance Program Description
The Pesticide Enforcement and Compliance Assurance Program focuses on pesticide product
and user compliance, including problems relating to pesticide worker safety protection, ineffective
antimicrobial products, food safety, adverse effects, and e-commerce. The enforcement and
compliance assurance program provides compliance assistance to the regulated community through
its National Agriculture Compliance Assistance Center, seminars, guidance documents, brochures,
and other forms of communication to ensure knowledge of and compliance with environmental laws.
EPA's grant support to states' and tribes' pesticide programs emphasizes pesticide worker
protection standards, high risk pesticide activities including antimicrobials, pesticide misuse in urban
areas, and the misapplication of structural pesticides. In FY 2005, states continued to conduct
compliance monitoring inspections on core pesticide requirements.
EPA will continue its commitment to maintaining a strong compliance and enforcement
presence. Agency priorities for FY 2006 and FY 2007 include enforcement for products making
illegal public health claims, including unregistered and ineffective products, such as inefficacious
hospital disinfectants; enforcement of worker protection standards; compliance monitoring and
enforcement activities related to special action chemicals identified by the Office of Pesticide
Programs and illegal distribution, sale, and advertisement of pesticides and pesticidal services via the
Internet.
Highlights and Accomplishments
Tolerance Performance Measures
As mandated by PRIA, no Tolerance fees were collected and deposited to the FIFRA Fund in
FY 2005.
Measure: Tolerance re-evaluations.
Results: In FY 2005, EPA reassessed 722 tolerance reassessment decisions. Of these, 413
reassessments occurred through reregistration/REDs, 69 were obtained through Tolerance
Reassessment Decisions (TREDs), 112 were from tolerance revocations, and 128 were from other
sources. Two decisions completed in 1998 were added during FY 2005 in cleaning up the tolerance
reassessment data base. At the end of FY 2005, EPA had completed 7,817 tolerance reassessment
decisions, addressing over 80% of the 9,721 tolerances that require reassessment.
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EPA's FY 2005 Annual FIFRA Financial Statements
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Reregistration (FIFRA) Financial Perspective
During FY 2005, the Agency's obligations charged against the FIFRA Fund for the cost of the
reregi strati on programs and other authorized pesticide programs were $25.7 million and 185.2
workyears. Of these amounts, OPP obligated $23.3 million of this cost and funded the 185.2
workyears.
Appropriated funds are used in addition to FIFRA revolving funds. In FY 2005,
approximately $48.7 million in appropriated funds were obligated for reregi strati on program
activities. The unobligated balance in the Fund at the end of FY 2005 was $5.0 million.
The Fund has two types of receipts: fee collections and interest earned on investments. Of
the $28.3 million in FY 2005 receipts, approximately 99% were fee collections.
Reregistration Program (FIFRA) Performance Measures
The following measures support the program's strategic goals of Healthy Communities and
Ecosystems as contained in the FY 2005 President's budget.
Measure 1: Number of Reregistration Eligibility Documents (REDs) completed.
Results: In FY 2005, OPP completed decisions for 41 pesticides including 28 REDs (27
countable) and 13 TREDs. Of the 612 chemical cases (representing 3,822 chemical active
ingredients), that initially were subject to reregistration, 271 have completed REDs. An additional
231 reregistration cases were voluntarily canceled before EPA invested significant resources in
developing REDs. A total of502 reregistration cases (over 82%), therefore, had completed the
reregistration eligibility decision making process by the end of FY 2005, leaving 110 cases (18%)
awaiting such decisions.
Measure 2: Number of products reregistered, canceled, or amended. Approximately 19,000
products are or eventually will be subject to product reregistration. Many products, however,
contain more than one active ingredient. Since products are reassessed separately for each
active ingredient, EPA will conduct approximately 38,000 product reviews.
Results: In FY 2005, 99product reregistration actions, 63 product amendment actions, 342
product cancellation actions, and 0product suspension actions were completed. Currently, a
universe of approximately 11,613 products are undergoing or have completed product reregistration.
The status of those products at the end of FY 2005 was as follows: 1,875 products had been
reregistered; 505product registrations had been amended; 4,375products were cancelleda; 30
a A product cancellation is reported as a reregistration decision when a voluntary cancellation request is
received, when the annual maintenance fee is not paid, or when a notice of intent to cancel due to unreasonable
adverse effects is issued. In the case of a voluntary cancellation request, the process of finalizing the
cancellation required by Section 6(f) of FIFRA may take about six months after receipt of the request to
complete.
