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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Operating efficiently and effectively
Management Alert:
EPA Oversight of Employee
Debt Waiver Process Needs
Immediate Attention
Report No. 18-P-0250
September 12, 2018

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Report Contributors:	John Trefry
Leah Nikaidoh
Kevin Collins
Robert Hairston
Abbreviations
CFC	Cincinnati Finance Center
EPA	U.S. Environmental Protection Agency
IBC	Interior Business Center (U.S. Department of the Interior)
OCFO	Office of the Chief Financial Officer
OGC	Office of General Counsel
OIG	Office of Inspector General
U.S.C.	United States Code
Cover Image: A depiction of missing debt waivers. (EPA OIG image)
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Washington, DC 20460
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www.epa.gov/oiq
Subscribe to our Email Updates
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September 12, 2018
x^fcD ST/w
• U.S. Environmental Protection Agency	18-P-0250
	 % Office of Inspector General
mZ I
At a Glance
Why We Did This Project
The U.S. Environmental
Protection Agency's (EPA's)
Office of Inspector General
(OIG) initiated an audit to
determine whether the EPA
properly collects salary
overpayments from its
employees.
The U.S. Department of the
Interior's Interior Business
Center (IBC) processes the
EPA's payroll. One of the IBC's
responsibilities is to issue debt
notices to employees when
salary overpayments are
identified. Under certain
circumstances, employees
can request to have their
debt waived. The agency is
responsible for reviewing the
debt waiver request and
determining whether to
accept or deny the request.
While our audit is ongoing, the
purpose of this management
alert is to notify the agency
about our finding related to
internal control weaknesses
that resulted in unprocessed
debt waivers.
This report addresses the
following:
• Operating efficiently and
effectively.
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oiq.
Listing of OIG reports.
Management Alert: EPA Oversight of Employee
Debt Waiver Process Needs Immediate Attention
When debt waiver requests
are not resolved in a timely
manner, EPA employees
may assume their debts
have been forgiven.
What We Found
Internal controls failed to detect 18 EPA employee
debt waiver requests totaling $22,015. Even
though the agency's payroll provider forwarded
this information to the EPA's Office of the Chief
Financial Officer (OCFO), the office was not
aware of the missing waivers until the OIG
brought it to their attention. Several debt waiver
requests have been outstanding since 2015.
Several internal control failures caused the debt waiver requests to go missing,
including the lack of:
•	Accurate and consistent policies and procedures for debt waiver processing.
•	Monitoring and accounting for current agency employee debts (in-service
debts).
The EPA has taken several actions to improve debt waiver processing. The
OCFO's Cincinnati Finance Center has begun processing the missing debt waiver
requests and has provided eight debt waiver packages to the Office of General
Counsel for review. However, the underlying issues that caused the missing debt
waivers have not been fully addressed.
Recommendations and Agency Corrective Actions
We recommend that the OCFO continue to analyze all debts that the IBC has
identified as having open waiver requests and take immediate action to process
any additional missing debt waiver requests. We also recommend that the OCFO
expand the accounting of in-service debts that the IBC has identified by
recognizing this debt activity in the EPA's accounting system.
The agency implemented corrective action to improve its process to analyze and
manage open waiver requests by adopting standard operating procedures for
debt waiver requests. We confirmed with the EPA Claims Officer that his office
has received additional debt waiver requests from the OCFO. No further action is
required for this recommendation.
Although the agency disagreed with our recommendation to record individual
accounts receivable for each employee debt, the OCFO adopted a new
procedure to record accounts receivable on a quarterly basis. We agree that the
OCFO's alternative corrective action satisfies the intent of the recommendation,
and we modified our recommendation in the final report. No further action is
required for this recommendation.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
September 12, 2018
MEMORANDUM
SUBJECT: Management Alert: EPA Oversight of Employee Debt Waiver Process
Needs Immediate Attention
Report No. 18-P-0250
FROM: Arthur A. Elkins Jr.
TO:
Holly Greaves, Chief Financial Officer
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). The project number for this audit was OA-FY18-0084.
This report contains findings that describe the problems the OIG has identified and corrective actions the
OIG recommends. This report represents the opinion of the OIG and does not represent the final EPA
position.
The Office of the Chief Financial Officer is responsible for managing the EPA's accounting system,
including debts resulting from salary overpayments. The Office of General Counsel is responsible for
the review and disposition of all debt waiver requests.
In accordance with EPA Manual 2750, your office has taken acceptable corrective actions in response to
OIG recommendations. All corrective actions are completed, and no final response to this report is
required. However, if you submit a response, it will be posted on the OIG's website, along with our
memorandum commenting on your response. Your response should be provided as an Adobe PDF file
that complies with the accessibility requirements of Section 508 or the Rehabilitation Act of 1973, as
amended. The final response should not contain data that you do not want to be released to the public;
if your response contains such data, you should identify the data for redaction or removal along with
corresponding justification.
The report will be available at www.epa.gov/oig.

