$
<
73
\
^0STA%
(J
'¦*> J
pRQl^
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Fiscal Year 2006 and 2005
Financial Statements for the
Pesticide Registration Fund
Report No. 2007-1-00071
May 30, 2007
-------
Report Contributors: Paul Curtis Ethel Lowery
Wanda Whitfield Sheila May
Bill Samuel Javier Negron
Sheree Brice Demetrios Papakonstantinou
Diane Forrest Cynthia Poteat
Carol Kwok Phil Weihrouch
Abbreviations
CFC
Cincinnati Finance Center
EPA
U.S. Environmental Protection Agency
FMFIA
Federal Managers' Financial Integrity Act
FMSD
Facilities Management and Services Division
GAD
Grants Administration Division
GAO
Government Accountability Office
IAG
Interagency Agreement
IFMS
Integrated Financial Management System
OARM
Office of Administration and Resources Management
OIG
Office of Inspector General
OMB
Office of Management and Budget
OPP
Office of Pesticide Programs
PRIA
Pesticide Registration Improvement Act
WFC
Washington Finance Center
-------
<
i
?
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2007-1-00071
May 30, 2007
Catalyst for Improving the Environment
Why We Did This Audit
The Pesticide Registration
Improvement Act (PRIA)
requires that we perform an
annual audit of the Pesticide
Registration Fund (known as
the PRIA Fund) financial
statements, and report findings
and recommendations
resulting from the audit.
Background
To expedite the registration of
certain pesticides, Congress
authorized the U.S.
Environmental Protection
Agency (EPA) to assess and
collect pesticide registration
fees. The fees collected are
deposited into the PRIA Fund.
The Agency is required to
prepare financial statements
that present financial
information about the PRIA
Fund.
Fiscal Year 2006 and 2005 Financial Statements
for the Pesticide Registration Fund
EPA Receives Unqualified Opinion
We rendered an unqualified, or clean, opinion on EPA's Pesticide Registration
Fund financial statements for fiscal years 2006 and 2005, meaning that they were
fairly presented and free of material misstatement.
Internal Control Reportable Condition Noted
EPA did not timely obligate PRIA funds, totaling $100,000, for worker protection
activities.
Noncompliance With Laws and Regulations Noted
We tested compliance with those laws and regulations that could either materially
affect the PRIA 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. However, EPA's not recording $100,000 in
obligations for services performed during fiscal year 2006 was contrary to Title 31,
U.S. Code, Section 1501.
Agency Comments and Office of Inspector General Evaluation
In a memorandum dated April 19, 2007, the Assistant Administrator for
Administration and Resources Management responded to our draft report.
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.aov/oia/reports/2007/
20070530-2007-1 -00071 .pdf
-------
^tDS%
o
I ^S\/2 *
# . . V ¦ I -o
I s UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
^ WASHINGTON, D.C. 20460
'W PROl^
OFFICE OF
INSPECTOR GENERAL
May 30, 2007
MEMORANDUM
SUBJECT: Fiscal Year 2006 and 2005 Financial Statements for the
Pesticide Registration Fund
Report No. 2007-1-00071
FROM: Melissa M. Heist
Assistant Inspector General for Audit
TO: James B. Gulliford
Assistant Administrator for Prevention,
Pesticides, and Toxic Substances
Luis A. Luna
Assistant Administrator for Administration
and Resources Management
Lyons Gray
Chief Financial Officer
Martha Cuppy
Assistant Regional Administrator, Region 7
This is our report on the audit of the U.S. Environmental Protection Agency's (EPA's) fiscal
year 2006 and 2005 financial statements for the Pesticide Registration 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 $249,000.
-------
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days of the date of this report. You should include a corrective action
plan for each recommendation that includes milestone dates.
If you or your staff have any questions regarding this report, please contact me at (202) 566-0899
or Heist.Melissa@epa.gov. or Paul Curtis at (202) 566-2523 or Curtis.Paul@epa.gov.
-------
Fiscal Year 2006 and 2005 Financial Statements for the
Pesticide Registration Fund
Table of Contents
Inspector General's Report on the Fiscal Year 2006 and 2005
Financial Statements for the Pesticide Registration Fund
Opinion on the PRIA 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 5
Agency Comments and OIG Evaluation 5
Attachments
1 Reportable Condition 6
Worker Protection Funds Not Obligated Timely 7
2 Compliance with Laws and Regulations 9
EPA Did Not Comply with U.S. Code for Recording Obligations 10
3 Status of Recommendations and Potential Monetary Benefits 12
Appendices
A Fiscal Year 2006 and 2005 PRIA Financial Statements
B Full Text of Agency Response
C Distribution
-------
Inspector General's Report on the
Fiscal Year 2006 and 2005 Financial Statements
for the Pesticide Registration Fund
The Administrator
U.S. Environmental Protection Agency
We have audited the Pesticide Registration Fund (known as the PRIA Fund) balance sheet as of
September 30, 2006 and 2005, and the related statements of net cost, changes in net position,
budgetary resources, and financing for the years 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 No. 06-03, 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.
As discussed in Note I.K., the Agency changed the manner in which it classified and reported
amounts for offsetting receipts in fiscal year 2006 to comply with OMB Circular No. A-136,
Financial Reporting Requirements. OMB Circular No. A-136 also does not require the
restatement of prior year (fiscal year 2005) financial statements. Accordingly, the 2006 financial
statements are not comparative with 2005 as they pertain to reporting offsetting receipts.
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 PRIA fund, as of and for the years ended September 30, 2006 and 2005, in accordance
with accounting principles generally accepted in the United States of America.