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EPA's FY 2005 Annual FIFRA Financial Statements
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products were sent for suspension; and 4,828 products had actions/decisions pending. The Agency's
goal in FY 2006 is to complete 450 product reregistration actions.
Measure 3: Progress in Reducing the Number of Unreviewed, Required Reregistration
Studies.
Results: EPA is making good progress in reviewing scientific studies submitted by registrants
in support of pesticides undergoing reregistration. 2 7,442 studies have been received by the Agency
through the reregistration program. Nearly 85% of these studies have been reviewed or have been
found to be extraneous. Approximately 15% of all studies are awaiting review for future REDs to
complete the reregistration program.
Measure 4: Number and Type of DCIs Issued to Support Product Reregistration by
Active Ingredient.
Results: The number and type of data requests or Data Call-In notices (DCIs) issued by EPA
under FIFRA section 3(c)(2)(B) to support product reregistration for pesticide active ingredients
included in FY 2005 REDs/TREDs are shown in Tables 1 and 2.
1
EPA's FY 2005 Annual FIFRA Financial Statements
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Table 1. Data Call-Ins Issued to Support Product Reregi strati on for FY 2005 REDs
Case No.
Case Name
Number of
Products
Covered by
the RED1
Number of
Product
Chemistry
Studies
Required2
Number of Acute Toxicology Studies
Required3
Number of
Efficacy
Studies
Required
0073
2,4-D
696
31
Not Completed Yet
0
0196
2,4-DB
22
31
48 (6 batches/2 products not batched)
0
3016
4-t Amylphenol and Salts
37
PDCI has not
been
completed
yet.
Antimicrobial RED - Acute toxicity
batching not completed yet.
PDCI has
not been
completed
yet.
2010
Ametryn
4
31
24 (4 products not batched)
0
4010
Aquashade
4
31
24 (4 products not batched)
0
3023
Azadioxabicylclooctane
2
PDCI has not
been
completed
yet.
Antimicrobial RED - Acute toxicity
batching not completed yet.
PDCI has
not been
completed
yet.
3026
Benziothiazolin-3-one
47
PDCI has not
been
completed
yet.
108 (5 batches/13 not batched)
PDCI has
not been
completed
yet.
0007
Chloroneb
12
31
60 (2 batches/8 not batched)
0
0631
Chlorsulfuron
16
31
72 (2 batches/10 products not
batched)
0
3063
Dimethipin
5
31
24 (4 products not batched)
0
0161
Dodine
5
31
Not Completed Yet
0
2245
Endothall
30
31
Not Completed Yet.
0
2265
Ethofumesate
18
31
(66 (3 batches/8 products not batched)
0
2180
Ferbam
7
31
Not Completed Yet
0
0049
Fluometuron
19
31
36 (5 batches/1 product not batched)
0
4054
Inorganic Polysulfides
17
31
Not Completed Yet
0
0643
Mancozeb
100
31
Not Completed Yet
0
0642
Maneb
21
31
Not Completed Yet
0
0644
Metiram
4
31
18 (3 products not batched)
0
2450
Napropamide
15
31
48 (5 batches/3 not batched)
0
0213
Nitrapyrin
4
31
12 (1 batch/1 product not
batched)
0
0277
Phenmedipham
16
31
96 (16 products not batched)
0
2570
Pyrazon
3
31
18 (3 products not batched)
0
8
EPA's FY 2005 Annual FIFRA Financial Statements
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Case No.
Case Name
Number of
Products
Covered by
the RED1
Number of
Product
Chemistry
Studies
Required2
Number of Acute Toxicology Studies
Required3
Number of
Efficacy
Studies
Required
2600
Sethoxydim
10
31
48 (1 batch/7 not batched)
0
2295
Tau-Fluvalinate
5
31
Not Completed Yet.
5
4092
Thidiazuron
18
31
Not Completed Yet
0
3144
Trichloromelamine
8
PDCI has not
been
completed
yet.
36 (1 batch/5 not batched)
PDCI has
not been
completed
yet.
3020
Xylene
5
31
Not Completed Yet
0
Total No. of Products
1150
1 The number of registered products containing a pesticide active ingredient can change over time. The
product total that appears in the RED document (counted when the RED is signed) may be different than the
number of products that EPA is tracking for product reregistration (counted later, when the RED is issued).