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Management Alert: EPA Oversight
of Employee Debt Waiver Process
Needs Immediate Attention
18-P-0250
Table of C
Purpose		1
Background		1
Responsible Offices		2
Scope and Methodology		2
Results		3
Conclusion		6
Recommendations		6
Agency Response and OIG Comments 		6
Status of Recommendations and Potential Monetary Benefits		8
Appendices
A OCFO's Response to Draft Report	 9
B Distribution	 12

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Purpose
The Office of Inspector General (OIG) of the U.S. Environmental Protection
Agency (EPA) is conducting an audit of the EPA's salary overpayment and debt
forgiveness waiver process. The objective of the audit is to determine whether
the agency properly collects salary overpayments from its employees. This report
alerts management to internal control weaknesses that were identified during the
audit and relate to the processing of debt waiver requests.
Our overall audit of the EPA's salary overpayment and debt waiver process is
ongoing.
Background
A salary overpayment to an employee can occur for a variety of reasons,
including the miscoding of salary information or corrections to a time card,
which can impact pay. The U.S. Department of the Interior's Interior Business
Center (IBC) is the EPA's payroll provider. When a salary overpayment occurs,
the IBC's payroll system automatically computes the amount of overpayment,
generates a bill for collection, and mails the bill to the subject employee. The bill,
known as a debt memo, formally notifies the employee of the amount that needs
to be repaid to the agency. The debt memo also includes a detailed listing of
specific pay periods and amounts where the employee was overpaid.
In addition, the debt memo provides instructions for payment options, and the
employee is informed about their legal and regulatory rights, including the right to
request a waiver or hearing. The employee may submit an application to the
appropriate EPA office to request that the debt be waived. In accordance with
federal regulations, executive agencies are permitted to waive debts of its
employees related to, among other things, salary overpayments.
Federal Law
Federal law at 5 U.S.C. 5584, Claims for overpayment ofpay and allowances, and
of travel, transportation and relocation expenses and allowances, provide the
authority for waiving, in whole or in part, debts if collection would be against the
equity and good conscience and not in the best interests of the United States.
Debts over $1,500 can be waived only by an authorized official.
EPA Policy Requirements
EPA Order 3155.1, Waiver of Claims for Overpayments (October 6, 2014),
establishes policies and procedures for the waiver of claims due to erroneous
payments. The policy specifically states that a waiver is precluded if an employee
receives a significant unexplained increase in pay or allowance or otherwise
18-P-0250
1

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knows, or reasonably should know, that an erroneous payment has occurred.
Waiver under this policy depends upon the facts existing in the particular case.
The policy also states:
... the Agency's Claims Officer will adjudicate any request for
waiver and deny or approve the request for waiver or for a refund
of an amount repaid in accordance with 5 U.S.C. § 5584 and case
law authority.
In accordance with EPA Delegation 1-26, Waiver of Claim for Erroneous
Payments of Pay (April 1, 2003), the Administrator delegated to the Office of
General Counsel (OGC) the authority to receive, evaluate and make decisions for
all matters under the authority of 5 U.S.C. 5584. This delegation has been
reauthorized several times since 2003. Most recently, on January 4, 2016, the
OGC redelegated this authority to the EPA's Claims Officer within the OGC.
Responsible Offices
The EPA's Office of the Chief Financial Officer (OCFO) has the following
responsibilities:
•	Receiving debt waiver requests through its Human Resources and Payroll
Customer Service help desk.
•	Recording debts in its financial systems.
•	Maintaining subsidiary records for debts/accounts receivable, including
the basis for the debt and all administrative actions regarding the debt and
final disposition.
•	Providing payroll support to EPA's payroll provider, the IBC.
•	Managing accounts receivable for the agency through the OCFO's
Cincinnati Finance Center (CFC).
The OGC is responsible for the review and disposition of all debt waiver requests.
Scope and Methodology
We conducted this audit in accordance with generally accepted government
auditing standards issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on the audit objectives. We believe that the evidence obtained
to date provides a reasonable basis for our findings and conclusions presented in
this report.
To determine whether the EPA properly forgives debts owed by its employees
through its waiver process, we performed the following steps:
18-P-0250
2