1
-------
Evaluation of Internal Controls
As defined by OMB Bulletin No. 06-03, internal control, as it relates to the financial statements,
is a process, affected 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 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.
In planning and performing our audit, we considered EPA's internal control over PRIA financial
reporting by obtaining an understanding of the Agency's internal controls. We determined
whether internal controls have been placed in operation, assessing control risk, and performing
tests of controls in order to determine our auditing procedures for the purpose of expressing an
opinion on the financial statements. We limited our internal control testing to those controls
necessary to achieve the objectives described in OMB Bulleting No. 06-03. 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 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.
06-03. 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.
2
-------
Material Weaknesses
Material weaknesses, as defined by OMB Bulletin No. 06-03, are 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 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. We noted certain matters discussed
below involving operations that we consider a reportable condition and noncompliance issue,
although we do not believe they are material weaknesses.
Reportable Conditions
OMB Bulletin No. 06-03 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 year
2006, we identified one reportable condition.
During fiscal year 2006, EPA did not timely obligate $100,000 in PRIA funds for worker
protection activities. In two instances, EPA received goods ordered prior to obligating and
expending the funds. The Government Accountability Office's (GAO's) Standards for Internal
Controls in the Federal Government require accurate and timely recording of transactions and
events. The Office of Pesticide Programs (OPP) committed the funds for these transactions.
However, the funds were not recorded as obligations timely due to a delay by Region 7 and the
Grants Administration Division (GAD) in providing documentation to the Cincinnati Finance
Center (CFC). When obligations are not recorded timely, it increases the risk for inaccurate or
incomplete information in the Agency's accounting system, the Integrated Financial
Management System (IFMS). Accordingly, it impacts the quality and reliability of financial data
available to manage EPA's resources.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 06-03 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.
Our audit did not disclose any material weaknesses, nor were any reported by the Agency as part
of the Integrity Act process.
3
-------
Tests of Compliance with Laws and Regulations
In accordance with PRIA, the Administrator is required to publish a schedule of decision review
periods for pesticide registration actions and corresponding registration fees in the Federal
Register. Decision time review periods are specified time limits for the Agency to grant or deny
pesticide registrations. The Act also requires the OIG to perform an analysis of the Agency's
compliance with decision time review periods. The Agency was in substantial compliance with
the statutory decision time frames.
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 PRIA 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. However, our tests
of laws and regulations disclosed the following noncompliance issue that we considered to be
significant to the audit.
EPA Did Not Comply with U.S. Code for Recording Obligations
During fiscal year 2006, EPA did not record $100,000 in obligations for services performed
during the year. Title 31, U.S. Code, Section 1501 requires that the obligation be recorded when
there is documentary evidence of a binding agreement or order between an agency and another
party. OPP committed the funds for these transactions. However, the funds were not obligated
timely due to a delay by Region 7 and GAD in providing documentation to CFC. Because the
funds were not recorded as obligations until fiscal year 2007, obligations were understated in the
fiscal year 2006 PRIA financial statements. Failure to promptly record obligations could result
in a violation of the Anti-Deficiency Act.
Overview Section of the Financial Statements
Our audit work related to the information presented in Management's Overview and Analysis of
the Pesticide 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.
4
-------
Prior Audit Coverage
During previous financial or financial-related audits, we reported the following reportable
conditions:
¦ We identified a weakness in the Agency's documentation of adjustments to IFMS entries.
¦ We could not assess the adequacy of IFMS automated controls.
¦ We identified a weakness in the Agency's preparation and quality control of the financial
statements and footnotes.
The Agency began corrective action to improve documentation of adjusting and correcting
entries in IFMS. EPA's Washington Finance Center (WFC) updated its procedures to include
maintaining adequate source documentation when adjusting and correcting entries are made to
transactions already entered in IFMS. WFC staff will include an adjustment control sheet to
document the reason for the adjustments and corrections. In addition, a separate staff person will
be assigned to review and approve the transactions (,Fiscal 2005 and 2004 (restated) Financial
Statements for the Pesticide Registration Fund, Audit Report 2007-1-00002).
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 2006 and 2005 Consolidated
Financial Statements, Audit Report 2007-1-00019). In addition, EPA recognizes the importance
of properly reviewing the financial statements, including the footnotes, supplemental
information, and overview, prior to release or submittal for audit. EPA strengthened its quality
control and review procedures for the financial statement documents.
In a memorandum dated April 19, 2007, the Assistant Administrator for Administration and
Resources Management responded to our draft report. The rationale for our conclusions and a
summary of the Agency comments are included in the appropriate sections of this report, and the
Agency's complete response is included in Appendix B to this report.
This report is intended solely for the information and use of the management of EPA, OMB, and
Congress, and is not intended to be and should not be used by anyone other than these specified
parties.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
May 16, 2007
Agency Comments and OIG Evaluation
5
-------
Attachment 1
Reportable Condition
Table of Contents
1 - Worker Protection Funds Not Obligated Timely 7
6
-------
1 - Worker Protection Funds Not Obligated Timely
During fiscal year 2006, EPA did not timely obligate $100,000 in PRIA funds for worker
protection activities. In two instances, EPA received goods ordered prior to obligating and
expending the funds. The GAO Standards for Internal Controls in the Federal Government
require accurate and timely recording of transactions and events. OPP committed the funds for
these transactions. However, the funds were not recorded as obligations timely due to a delay by
Region 7 and GAD in providing documentation to CFC. When obligations are not recorded
timely, it increases the risk for inaccurate or incomplete information in IFMS. Accordingly, it
impacts the quality and reliability of financial data available to manage EPA's resources.