This table reflects the final number of products associated with each RED, as they are being tracked for
product reregistration.
This column shows the number of product chemistry studies that are required for each product covered by
the RED.
In an effort to reduce the time, resources, and number of animals needed to fulfill acute toxicity data
requirements, EPA "batches" products that can be considered similar from an acute toxicity standpoint. For
example, one batch could contain five products. In this instance, if six acute toxicology studies usually were
required per product, only six studies (rather than 30 studies) would be required for the entire batch. Factors
considered in the sorting process include each product's active and inert ingredients (e.g., identity, percent
composition, and biological activity), type of formulation (e.g., emulsifiable concentrate, aerosol, wettable
powder, granular, etc.), and labeling (e.g., signal word, use classification, precautionary labeling, etc.). The
Agency does not describe batched products as "substantially similar," because all products within a batch may
not be considered chemically similar or have identical use patterns. (Note: FIFRA Section 24(c) or Special
Local Need (SLN) registrations are not included in acute toxicity batchings because they are supported by a
valid parent product (Section 3) registration.)
Special Local Need (SLN) or Section 24(c) products are not included in the acute toxicity
batching. These products have a parent product; therefore, acute toxicity data do not need to be
generated for these SLN or Section 24(c) products.
There are special cases where product-specific data call-ins may be required for TREDs,
particularly if the Agency believes that adequate product chemistry or acute toxicity data are not
currently on file to support the reregistration of the products associated with the TREDs. The
Agency is requiring a product-specific data call-in for the following TRED:
9
EPA's FY 2005 Annual FIFRA Financial Statements
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Table 2. Data Call-In Issued to Support Product Reregi strati on for FY 2005 TRED
Case No.
Case Name
Number of
Products
Covered by
the TRED1
Number of
Product
Chemistry
Studies
Required2
Number of Acute Toxicology
Studies Required3
Number of
Efficacy
Studies
Required
2285
Fluazifop-p-butyl
35
31
84 (4 batches/10 not batched)
0
Total No. of Products
35
1 The number of registered products containing a pesticide active ingredient can change over time. The
product total that appears in the TRED document (counted when the TRED is signed) may be different
than the number of products that EPA is tracking for product reregistration (counted later, when the
TRED is issued). This table reflects the final number of products associated with each TRED, as they are
being tracked for product reregistration.
This column shows the number of product chemistry studies that are required for each product covered
by the TRED.
In an effort to reduce the time, resources, and number of animals needed to fulfill acute toxicity data
requirements, EPA "batches" products that can be considered similar from an acute toxicity standpoint.
For example, one batch could contain five products. In this instance, if six acute toxicology studies
usually were required per product, only six studies (rather than 30 studies) would be required for the
entire batch. Factors considered in the sorting process include each product's active and inert ingredients
(e.g., identity, percent composition, and biological activity), type of formulation (e.g., emulsifiable
concentrate, aerosol, wettable powder, granular, etc.), and labeling (e.g., signal word, use classification,
precautionary labeling, etc.). The Agency does not describe batched products as "substantially similar,"
because all products within a batch may not be considered chemically similar or have identical use
patterns. (Note: FIFRA Section 24(c) or Special Local Need (SLN) registrations are not included in acute
toxicity batchings because they are supported by a valid parent product (Section 3) registration.)
Special Local Need (SLN) or Section 24(c) products are not included in the acute toxicity
batching. These products have a parent product; therefore, acute toxicity data do not need to be
generated for these SLN or Section 24(c) products.
Measure 5: Future Schedule for Reregistrations.
Results: EPA is now conducting reregistration in conjunction with tolerance
reassessment under FQPA. That law requires the Agency to reassess all existing tolerances over
a ten year period to ensure consistency with the new safety standard, and to consider pesticides
that appear to pose the greatest risk first. The organophosphate (OP) pesticides thus have been
the focal point of EPA 's reregistration and tolerance reassessment programs for several years
(see List 1).