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•	Interviewed the EPA's Claims Officer regarding legal authority to make
employee debt waiver decisions, and reviewed related documentation.
•	Interviewed the OCFO Controller and staff, and reviewed documentation
related to policies, procedures and guidance for managing employee debts.
•	Interviewed IBC officials to determine IBC responsibilities related to the
EPA employee debt memo process.
•	Reviewed debt waiver requests and their disposition.
Results
This management alert notifies the agency that internal control weaknesses have
resulted in the mishandling of debt waiver requests. The EPA had a total of
$22,015 in debt waiver requests that were not processed by the OCFO or the
OGC. The agency was not aware of the missing debt waiver requests until we
brought the matter to its attention. While the CFC has started processing the debt
waiver requests, underlying issues that caused the debt waiver requests to go
missing have not been addressed.
EPA Unaware of Unresolved Employee Debt Waiver Requests
The EPA had not processed 18 employee debt waiver requests for salary
overpayments totaling $22,015. The IBC identified the debt waiver requests as
being in "waiver review status" as of December 2017. Being in waiver review
status essentially puts the debt-collection process on hold while the EPA reviews
the requested debt waiver.
Although the IBC informed the EPA that the debts were in waiver review status,
the agency's lack of internal controls caused the debt waiver requests to be
overlooked. Neither the OGC nor the OCFO was aware of the debt waiver
requests. All but one of the debts have been in waiver review status for more than
1 year, some for several years.
We provided a list of 15 missing debt waiver requests to the OCFO on March 28,
2018. The OCFO responded on April 23, 2018, stating that the debt waiver
requests were now under review by the CFC. For 15 of the missing debt waiver
requests, the CFC sent debt waiver request packages to the employees on
April 19, 2018. The CFC notified the employees about their obligation and the
procedures for debt waiver requests.
On May 17, 2018, we identified three additional missing debt waiver requests and
provided this information to the OCFO for review and action.
Table 1 highlights the 18 debts and details their waiver status as of June 15, 2018.
18-P-0250
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Table 1: Unresolved employee debt waiver requests
Debt ID
Debt total
Original date
IBC sent debt
waiver request
to EPA
IBC bill
date
Date CFC
sent waiver
package to
employee
Date CFC
submitted
waiver request
to OGC
M1715700001
$188.02
6/26/17
6/6/17
4/19/18
5/4/18
70030265404
452.33
1/25/17
1/3/17
4/19/18
4/27/18
62570260283
749.11
9/21/16
9/12/16
4/19/18
4/30/18
61731590726
295.05
7/13/16
6/20/16
4/19/18
4/23/18
61731496723
2,663.02
6/30/16
6/20/16
4/19/18
4/25/18
Q1170266097
100.53
5/13/16
4/25/16
4/19/18
5/4/18
60890270536
1,070.91
4/14/16
3/28/16
4/19/18

60750270536
9,391.13
4/11/16
3/14/16
4/19/18

M1608500006
226.83
4/11/16
3/25/16
4/19/18
5/14/18
Q0470262918
414.87
4/5/16
2/16/16
4/19/18

Q0750270280
238.02
3/19/16
3/14/16
4/19/18

60051536197
1,781.52
1/25/16
1/4/16
4/19/18
5/7/18
53420270495
2,169.44
1/5/16
12/7/15
5/29/18