The GAO Standards for Internal Controls in the Federal Government state that "transactions
should be promptly recorded to maintain their relevance and value to management in controlling
operations and making decisions. This applies to the entire process or life cycle of a transaction
or event from the initiation and authorization through its final classification in summary
records."
EPA Comptroller Policy Announcement No. 86-09, Requirements for Timely Posting of Agency
Obligations, establishes policies and procedures that the Agency must comply with to ensure
prompt recording of obligations. It states that "each program and administrative office is
responsible for establishing supplementary procedures to ensure prompt processing of documents
under its control from initiation to the point of obligation." Individuals with obligational
authority are responsible for ensuring that the valid obligating document or, alternatively, written
evidence is received by the servicing finance office. In addition, the policy requires that data be
recorded in IFMS as promptly as possible after authorized officials take action in order to report
accurately and timely on funds status and other financial results of Agency activities.
Funds to support worker protection activities for three transactions, totaling $100,000, were not
obligated timely. EPA issued two print requests for the reproduction of worker safety training
materials, totaling $50,000, to the U.S. Government Printing Office. The products from the print
requests were received in fiscal year 2006. However, we learned that the funds for these two
transactions were not obligated until February 8, 2007. The obligation occurred 10 months after
the funds were committed and at least 3 months after the products were received. In addition,
EPA increased funding for an Interagency Agreement (IAGNo. DW-75-92221801-1) with the
Department of Health and Human Services, National Cancer Institute, totaling $50,000. Under
this IAG, the National Cancer Institute is to provide a pesticide health effects data analysis to
EPA. The IAG was signed in fiscal year 2006, but funds were not obligated until February 13,
2007. As of the end of our field work, these transactions had not been paid.
The funds were not recorded as obligations timely due to a delay by Region 7 and GAD in
providing documentation to CFC. Failure to promptly record the obligations increases the risk
for inaccurate or incomplete information in IFMS. Accordingly, it impacts the quality and
reliability of financial data available to manage EPA's resources.
7
-------
Recommendations
We recommend that the Assistant Regional Administrator, Region 7 Office of Policy and
Management:
1-1 Have the Chief, Facilities, Security and Safety Branch, ensure that print orders
placed with the Government Printing Office are promptly forwarded to CFC to
ensure that the obligations are recorded timely in IFMS.
We recommend that the Assistant Administrator for Administration and Resources Management:
1-2 Have the Director, GAD, ensure that IAGs signed by all responsible parties are
promptly forwarded to CFC to ensure that the obligations are recorded timely in
IFMS.
Agency Response and OIG Evaluation
The Office of Administration and Resources Management (OARM) identified Region 7 as the
appropriate organization to respond to Recommendation 1-1 because both printing requisitions
originated in Region 7. Region 7 recognized its responsibility in an informal response and
agreed with our finding and recommendation. OARM agreed with Recommendation 1-2, and
indicated it will review its internal procedures and make any necessary changes to ensure that
funds are obligated timely.
We acknowledge OARM's and Region 7's responses and appreciate their cooperation. We also
note that the ultimate responsibility to monitor and ensure funds are obligated timely rest with
OPP as the organization responsible for oversight of PRIA funds.
8
-------
Attachment 2
Compliance with Laws and Regulations
Table of Contents
2 - EPA Did Not Comply with U.S. Code for Recording Obligations 10
9
-------
2 - EPA Did Not Comply with U.S. Code
for Recording Obligations
During fiscal year 2006, EPA did not record $100,000 in obligations for services performed
during the year. Title 31, U.S. Code, Section 1501 requires that the obligation be recorded when
there is documentary evidence of a binding agreement or order between an agency and another
party. OPP committed the funds for these transactions. However, the funds were not recorded
as obligations timely due to a delay by Region 7 and GAD in providing documentation to CFC.
Because the funds were not recorded as obligations until fiscal year 2007, obligations were
understated in the fiscal year 2006 PRIA financial statements. Failure to promptly record
obligations could result in a violation of the Anti-Deficiency Act.
Title 31, U.S. Code, Section 1501(a) states:
an amount shall be recorded as an obligation of the United States Government
only when supported by documentary evidence of -
(1) a binding agreement between an agency and another person (including
an agency) that is (A) in writing, in a way and form, and for a purpose
authorized by law; and (B) executed before the end of period of
availability for obligation of the appropriation or fund usedfor ...
work or service to be provided; or ...
(3) an order required by law to be placed with an agency...
The GAO Principles of Federal Appropriations Law describe an example of "orders required by
law" as printing and binding to be done by the Government Printing Office (Title 44, U.S. Code,
Section 501). The rule is that a requisition for printing services may be recorded as an obligation
when placed if (1) there is a present need for the printing, and (2) the requisition is accompanied
by copy or specifications sufficient for the Government Printing Office to proceed with the job.
Pursuant to Title 31, U.S. Code, Section 1501, a voluntary interagency order for goods is
recordable as an obligation when the order is placed.
Further, the EPA Resources Management Directives System 2520, Administrative Control of
Appropriated Funds, Chapter 2, requires that accurate and complete documentation be forwarded
immediately to the appropriate Financial Management Officer to record the obligation in IFMS.