10
EPA's FY 2005 Annual FIFRA Financial Statements
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List 1. The Organophosphate Pesticides
Organophosphate Pesticides with Decisions Pending
Dichlorvos (DPVP) Dimethoate Malathion
Organophosphate Pesticides with Individual Decisions Completed
Acephate
Dicrotophos
Methidathion
Pirimiphos methyl
Azinphos-methyl
Disulfoton
Methyl parathion
Profenofos
Bensulide
Ethion
Mevinphos
Propetamphos
Cadusafos
Ethoprop
Naled
Sulfotepp
Chlorethoxyfos
Ethyl Parathion
Oxydemeton-methyl
Temephos
Chlorpyrifos
Fenamiphos
Phorate
Terbufos
Chlorpyrifos methyl
Fenitrothion
Phosalone
Tetrachlorvinphos
Coumaphos
Fenthion
Phosmet
Tribufos (DEF)
Diazinon
Methamidophos
Phostebupirim
Trichlorfon
EPA currently is reviewing each of the OP pesticides with individual decisions pending,
and expects to complete risk assessments and interim risk management decisions for these three
pesticides in FY 2006.
11
EPA's FY 2005 Annual FIFRA Financial Statements
-------
List 2. Fiscal Year 2006 Candidates for Decisions
FY 2006 RED, IRED, and TRED Candidate Pesticides
ADBAC
Aliphatic alkyl quarternaries
Aliphatic solvents
Alkylbenzene sulfonates
Cacodylic acid
Chlorine dioxide
Copper compounds II
Copper salts
Copper sulfate
Cypermethrin
Dicamba
Dichloran (DCNA)
Ethylene oxide
Glutaraldehyde
RED Candidates
Imazapyr
Inorganic chlorates
Inorganic sulfites
Iodine
MCPB
Metaldehyde
Methanearsonic acid, salts
(DSMA, MSMA, CAMA)
Methyl bromide
Mehtyldithiocarbamate salts
(metam sodium/potassium)
MGK-264
Mineral acids, weak (sodium
carbonate) [previously counted
as cancelled]
MITC
PCNB
Permethrin
2-Phenylphenol and salts
Phytophtora citrophthora
(Phytophtora palmivora)
Piperonyl butoxide
Propiconazole
Propylene oxide
Pyrethrins
Resmethrin
Rotenone
Salicylic acid
Sodium carbonate
TCMB
Triadimefon
Aldicarb
Carbofuran
IRED Candidates
Dichlorvos (DDVP)
Dimethoate
Formetanate HC1
Malathion
Simazine
TRED Candidates
Acetochlor
Amitraz
Azadirachitin
Benzaldehyde
Bitertanol
Boric acid group
CP enolpyruvylshikimate-3-phosphate
Ethephon
Fomesafen
Imazaquin
Neomycinphosphotransferase II
Oxytetracycline
Propazine
Sodium Cyanide
Streptomycin
Triadimenol
Tridemorph
12
EPA's FY 2005 Annual FIFRA Financial Statements
-------
PRINCIPAL
FINANCIAL STATEMENTS
13
EPA's FY 2005 Annual FIFRA Financial Statements
-------
TABLE OF CONTENTS
Financial Statements
Balance Sheet
Statement of Net Cost
Statement of Changes in Net Position
Statement of Budgetary Resources
Statement of Financing
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balances with Treasury
Note 3. Other Assets - Advances to Working Capital Fund
Note 4. Other Liabilities
Note 5. Payroll and Benefits Payable, non-Federal
Note 6. Income and Expenses from Other Appropriations
Note 7. Exchange Revenues, Statement of Net Cost
14
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
FIFRA
Balance Sheet
As of September 30, 2005 and 2004
(Dollars in Thousands)
FY 2005 FY 2004
ASSETS
Intragovernmental
Fund Balance With Treasury (Note 2) $ 7,941 $ 4,881
Other (Note 3) 1,489 620
Total Intragovernmental $ 9,430 $ 5,501
Accounts Receivable, Net 1_
Total Assets $ 9,430 $ 5,502
LIABILITIES
Intragovernmental
Accounts Payable & Accrued Liabilities $ 319 $ 115
Other (Note 4) 226_ 195
Total Intragovernmental $ 545 $ 310
Accounts Payable & Accrued Liabilities 88 16
Payroll & Benefits Payable (Note 5) 3,292 3,348
Other (Note 4) 8,509 4,348
Total Liabilities $ 12,434 $ 8,022
NET POSITION
Cumulative Results of Operations (3,004) (2,520)
Total Net Position (3,004) (2,520)
Total Liabilities and Net Position $ 9,430 $ 5,502
15
The accompanying notes are an integral part of these statements.
