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At a Glance
Catalyst for Improving the Environment
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act, which
requires EPA to prepare, and the
Office of Inspector General to
audit, the Agency's financial
statements each year. Our
primary objectives were to
determine whether
•	EPA's consolidated financial
statements were fairly
presented in all material
respects.
•	EPA's internal controls over
financial reporting were in
place.
•	EPA management complied
with applicable laws and
regulations.
Background
The requirement for audited
financial statements was enacted
to help bring about improvements
in agencies' financial
management practices, systems,
and controls so that timely,
reliable information is available
for managing Federal programs.
For further information, contact
our Office of Congressional and
Public Liaison at (202) 566-2391.
To view the full report, click on the
following link:
www.epa.qov/oiq/reports/2006/
20051114-2006-1 -00015.pdf
Audit of EPA's Fiscal 2005 and 2004
Consolidated Financial Statements
EPA Receives Unqualified Opinion
We rendered an unqualified, or clean, opinion on EPA's Consolidated Financial
Statements for fiscal 2005 and 2004, meaning that they were fairly presented
and free of material misstatement.
Internal Control Reportable Conditions Noted
EPA converted to a new payroll system in fiscal 2005. While EPA was able to
resolve many issues arising from the conversion, we noted several reportable
conditions. Most significantly, EPA made inappropriate payments to separated
(transferred, retired, or resigned) employees and made excess salary payments
to current employees. These conditions occurred because EPA's automated
controls and manual processes were not effective in identifying and preventing
these overpayments, or alerting EPA officials to take corrective actions in a
timely manner.
In addition to these conditions, we noted seven other reportable conditions
including overstated State Superfund Contract unearned revenue and unbilled
Superfund oversight costs, improperly adjusted general ledger accounts,
inadequate documentation for adjustments made to entries in EPA's Integrated
Financial Management System (IFMS), and uncorrected data that IFMS
rejected.
Noncompliance With Laws and Regulations Noted
The Agency still is in noncompliance with laws and regulations relating to
implementing the cost accounting standard and reconciling intragovernmental
transactions, though we do not consider EPA to be in substantial
noncompliance.
Agency Comments and Office of Inspector General Evaluation
In a memorandum received on November 10, 2005, from the Chief Financial
Officer, the Agency agreed with the issues raised and stated it has begun to
evaluate the best methods to address each issue to achieve a timely resolution.

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