EPA did not timely obligate funds to support worker protection activities for three transactions
with documentary evidence, totaling $100,000. The transactions consisted of two print requests
totaling $50,000 and an IAG totaling $50,000. During fiscal year 2006, EPA issued the two print
requests to the Government Printing Office and received the goods in fiscal year 2006. In
addition, EPA increased funding for an IAG with the Department of Health and Human Services,
totaling $50,000, which was signed by all responsible parties in fiscal year 2006. However, the
funds for these transactions were not recorded as obligations in IFMS until February 2007. OPP
committed the funds for these transactions. The breakdown in recording these obligations
occurred in Region 7's and GAD's delay in providing documentation to CFC. After our inquiry,
the transactions were obligated.
10
-------
Because the funds were not recorded as obligations until fiscal year 2007, obligations were
understated in the fiscal year 2006 PRIA financial statements. Failure to promptly record
obligations could result in a violation of the Anti-Deficiency Act.
We are not making further recommendations as implementation of the two preceding
recommendations would address our findings above and ensure adherence to Title 31, U.S.
Code, Section 1501, by providing closer monitoring and oversight of recording obligations.
11
-------
Attachment 3
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
1-1 8 Have the Chief, Facilities, Security and Safety
Branch, ensure that print orders placed with the
Government Printing Office are promptly forwarded
to CFC to ensure that the obligations are recorded
timely in IFMS.
1-2 8 Have the Director, GAD, ensure that lAGs signed
by all responsible parties are promptly forwarded to
CFC to ensure that the obligations are recorded
timely in IFMS.
Planned
Completion
Date
Claimed
Amount
Agreed To
Amount
Assistant Regional
Administrator, Region 7
Office of Policy
and Management
Assistant Administrator for
Administration and
Resources Management
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
12
-------
Appendix A
FYs 2006 and 2005 PESTICIDE REGISTRATION FUND
(PRIA)
FINANCIAL
STATEMENTS
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of Financial Management
-------
TABLE OF CONTENTS
Management's Discussion and Analysis 1
Principal Financial Statements 6
i
EPA's FY 2006 Annual PRIA Financial Statements
-------
Management's Discussion and Analysis
i
EPA's FY 2006 Annual PRIA Financial Statements
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
With passage of the Pesticide Registration Improvement Act (PRIA) of 2003, the
pesticide program now administers the newly established Registration Fund. PRIA authorizes
the collection of new fees for pesticide registrations. Registration service fees are deposited into
the Registration Fund and made available for obligation to the extent provided in appropriation
Acts, and are available without fiscal year limitation.
Pesticide Registration
Under the authority of FIFRA and the Federal Food, Drug, and Cosmetic Act (FFDCA)
as amended by the Food Quality Protection Act (FQPA), no person or State can distribute or sell
any pesticide that is not registered with the Agency. The pesticide registration program works to
decrease the risk to the public from pesticide use through the regulatory review of new
pesticides. In 2004, Congress passed PRIA, with deadlines for completion of certain registration
actions. As part of the registration program, EPA expedites the registration of reduced-risk
pesticide uses, which are generally presumed to pose lower risks to consumers, workers,
groundwater, and/or wildlife. These accelerated pesticide reviews provide an incentive for
industry to develop, register, and use lower risk pesticides. Additionally, the availability of these
reduced-risk pesticides provides alternatives to older, potentially more harmful products
currently on the market.
Biological agents are potential weapons that could be exploited by terrorists against the
United States. EPA's pesticides antimicrobial program is working to help address this threat.
Antimicrobials play an important role in public health and safety. EPA is conducting
comprehensive scientific assessments and developing test protocols to determine the safety and
efficacy of products used against chemical and biological weapons of mass destruction, and
registering products as necessary. EPA is also developing a timeline for prioritizing and
implementing the tests. In addition, the Section 18 program provides emergency exemption to
any part of FIFRA. This authority is typically used by States on an emergency basis. EPA has
recently used this authority to help with homeland security. Section 18 exemptions have been
authorized to help with anthrax and soybean rust.
2
EPA's FY 2006 Annual PRIA Financial Statements
-------
PRIA established registration service fees for certain antimicrobials, biopesticides and
conventional pesticides registration actions. The category of action, the amount of the
registration service fee, and the corresponding decision review periods by year are prescribed in
the statute. The goal is to create a more predictable evaluation process for affected pesticide
decisions, and couple the collection of individual fees with specific decision review periods. The
legislation also promotes shorter decision review periods for reduced-risk applications. The
legislation became effective on March 23, 2004, and the collection of registration fees are
authorized through FY 2008. In order to help ensure a smooth transition (if PRIA is not re-
authorized), PRIA reduces the registration service fees by 40 percent in FY 2009 and then by 70
percent in FY 2010. For any application received after September 30, 2008, but before
September 30, 2010, the reduced registration service fee applies, while the decision review
periods do not.
In order for a pending or a new application covered by PRIA to be deemed complete and
subject to the decision review periods, a registrant is required to pay the applicable fee or receive
a waiver from the fees1. For most applications, the decision review period starts 21 days after
submission of the application - provided it includes the applicable fee and all the necessary
forms, labeling, data requirements, and documents certifying payment of the fee. The legislation
provides fee waivers for certain categories of small businesses, minor uses2, IR-4 petitions3, and
for applications from federal and state agencies. If the registrant requests a waiver or reduction
of the fee, the decision review period will begin when the Agency grants such request or 60 days
after receipt of the application. If it is determined that a fee is required and thus the waiver is not
granted, the decision review period starts after the fee is collected.
Research Program Description
EPA's pesticides and toxics research continues to focus on providing scientifically-valid,
cost-effective, and low-burden methods for evaluating risks associated with pesticide
manufacture, use, and release into the environment.