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
FIFRA
Statement of Net Cost
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)
COSTS
Intragovernmental
With the Public
Expenses from Other Appropriations (Note
Total Costs
Less:
Earned Revenues, Federal (Note 7)
Earned Revenues, Non-Federal (Note 7)
Total Earned Revenues
NET COST OF OPERATIONS
FY 2005
FY 2004
$
7,038
$
6,061
19,025
18,260
50,511
40,895
$
76,574
$
65,216
$
315
$
72
23,539
22,145
$
23,854
$
22,217
$
52,720
$
42,999
16
The accompanying notes are an integral part of these statements.
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
FIFRA
Statement of Changes in Net Position
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)
FY 2005 FY 2004
Net Position - Beginning of Period $ (2,520) $ (2,114)
Budgetary Financing Sources:
Income from Other Appropriations (Note 6) 50,511 40,895
Total Budgetary Financing Sources $ 50,511 $ 40,895
Other Financing Sources:
Imputed Financing Sources 1,725 1,495
Other - Unfunded Annual Leave Transfer (Note 5) - 203
Total Other Financing Sources $ 1,725 $ 1,698
Net Cost of Operations (52,720) (42,999)
Net Change (484) (406)
Net Position - End of Period $ (3,004) $ (2,520)
17
The accompanying notes are an integral part of these statements.
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
FIFRA
Statement of Budgetary Resources
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)
FY 2005 FY 2004
BUDGETARY RESOURCES
Unobligated Balances:
Beginning of Period $ 2,532 $ 890
Spending Authority from Offsetting Collections:
Earned and Collected 23,857 22,220
Advance Received 4,159 4,129
Total Spending Authority from Collections $ 28,016 $ 26,349
Recoveries of Prior Year Obligations 101 40
Total Budgetary Resources $ 30,649 $ 27,279
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Reimbursable $ 25,663 $ 24,747
Unobligated Balances:
Apportioned 4,986 2,532
Total Status of Budgetary Resources $ 30,649 $ 27,279
RELATIONSHIP OF OBLIGATIONS TO
OUTLAYS
Obligations Incurred, Net $ (2,454) $ (1,642)
Obligated Balances, Net - Beginning of Period 2,348 904
Undelivered Orders, Unpaid (1,419) (1,197)
Accounts Payable (1,533) (1,151)
Total Outlays $ (3,058) $ (3,086)
Disbursements $ 24,958 $ 23,263
Collections (28,016) (26,349)
Net Outlays $ (3,058) $ (3,086)
The accompanying notes are an integral part of these statements.
18
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
Statement of Financing
FIFRA
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)
FY 2005
FY 2004
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred
$ 25,663
$ 24,747
Less: Spending Authority from Offsetting
Collections and Recoveries
(28,117)
(26,389)
Obligations, Net of Offsetting Collections
$ (2,454)
$ (1,642)
Other Resources
Imputed Financing Sources
$ 1,725
$ 1,495
Income from Other Appropriations (Note 6)
50,511
40,895
Net Other Resources Used to Finance Activities
$ 52,236
$ 42,390
Total Resources Used To Finance Activities
$ 49,782
$ 40,748
RESOURCES USED TO FINANCE ITEMS
NOT PART OF NET COST OF OPERATIONS
Change in Budgetary Resources Obligated for Goods
$ 3,069
$ 2,162
Resources that Fund Prior Period Expenses
(132)
-
Total Resources Used to Finance Items Not
Part of the Net Cost of Operations
$ 2,937
$ 2,162
Total Resources Used to Finance the Net
Cost of Operations
$ 52,719
$ 42,910
COMPONENTS OF NET COST OF OPERATIONS
THAT WILL NOT REQUIRE OR GENERATE
RESOURCES IN THE CURRENT PERIOD
Components Requiring or Generating Resources in
Future Periods:
Increase in Annual Leave Liability (Note 5)
$
$ 91
Total Components of Net Cost of Operations that
Requires or Generates Resources in the Future
$
$ 91
Expenses Not Requiring Budgetary Resources
1
(2)
Net Cost of Operations $ 52,720 $ 42,999
19
The accompanying notes are an integral part of these statements.