EPA's FY 2006 research addressed aggregate and cumulative 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
1 Out of approximately 1350 completed PRIA actions in FY06, 99.8% were completed on or before its due date.
2 Minor use pesticides are those that produce relatively little revenue for their manufacturers, for a variety of
reasons. They may be registered for a seldom seen pest, or for a crop that is not grown by a large number of
producers. However, minor crops include some high revenue fruit, vegetable, and ornamental crops.
3 The IR-4 (Interregional Research Project No.4) program is involved in making sure that pesticides are registered
for use on minor crops. IR-4 helps by conducting research on minor use pesticides, pesticides that would not
otherwise be profitable to manufacture.
3
EPA's FY 2006 Annual PRIA Financial Statements
-------
infants and children exposed to pesticides and other toxins. Results from this work support
human and environmental risk assessments.
Specifically, in FY 2006, EPA research results directly influenced regulatory actions and
risk assessment decisions for pesticides to which the young are uniquely sensitive. To decrease
the potential for exposure in the young, OPP cancelled or reduced household and agricultural
uses of selected cholinesterase-inhibiting pesticides. Additionally, OPP issued a Data Call-In
(DCI) for all registered organophosphates (-30) to collect data on comparative sensitivity of the
young. This DCI provided important information for Agency consideration in evaluating the risk
to infants and children.
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, risks of pesticides to endangered
species, ineffective pesticide containers and containment facilities, 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 enforcement of
the pesticide worker protection standards. In FY 2006, 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 2007 and FY 2008 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 newly promulgated pesticide container and
containment rules, protection of endangered species from pesticides, and special action
chemicals identified by the Office of Pesticide Programs as well as illegal distribution, sale, and
advertisement of pesticides and pesticidal services via the Internet.
Highlights and Accomplishments
Registration Financial Perspective
During FY 2006, the Agency's obligations charged against the Pesticide Registration
Fund for the cost of registration were $10.7 million and 51.5 workyears (all obligated by OPP).
4
EPA's FY 2006 Annual PRIA Financial Statements
-------
Appropriated funds are used in addition to Registration funds. In FY 2006,
approximately $39.8 million in appropriated funds were obligated for registration activities. The
unobligated balance in the Fund at the end of FY 2006 was $12.3 million.
The Fund has two types of receipts: fee collections and interest earned on investments.
Of the $13.8 million in FY 2006 receipts, 100% were fee collections.
Registration Program Performance Measures
The following measures support the program's strategic goals of Healthy Communities and
Ecosystems as contained in the FY 2006 President's budget.
Measure 1: Number of new active ingredients registered.
Results: In FY 2006, EPA registered 24 new active ingredients, of which 15 are
biopesticides, 6 are antimicrobials, and 3 are conventional pesticides with domestic uses.
OPP also established import tolerances for 8 conventional new active ingredients that
are not registered in the U.S. but found on importedfood products. This is in addition to the 24
total.
Measure 2: Progress in Registering Reduced-risk Pesticides.
Results: In FY 2006, EPA registered 15 reduced-risk new active ingredients, all of
which were biological pesticides. Biological pesticides are certain types ofpesticides derived
from such natural materials as animals, plants, bacteria, and certain minerals. They are usually
less toxic and are typically considered safer pesticides than the traditional conventional
chemicals; therefore, the 15 biopesticides new active ingredients are counted as reduced-risk
pesticides. There were no conventional chemicals with reduced-risk uses registered in FY 2006.
Measure 3: Number of New Food Uses Registered.
Results: EPA registered 186 new food uses for previously registered active ingredients.
Measure 4: Progress in Registering Reduced-risk New Uses.
Results: Included in the new uses registered are 40 reduced-risk, 4 organophosphate
alternatives, and no methyl bromide alternative uses.
5
EPA's FY 2006 Annual PRIA Financial Statements
-------
PRINCIPAL
FINANCIAL STATEMENTS
6
EPA's FY 2006 Annual PRIA Financial Statements
-------
TABLE OF CONTENTS
Financial Statements
Balance Sheet 8
Statement of Net Cost 9
Statement of Changes in Net Position 10
Statement of Budgetary Resources 11
Statement of Financing 12
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies 13
Note 2. Fund Balances with Treasury 16
Note 3. Other Liabilities 16
Note 4. Property, Plant and Equipment 16
Note 5. Payroll and Benefits Payable 17
Note 6. Income and Expenses from Other Appropriations 18
Note 7. Exchange Revenues, Statement of Net Cost 19
Note 8. Intragovernmental Costs and Exchange Revenue 19
7
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
PRIA
Balance Sheet
For the Years Ended September 30, 2006 and 2005
(Dollars in Thousands)
FY 2006 FY 2005
ASSETS
Intragovernmental
Fund Balance With Treasury (Note 2) $ 16,243 $ 11,877
Total Intragovernmental $ 16,243 $ 11,877
Property, Plant & Equipment, Net (Note 4) 131 179
Total Assets $ 16,374 $ 12,056
LIABILITIES
Intragovernmental
Accounts Payable & Accrued Liabilities 86 119
Other (Note 3) 45_ 39_
Total Intragovernmental $ 131 $ 158
Accounts Payable & Accrued Liabilities 402 275
Payroll & Benefits Payable (Note 5) 633 560
Other (Note 3) 15,763 11,517
Total Liabilities $ 16,929 $ 12,510
NET POSITION
Cumulative Results of Operations (555) (454)
Total Net Position (555) (454)
Total Liabilities and Net Position $ 16,374 $ 12,056
The accompanying notes are an integral part of these statements.
8
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
PRIA
Statement of Net Cost
For the Years Ended September 30, 2006 and 2005
(Dollars in Thousands)
FY 2006 FY 2005
COSTS
Gross Cost (Note 8) $ 9,908 $ 10,739
Expenses from Other Appropriations (Note 6) 39,595 36,019
Total Costs
$ 49,503 $
46,758
Less:
Earned Revenues, (Notes 7 and 8)
9,530
10,522
NET COST OF OPERATIONS (Note 8)
$ 39,973 $
36,236
The accompanying notes are an integral part of these statements.
9
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
PRIA
Statement of Changes in Net Position
For the Years Ended September 30, 2006 and 2005
(Dollars in Thousands)
FY 2006 FY 2005
Net Position - Beginning of Period $ (454) $ (453)
Budgetary Financing Sources:
Income from Other Appropriations (Note 6) 39,595 36,019
Total Budgetary Financing Sources $ 39,595 $ 36,019
Other Financing Sources:
Imputed Financing Sources 277 216
Total Other Financing Sources $ 277 $ 216
Net Cost of Operations (39,973) (36,236)
Net Change (101) (1)
Net Position - End of Period $ (555) $ (454)
The accompanying notes are an integral part of these statements.
10
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
PRIA
Statement of Budgetary Resources
For the Years Ended September 30, 2006 and 2005
(Dollars in Thousands)
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1:
Recoveries of Prior Year Unpaid Obligations
Budgetary Authority:
Appropriations
Total Budgetary Resources
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Total Obligations Incurred
Unobligated Balances:
Apportioned
Total Status of Budgetary Resources
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1
Total Unpaid Obligated Balance, Net
Obligations Incurred, Net
Less: Gross Outlays
Less Recoveries of Prior Year Unpaid Obligations, Actual
Total, Change in Obligated Balance
Obligated Balance, Net, End of Period:
Unpaid Obligations
Total, Unpaid Obligated Balance, Net, End of Period
FY 2006
9,229
29
13,777
23,035
10,695
10,695
12,340
23,035
2,647
2,647
10,695
(9,411)
(29)
3,902
3,902
3,902
FY 2005
9,621
10,780
20,401
11,172
11,172
9,229
20,401
1,746
1,746
11,172
(10,271)
2,647
2,647
2,647
NET OUTLAYS
Net Outlays:
Gross Outlays
Less Distributed Offsetting Receipts (Note l.K)
Total, Net Outlays
$ 9,411
(13,777)
$ (4,366)
10,271
10,271
The accompanying notes are an integral part of these statements.
11
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
Statement of Financing
PRIA
For the Years Ended September 30, 2006 and 2005
(Dollars in Thousands)
FY 2006 FY 2005
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 10,695 $ 11,172
Less: Spending Authority from Offsetting Collections and Recoveries (29) -
Obligations, Net of Offsetting Collections $ 10,666 $ 11,172
Less: Offseting Receipts (Note l.K) (13,777) -
Net Obligations (3,111) 11,172
Other Resources
Imputed Financing Sources $ 277 $ 216
Income from Other Appropriations (Note 6) 39,595 36,019
Net Other Resources Used to Finance Activities $ 39,872 $ 36,235
Total Resources Used To Finance Activities $ 36,761 $ 47,407
RESOURCES USED TO FINANCE ITEMS
NOT PART OF NET COST OF OPERATIONS
Change in Budgetary Resources Obligated $ (1,136) $ (649)
Resources that Fund Prior Period Expenses - (59)
Offsetting Receipts Not Affecting Net Cost (Note l.K) 13,777 -
Total Resources Used to Finance Items Not
Part of the Net Cost of Operations $ 12,641 $ (708)
Total Resources Used to Finance the Net
Cost of Operations $ 49,402 $ 46,699
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) 53
Increase in Public Exchange Revenue Receivable $ (9,530) $ (10,522)
Total Components of Net Cost of Operations that
Requires or Generates Resources in the Future $ (9,477) $ (10,522)
Components Not Requiring/Generating Resources:
Depreciation and Amortization 48 59
Total components of Net cost of Operations that Will Not
Require or General Resources 48 59
Total components of Net cost of Operations that Will Not Require
or Generate Resources in the Current Period (9,429) (10,463)
Net Cost of Operations $ 39,973 $ 36,236
The accompanying notes are an integral part of these statements.
12
EPA's FY 2006 Annual PRIA Financial Statements
-------
Environmental Protection Agency
PRIA
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 Pesticide Registration Fund
(PRIA) as required by the Chief Financial Officers Act of 1990 and the Pesticide Registration
Improvement Act (PRIA) of 2003. In the prior years, pesticide registration was included in the
FIFRA financial statements. 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.
The PRIA fund is authorized under the Pesticide Registration Improvement Act of 2003, and
became effective on March 23, 2004. This Act authorizes EPA to assess and collect pesticide
registration service fees on applications submitted to register pesticides covered by this Act, as
well as, assess and collect fees to register new active ingredients not listed in the Registration
Division 2003 Work Plan of the Office of Pesticide Programs. The PRIA Fund is accounted for
under Treasury symbol number 68X5374.
Pesticide 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 2006 and 2005 were $39,595 thousand and $36,019 thousand,
respectively. This amount was 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 for FYs 2006 and 2005.
13
EPA's FY 2006 Annual PRIA Financial Statements
-------
C. Budgets and Budgetary Accounting
Funding for PRIA 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 2006 and 2005, PRIA received funding from fees collected for monitoring of pesticides.
For FYs 2006 and 2005, revenues were recognized from fee collections to the extent that
expenses are incurred during the fiscal year.