EPA's FY 2005 Annual FIFRA Financial Statements
-------
Environmental Protection Agency
FIFRA
Notes to Financial Statements
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies:
A. Basis of Presentation
These financial statements have been prepared to report the financial position and results of
operations of the Environmental Protection Agency (EPA) for the Reregi strati on and Expedited
Processing (FIFRA) Revolving Fund as required by the Chief Financial Officers Act of 1990.
The reports have been prepared from the books and records of EPA in accordance with Financial
Reporting Requirements, Office of Management and Budget (OMB) Circular A-136 and EPA's
accounting policies which are summarized in this note. These statements are therefore different
from the financial reports also prepared by EPA pursuant to OMB directives that are used to
monitor and control EPA's use of budgetary resources.
B. Reporting Entity
EPA 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.
FIFRA was authorized in 1988 by amendments to the Federal Insecticide, Fungicide and
Rodenticide Act. The 1988 amendments mandated the accelerated reregi strati on of all products
registered prior to November 1, 1984. Congress authorized the collection of fees to supplement
appropriations to fund re-registration and to fund expedited processing of pesticides. FIFRA also
includes provisions for the registration of new pesticides, monitoring the distribution and use of
pesticides, issuing civil or criminal penalties for violations, establishing cooperative agreements
with the states, and certifying training programs for users of restricted chemicals. Appropriated
funds, however, pay for these activities. The FIFRA Revolving Fund is accounted for under
Treasury symbol number 68X4310.
FIFRA may charge some administrative costs directly to the fund and charge the remainder of
the administrative costs to Agency wide appropriations. Costs funded by Agency wide
appropriations for FYs 2005 and 2004 were $50,511 thousand and $40,895 thousand,
respectively. These amounts were included as Income from Other Appropriations on the
Statements of Changes in Net Position and Financing and as Expenses from Other
Appropriations on the Statement of Net Cost.
20
EPA's FY 2005 Annual FIFRA Fund Financial Statements
-------
C. Budgets and Budgetary Accounting
Funding of the FIFRA Revolving Fund is provided by fees collected from industry to offset costs
incurred by EPA in carrying out these programs. Each year EPA submits an apportionment
request to OMB based on the anticipated collections of industry fees.
D. Basis of Accounting
Transactions are recorded on an accrual accounting basis and a budgetary basis. Under the
accrual method, revenues are recognized when earned and expenses are recognized when a
liability is 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
For FYs 2005 and 2004, FIFRA received funding from fees collected for registration, re-
registration and from interest collected on investments in U.S. Government securities. However,
after September 30, 2002 the Agency no longer has the authority to collect Reregi strati on
Maintenance Fees. For FYs 2005 and 2004 revenues were recognized from fee collections to the
extent that expenses are incurred during the fiscal year.
F. Funds with the Treasury
FIFRA deposits receipts and processes disbursements through its operating account maintained
at the U.S. Department of Treasury. Cash funds in excess of immediate needs, are invested in
U.S. Government securities.
G. Investments in U. S. Government Securities
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. FIFRA holds the investments to maturity, unless
needed to finance operations of the fund. No provision is made for unrealized gains or losses on
these securities because, in the majority of cases, they are held to maturity.
H. Accounts Receivable and Interest Receivable
FIFRA receivables are mainly for interest receivable on investments.
21
EPA's FY 2005 Annual FIFRA Fund Financial Statements
-------
I. Liabilities
Liabilities represent the amount of monies or other resources that are likely to be paid by EPA as
the result of a transaction or event that has already occurred. However, no liability can be paid
by EPA 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. For FIFRA, liabilities are liquidated from
fee receipts and interest earnings, since FIFRA receives no appropriation. Liabilities of EPA,
arising from other than contracts, can be abrogated by the Government acting in its sovereign
capacity.
J. Annual, Sick and Other Leave
Annual, sick and other leave is expensed as taken during the fiscal year. Sick leave earned but
not taken is not accrued as a liability. Annual leave earned but not taken as of the end of the
fiscal year is accrued as an unfunded liability. Accrued unfunded annual leave is included in the
Balance Sheet as a component of "Payroll and Benefits Payable."
K. Retirement Plan
There are two primary retirement systems for federal employees. Employees hired prior to
January 1, 1984, may participate in the Civil Service Retirement System (CSRS). 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, elected to either join FERS and Social
Security or remain in CSRS. A primary feature of FERS is that it offers a savings plan to which
the Agency automatically contributes one percent of pay and matches any employee
contributions up to an additional four percent of pay. The Agency also contributes the
employer's matching share for Social Security.
With the issuance of "Accounting for Liabilities of the Federal Government" (SFFAS No.5),
accounting and reporting standards were established for liabilities relating to the Federal
employee benefit programs (Retirement, Health Benefits and Life Insurance). SFFAS No. 5
requires employing agencies to recognize the cost of pensions and other retirement benefits
during their employees' active years of service. SFFAS No. 5 requires that the Office of
Personnel Management, as administrator of the CSRS, the FERS, the Federal Employees Health
Benefits Program, and the Federal Employees Group Life Insurance Program, provide EPA with
the 'cost factors' to compute EPA's liability for each program.
22
EPA's FY 2005 Annual FIFRA Fund Financial Statements
-------
Note 2. Fund Balances with Treasury:
FY 2005 FY 2004
Revolving Funds: Entity Assets $7.941 $ 4.881
Note 3. Other Assets - Advances to Working Capital Fund
FIFRA advances funds to the EPA's Working Capital Fund to pay for computer, postage, and
other administrative support services. As of September 30, 2005 and 2004, funds advanced that
will be applied to future costs as incurred were $1,489 thousand and $620 thousand, respectively.
Note 4. Other Liabilities:
For FYs 2005 and 2004, the Payroll and Benefits Payable, non-Federal, are presented on a
separate line of the Balance Sheet and in a separate footnote (see Note 4 below).
FY 2005 FY 2004
Other Intragovernmental Liabilities - Covered by Budgetary Resources
Employer Contributions - Payroll $ 226
Total $ 226
Other Non-Federal Liabilities - Covered by Budgetary Resources
Advances to Non-Federal Entities $ 8.509
Total $ 8,509
$
195
$
195
$
4.348
$
4,348
23
EPA's FY 2005 Annual FIFRA Fund Financial Statements
-------
Note 5. Payroll and Benefits Payable, non-Federal:
FY 2005 FY 2004
Covered by Budgetary Resources
Accrued Payroll Payable to Employees $ 546 $ 540
Withholdings Payable 478 413
Thrift Savings Plan Benefits Payable 34 28
Total $ 1,058 $ 981
FY 2005 FY 2004
Not Covered by Budgetary Resources
Unfunded Annual Leave Liability - $ 2,367 $ 2,479
Beginning of the Year
Amounts Transferred to PRIA (a) - (203)
Unfunded Annual Leave Expense (133) $ 91
Unfunded Annual Leave Liability - End
of the Year $ 2,234 $ 2,367
(a) In FY 2004, certain employees were transferred to the new PRIA fund, the unfunded leave liability
associated with those employees was approximately $203 thousand.
At various periods throughout FYs 2005 and 2004, employees with their associated payroll costs
were transferred from the FIFRA fund to the Environmental Programs and Management (EPM)
appropriation. (See graph in Note 6 below showing trend of hours charged per month to the
FIFRA fund for FYs 2005 and 2004.) These employees were transferred in order to keep
FIFRA's obligations and disbursements within budgetary and cash limits. When resources
became available, the employees charging to FIFRA increased in order to utilize resources as
much as possible. The Agency expects that the practice of transferring employees when
FIFRA's resources are low, and restoring employees when funds become available, will continue
throughout FY 2005 and probably beyond that period.
This process has led to variations between the year-end liabilities of FYs 2005 and 2004. The
liabilities covered by budgetary resources (both intragovernmental and non-Federal) represent
unpaid payroll and benefits at year-end. At the end of FY 2005, about 346 employees were
charging all or part of their salary and benefits to FIFRA. As of September 30, 2005 these
24 EPA's FY 2005 Annual FIFRA Fund Financial Statements
-------
liabilities were $226 thousand and $1,058 thousand for employer contributions and accrued
funded payroll and benefits, as compared to FY 2004's balances of $195 thousand and $981
thousand, respectively.
In contrast, the unfunded annual leave liability is a longer term liability than the funded
liabilities. At various periods throughout FYs 2005 and 2004, approximately 185 employees in
total have been under FIFRA's accountability. Therefore both the September 30, 2005 and 2004
liability balances for unfunded annual leave were accrued to cover these 185 employees for a
total of $2,234 thousand and $2,367 thousand, respectively.