F. Funds with the Treasury
PRIA deposits receipts and processes disbursements through its operating account maintained at
the U.S. Department of the Treasury. Cash funds in excess of immediate needs, are invested in
U.S. Government securities.
G. Property, Plant and Equipment
Purchases of EPA-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. Depreciation is taken on
a basic straight-line method over the specific asset's useful life, ranging from two to 15 years.
EPA shows property, plant and equipment at net of depreciation on its audited financial
statements.
H. 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 PRIA, liabilities are liquidated from fee
receipts and interest earnings, since PRIA receives no appropriation. Liabilities of EPA, arising
from other than contracts, can be abrogated by the Government acting in its sovereign capacity.
14
EPA's FY 2006 Annual PRIA Financial Statements
-------
I. 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."
J. 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.
K. Offsetting Receipts
OMB Circular No. A-13 6, Financial Reporting Requirements, states that the amount of
distributed offsetting receipts reported in the Statement of Budgetary Resources (SBR) and the
Statement of Financing (SOF) should equal the amount recorded as offsetting receipts by the
Department of the Treasury (Treasury). Pesticide Registration Fees collected under PRIA are
considered to be offsetting receipts by Treasury. Prior to FY 2006, EPA did not include PRIA
receipts on the distributed offsetting receipts line on the SBR and SOF. OMB Circular A-136
does not require that prior periods be restated. PRIA offsetting receipts in FY 2005 were
$10,781 (in thousands).
15
EPA's FY 2006 Annual PRIA Financial Statements
-------
Note 2. Fund Balances with Treasury:
FY 2006 FY 2005
Revolving Funds: Entity Assets $16.243 $ 11.877
Note 3. Other Liabilities:
For FYs 2006 and 2005, the Payroll and Benefits Payable, non-Federal, are now presented on a
separate line of the Balance Sheet and in a separate footnote (see Note 5 below).
FY 2006 FY 2005
Other Intragovernmental Liabilities - Covered by Budgetary Resources
Employer Contributions - Payroll $ 45 $ 39
Total ~$ 45~ ~$ 39~
Other Non-Federal Liabilities - Covered by Budgetary Resources
Advances from Non-Federal Entities $ 15,763 $ 11,517
Total ~$ 15,763 ~$ 11,517
Note 4. General Plant, Property and Equipment:
Plant, property and equipment consists of EPA-Held personal property.
As of September 30, 2006 and 2005, Plant, Property and Equipment consist of the following:
FY 2006 FY 2005
Acquisition Accumulated Net Book Acquisition Accumulated Net Book
Value Depreciation Value Value Depreciation Value
EPA-Held Equipment $ 238 $ (107) $ 131 $ 238 $ $ (59) $ 179
16 EPA's FY 2006 Annual PRIA Financial Statements
-------
Note 5. Payroll and Benefits Payable, non-Federal:
FY 2006 FY 2005
Covered by Budgetary Resources
Accrued Payroll Payable to Employees $ 105 $ 95
Withholdings Payable 94 84
Thrift Savings Plan Benefits Payable 7 6
Total $ 206 $ 185
Not Covered by Budgetary Resources
Unfunded Annual Leave $ 427 $ 375
Total $ 427* $ 375
At various periods throughout FYs 2006 and 2005, employees with their associated payroll costs
were transferred from the fund to the Environmental Programs and Management (EPM)
appropriation. (See graph in Note 6 below showing trend of hours charged per month to the
PRIA Fund for FYs 2006 and 2005.) These employees were transferred in order to keep PRIA's
obligations and disbursements within budgetary limits.
This process has led to variations between the year-end liabilities of FYs 2006 and 2005. The
liabilities covered by budgetary resources (both intragovernmental and non-Federal) represent
unpaid payroll and benefits at year-end. At the end of FY 2006, about 136 employees were
charging all or part of their salary and benefits to PRIA. As of September 30, 2006, these
liabilities were $45 thousand and $206 thousand for employer contributions and accrued funded
payroll and benefits as compared to FY 2005's balances of $39 thousand and $185 thousand,
respectively.
In contrast, the unfunded annual leave liability is a longer term liability than the funded
liabilities. At various periods throughout FYs 2006 and 2005, approximately 52 employees in
total have been under PRIA's accountability. Therefore the September 30, 2006 and 2005
liability balances for unfunded annual leave were accrued to cover these 52 employees for a total
of $427 thousand and $375 thousand, respectively.
17
EPA's FY 2006 Annual PRIA Financial Statements
-------
Note 6. Income and Expenses front 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 2006 and 2005, 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 PRIA to EPM at
various times during FYs 2006 and 2005 (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 PRIA each month, the transfers of employees and their associated
costs during FYs 2006 and 2005 are shown below. Note that a decrease in hours charged to
PRIA normally signifies an increase in EPM's payroll costs, and vice versa.
PRIA Payroll Hours Per Month
20,000
16,000
12,000
10,000
8,000
6,000
4,000
FY06 Hours
FY05 Hours
Months
All of the expenses from EPM were distributed among EPA's two Reporting Entities: Superfund
and All Other (includes PRIA). This distribution is calculated using a combination of specific
identification of expenses to Reporting Entities, and a weighted average that distributes expenses
18
EPA's FY 2006 Annual PRIA Financial Statements
-------
proportionately to total programmatic expenses. As illustrated below, this estimate does not
impact the PRIA's Net Position.
Income from Other
Appropriations
FY 2006 $39.595
Expenses from Other
Appropriations
$39.595
Net Effect
$0
FY 2005
$36.019
$36.019
$0
Note 7. Exchange Revenues, Statement of Net Cost
For FYs 2006 and 2005, the exchange revenues reported on the Statement of Net Cost consists of
non-Federal amounts.