Note 6. 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 FYs 2005 and 2004, EPA had two appropriations which funded a variety of
programmatic and non-programmatic activities across the Agency, subject to statutory
requirements. The EPM appropriation was created to fund personnel compensation and benefits,
travel, procurement, and contract activities. Transfers of employees from FIFRA to EPM at
various times during these years (see Note 5 above) resulted in an increase in payroll expenses in
EPM, and these costs financed by EPM are reflected as an increase in the Expenses from Other
Appropriations on the Statement of Net Cost. The increased financing from EPM is reported on
the Statement of Changes in Net Position as Income from Other Appropriations.
In terms of hours charged to FIFRA each month, the transfers of employees and their associated
costs during FYs 2005 and 2004 are shown below. Note that a decrease in hours charged to
FIFRA normally signifies an increase in EPM's payroll costs, and vice versa. In addition,
Pesticide was separated from FIFRA starting with FY 2004 and Pesticide has its own set of
financial statements.
25
EPA's FY 2005 Annual FIFRA Fund Financial Statements
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FIFRA Payroll Hours Per Month
^ 70,000 n
& 60,000
CO
O 50,000
^ 40,000
o
x 30,000
•g '
5 20,000
E 10,000
s
2 0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Months
FY05 Hours
FY 04 Hours
All of the expenses from EPM were distributed among EPA's two Reporting Entities: Superfund
and All Other (includes FIFRA). 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 FIFRA's Net Position.
Income from Other
Appropriations
FY 2005
FY 2004
50.511
$ 40.895
Expenses from Net
Other Effect
Appropriations
$ 50.511 $ 0
$ 40.895 $_0
Note 7. Exchange Revenues, Statement of Net Cost
For FYs 2005 and 2004, the exchange revenues reported on the Statement of Net Cost are
separated into Federal and non-Federal portions.
26
EPA's FY 2005 Annual FIFRA Fund Financial Statements
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Appendix B
Full Text of Agency Response
August 24, 2006
MEMORANDUM
SUBJECT: Draft Audit Report
Fiscal 2005 and 2004 Financial Statements for the Pesticides Reregi strati on and
Expedited Processing Fund
Assignment No. 2005-000614
FROM: Milton Brown, Director /s/
Office Financial Services (2734R)
Aracely Nunez-Mattocks
Washington Finance Center (2734R)
TO: Paul Curtis
Director, Financial Statement Audits (2422T)
This is in response to your memorandum of July 19, 2006, which contained a draft report on the
audit of the U.S. Environmental Protection Agency's Fiscal 2005 and 2004 Financial Statements
for the Pesticides Reregi strati on and Expedited Processing Fund, conducted by the EPA Office
of Inspector General (OIG).
We concur with the factual accuracy of the draft report and concur with the finding and proposed
recommendation. The Washington Finance Center(WFC), Accounting and Reporting Section
staff has been provided, via email, a copy of Comptroller Policy Announcement 93-02,
reiterating what the Agency's policy is for recording financial transactions in the accounting
system (IFMS). The Accounting and Reporting Section has updated the WFC desk procedures
to include the maintenance of adequate source documentation when adjustments/corrected
entries are made to transactions that are already entered into IFMS. Furthermore, WFC staff will
include an adjustment control sheet to document the reason for the adjustment/correction
transaction (s), and a separate staff person will be assigned to review, and approve the
transaction(s).
If you have any questions or need additional information, please call Sheila Bullock at (202)564-
5202 or Aracely Nunez-Mattocks at (202) 564-4864.
cc: Lyons Gray
Maryann Froehlich
Raffael Stein
Lorna McAllister
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Appendix C
Distribution
Office of the Administrator
Agency Followup Official (the CFO)
Deputy Chief Financial Officer
Agency Followup Coordinator
General Counsel
Director, Office of Pesticide Programs
Deputy Director, Office of Pesticide Programs
Director, Biopesticides and Pollution Prevention Division
Director, Special Review and Reregi strati on Division
Director, Registration Division
Director, Antimicrobials Division
Director, Information Technology and Resources Management Division
Director, Office of Financial Management
Director, Office of Financial Services
Director, Washington Finance Center
Director, Reporting and Analysis Staff
Director, Financial Policy and Planning Staff
Audit Followup Coordinator, Office of Prevention, Pesticides and Toxic Substances
Audit Followup Coordinator, Office of the Chief Financial Officer
Audit Liaison, Washington Finance Center
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Acting Inspector General
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