Note 8. Intragovernmental Costs and Exchange Revenue
COSTS:
Intragovernmental
With the Public
Expenses from Other Approprations
Total Costs
FY 2006
2,101 $
7,807
39,595
49,503 $
FY 2005
2,495
8,244
36,019
46,758
REVENUE:
With the Public
Total Revenue
9,530 10,522
$ 9,530 $ 10,522
NET COST OF OPERATIONS
$
39,973 $
36,236
Intragovernmental costs relate to the source of the goods or services not the classification of the
related revenue.
19
EPA's FY 2006 Annual PRIA Financial Statements
-------
Appendix B
Full Text of Agency Response
April 19, 2007
MEMORANDUM
SUBJECT: Draft Audit Report
Fiscal Year 2006 and 2005 Financial Statements for the
Pesticide Registration Fund
FROM: Luis A. Luna /s/ Sherry A. Kaschak
Assistant Administrator
TO: Paul C. Curtis
Director, Financial Statement Audits
Thank you for the opportunity to provide our comments and perspectives on the Draft
Audit Report.
The Report identifies a reportable condition, as defined in Office of Management Budget
Bulletin No. 06-03, for Fiscal Year (FY) 2006. The condition involves the untimely obligation
of $100,000 in Pesticide Registration Fund dollars for worker protection activities. Specifically,
the Report notes that the Agency: 1) obligated $50,000 for two print requests to reproduce
worker safety training materials ten months after the funds were committed and at least three
months after the products were received; and 2) signed a $50,000 amendment to an Interagency
Agreement (IAG) with the Department of Health and Human Services, National Cancer Institute
in FY 2006 but did obligated the funds until February 2007.
The Report presents a number of recommendations to address these findings. OARM's response
to these recommendations is presented below.
Recommendation #1-1: Have the Director, Facilities Management and Security Division,
ensure that print orders placed with the Government Printing Office are promptly forwarded to
the Cincinnati Finance Center (CFC) to ensure that the obligations are recorded timely in the
Integrated Financial Management System (IFMS).
OARM Response: OARM is not the appropriate organization to respond to this
recommendation because both printing requisitions originated in Region 7 and did not at any
time involve the Facilities Management and Services Division or any other part of OARM. The
Agency's printing manual specifies that regional offices are responsible for their own printing
activities. We have forwarded your draft report to Region 7 and we understand they are already
in touch with you and are developing a response which will be sent directly by them.
-------
Recommendation #1-2: Have the Director, Grants and Interagency Agreement Management
Division (GIAMD), ensure that IAGs signed by all responsible parties are promptly forwarded to
CFC to ensure that obligations are recorded timely in IFMS.
OARM Response: OARM agrees with this recommendation. After an IAG is awarded,
GIAMD's standard practice is to send the other Federal agency the IAG for acceptance. The
agency has three weeks to accept the agreement and return a fully executed copy to EPA. After
the accepted copy is received, the GIAMD sends a copy to CFC for the funds to be obligated.
CFC obligates the funds within five working days.
To ensure that this process results in the timely obligation of funds, GIAMD periodically
conducts follow-up with the other agency and CFC. Typically, follow-up is done on a quarterly
basis, except for the large number of end-of-fiscal year IAGs, where follow-up is done on a
weekly basis. During the rush to process the National Cancer Center IAG toward the end of FY
2006, GIAMD inadvertently failed to conduct the necessary follow-up. While we believe this
was an isolated occurrence, we will examine our follow-up procedures and make any necessary
adjustments.
Recommendation #2-1: Implementation of the two preceding recommendations would address
our findings above and ensure adherence to Title 31, U.S. Code, Section 1501 by providing
closer monitoring and oversight of recording obligations.
OARM Response: As explained above, OARM agrees with the two preceding
recommendations and will review its internal procedures and make any necessary changes to
ensure that the funds are timely obligated.
Thank you for the opportunity to comment on the Report. If you have any questions
about the comments, please contact Sherry Kaschak, Director, Office of Policy and Resources
Management at (202) 564-4600.
cc: Lyons Gray
James Gulliford
Susan Hazen
Richard Lemley
Howard Corcoran
David Bushta
Richard Kuhlman
Milton Brown
Jim Wood
-------
Appendix C
Distribution
Office of the Administrator
Agency Followup Official (the CFO)
Deputy Chief Financial Officer
Agency Followup Coordinator
General Counsel
Assistant Administrator, Office of Prevention, Pesticides, and Toxic Substances
Assistant Administrator, Office of Administration and Resources Management
Assistant Regional Administrator, Region 7 Office of Policy and Management
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
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, Field and External Affairs Division
Director, Office of Grants and Debarment
Director, Grants Administration Division
Director, Office of Financial Management
Director, Office of Financial Services
Director, Cincinnati Finance Center
Director, Washington Finance Center
Director, Reporting and Analysis Staff
Director, Financial Policy and Planning Staff
Director, Office of Regional Operations
Region 7 Comptroller
Chief, Facilities, Security and Safety Branch, Region 7
Audit Followup Coordinator, Office of Prevention, Pesticides, and Toxic Substances
Audit Followup Coordinator, Office of Administration and Resources Management
Audit Followup Coordinator, Office of Grants and Debarment
Audit Followup Coordinator, Office of the Chief Financial Officer
Audit Followup Coordinator, Region 7
Audit Liaison, Washington Finance Center
Acting Inspector General
------- |