Q2160260410
254.21
8/25/15
8/3/15
4/19/18

Q2300260410
148.42
8/25/15
8/17/16
4/19/18

51740257722
1,021.63
7/30/15
6/22/15
5/29/18

50480255627
779.24
3/18/15
2/17/15


Q0340266326
70.87
2/18/15
2/2/15
4/19/18
N/A
Total
$22,015.15

Source: OIG analysis of IBC and EPA data.
The CFC received completed debt waiver requests for eight debts and forwarded
the requests to the OGC for resolution. For one debt, the CFC indicated that the
employee no longer wanted a waiver and had repaid the debt to the IBC. However,
the CFC did not verify with the IBC that this individual's debt was repaid until we
explained that this individual had multiple debts and the CFC needed to confirm
payment. The CFC followed up with IBC and determined that the debt had not
been paid. The CFC plans to notify the employee about the outstanding debt.
We also noted that when the CFC recently began sending waiver request forms to
EPA employees for the missing debts, the form used was outdated and from the
agency's previous payroll provider. We discussed this issue with the OCFO, and
the office drafted a waiver form that eliminates all references to other federal
agencies, which should help reduce confusion as to where debt waiver requests
should be sent.
Conflicting Instructions for Receiving Debt Waiver Requests and
Processing Them in EPA's Accounting System
Not only did we identify issues with how debt waiver requests get to the EPA, we
also identified issues with how the EPA monitors and records the debts in its
18-P-0250
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accounting system. The following issues contributed to the EPA's mishandling of
debt waiver requests:
•	Debt waiver request delivery. There are conflicting instructions
regarding where the IBC should send debt waiver requests to the EPA.
According to EPA Policy 3155.1, the IBC should send the debt waiver
case file to the EPA's Claims Officer. However, separate OCFO
instructions provided to the IBC state that the IBC should submit waiver
process notifications to the OCFO's Human Resources and Payroll help
desk. According to the IBC, the 18 debt waiver requests were sent to the
help desk. The OCFO's Office of Technology Solutions manages the help
desk and claimed the requests were never received. The Office of
Technology Solutions stated that the debt waiver requests should go
directly to the OCFO's Office of the Controller or to the OGC, because the
help desk is designed and funded to address technical difficulties that
employees have related to administrative systems. According to the Office
of Technology Solutions, it is not equipped to provide assistance in
managing employee debt inquiries and debt waiver requests.
•	Monitoring of debts and debt waivers. During discussions with
OCFO officials, they stated that the IBC manages the salary overpayment
process, and that the EPA does not monitor or account for the debts. As of
April 2018, the EPA did not use the various reports that are available
through Datamart—the IBC's on-line data portal—to monitor employee
debts and their status. The EPA indicated that the OCFO uses reports
available in Datamart to reconcile its labor cost files. However, the EPA's
reconciliation process did not identify the unprocessed waivers. Conversely,
the IBC was able to quickly provide such information to us. We used this
information to identify debt waivers that the EPA had not recognized.
•	Accounting for in-service debts. In its accounting records, the EPA did
not record any employee debts related to salary overpayments. In calendar
year 2017, EPA employees generated 969 salary overpayment debts
totaling $1,268,068.
The EPA did not believe that this was its responsibility, stating that the
IBC is responsible for managing employee debts. However, this
contradicts the EPA's own accounting policy—Resource Management
Directive System 2540-9-P1—which states that all debts/accounts
receivable must be recorded in the agency's financial accounting system
of record. Additionally, any changes in the status of the debts/accounts
receivable must be recorded promptly in the agency's accounting system.
The OCFO recently adopted a standard operating procedure titled
Adjustment 31: In-Service Debt (effective March 31, 2018). This
procedure requires the OCFO to prepare a quarterly journal voucher as a
18-P-0250
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receivable for consolidated financial statement reporting purposes. While
this procedure will allow the in-service debt accounts receivable to be
reported at the financial statement level, the individual accounts receivable
are not recorded in the EPA's accounting system.
Agency Actions to Address Debt Waiver Issues
The OCFO has taken actions to address various concerns identified as part of our
ongoing audit:
•	The CFC obtained missing debt waiver request documentation from the
IBC and notified affected employees. As of June 15, 2018, the CFC had
forwarded eight debt waiver requests to the OGC Claims Officer for
review and disposition.
•	The EPA developed a standard operating procedure to identify in-service
debts as part of its quarterly consolidated financial statement process.
•	The OCFO's Office of the Controller recognized that it did not have the
authority to make decisions on in-service debt waiver requests and
discontinued this practice in February 2018.
Conclusion
The EPA has made progress addressing various issues related to the debt waiver
process. However, the agency needs to act and address internal control issues that
resulted in the missing debt waiver requests, and formally establish these
individual debts in their accounting system. The agency also needs to develop
policies and procedures that clearly and consistently describe the debt waiver
process, including requirements to periodically monitor the process.
Recommendations
We recommend that the Chief Financial Officer:
1.	Continue to analyze all debts in waiver status and take immediate action to
process any additional missing debt waiver requests.
2.	Expand the accounting of in-service debts that the Interior Business Center
has identified by recognizing this debt activity in the EPA's accounting
system.
Agency Response and OIG Comments
In response to the draft report, the OIG received comments and corrective actions
from OCFO, as shown in Appendix A.
18-P-0250
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The OCFO agreed with Recommendation 1, and continues to analyze all debts in
waiver status and implemented standard operating procedures for processing
waiver requests. The OCFO approved the new standard operating procedures on
July 24, 2018. We confirmed with the EPA Claims Officer that the CFC is
processing debt waiver requests and submitting them to him for review. Therefore,
we consider the corrective actions for Recommendation 1 to be complete.
The OCFO disagreed with our original Recommendation 2, but adopted an
alternative action to account for in-service debts by using accounts receivable
information from its payroll provider to post quarterly journal entries into the
agency's financial statements. The OCFO believes its alternative action will meet
the intent of federal financial management system requirements. Our review of
those federal requirements—Office of Management and Budget Circular A-123
Appendix D and Treasury Financial Manual Chapter 9500—supports the OCFO's
position. We also independently verified that the OCFO posted journal vouchers
to recognize employee in-service debt due to the EPA for the second and third
quarters of fiscal year 2018. We consider the agency's alternative actions to be
responsive. Therefore, we revised our recommendation in the final report. The
OCFO agreed with the revised recommendation, and we consider corrective
actions for Recommendation 2 to be complete.
18-P-0250
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS






Potential





Planned
Monetary
Rec.
Page



Completion
Benefits
No.
No.
Subject
Status1
Action Official
Date
(in $000s)
1 6 Continue to analyze all debts in waiver status and take	C Chief Financial Officer 7/24/18
immediate action to process any additional missing debt waiver
requests.
2 6 Expand the accounting of in-service debts that the Interior	C Chief Financial Officer 6/30/18
Business Center has identified by recognizing this debt activity in
the EPA's accounting system.
1 C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
18-P-0250
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Appendix A
OCFO's Response to Draft Report
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
as.
WASHINGTON, 0 C- SMoO
it
AUC- 10
CH
MEMORANDUM
SUBJECT: Response to the Office of Inspector General Management Alert Report No. OA-1'Y 18-
0084, "EPA Oversight of Employee Debt Waiver Process Needs Immediate Attention, "
dated Jul) 23. 2018
Thank you for the opportunity to respond to the issues and recommendations in the Management
Alert report. The following is a summary of the U.S. Environmental Protection Agency's overall
position along with its position on each of the report recommendations. For the report
recommendation with which the agency agrees, we have provided either high-level intended
corrective actions and estimated completion dates, to the extent we can, or reasons why we are
unable to provide a corrective action or estimated completion date. For the report
recommendation with which the agency disagrees, we have explained our position and proposed
alternatives to recommendations.
AGENCY'S OVERALL POSITION
The agency concurs with recommendation 1 and non-concurs with recommendation 2.
18-P-0250	9
FROM: ! lolly W. Greaves, Chief Financial Oftieer
Office of the Chief Finaoeia! Oftieer
TO:
Kevin Christensen. Assistant Inspector General
Offiee of Audit and Evaluation

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AGENCY'S RESPONSE TO AUDIT RECOMMENDATIONS
Agreement	
No.
Recommendation
Assigned
to:
High-Level Intended
Corrective Action(s)
Estimated
Completion by
Quarter and FY
1
Continue to analyze all
debts in waiver status and
take immediate action to
process any additional
missing debt waiver
requests.
OCFO
Concur: The agencv
continues to analyze all
debts in waiver status and
has taken action to ensure
additional missing debt
waiver requests are
processed. To continually
analyze all debt in waiver
status, the agency
implemented standard
operating procedures
providing guidance to
process waiver requests.
The waiver request
procedures include the
process flow as well as roles
and responsibilities.
Complete
6/30/2018
Disagreement
No.
Recommendation
Assigned
to:
High-Level Intended
Corrective Action(s)
Estimated
Completion by
Quarter and FY
2
Expand the accounting of
in-service debts that the
Interior Business Center
has identified, and
establish individual
accounts receivable in the
EPA's accounting system
for each employee debt.
OCFO
Non-concur: The agencv
practice of recording
accounts receivable for in-
service debts in Compass,
the financial system, as
summary entries complies
with OMB and Treasury
requirements as established
in OMB A-123 Appendix D
and the Treasury Financial
Manual, Chapter 9500. The
agency can support all
summary entries with the
required detail.
N/A
18-P-0250
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CONTACT INFORMATION
If you have any questions regarding this response, please contact the OCFO's Audit Follow-up
Coordinator, Bob Trent, at trent.bobbie@epa.gov or (202)-566-0983.
cc: David Bloom
Howard Osborne
Jeanne M. Conklin
Meshell Jones-Peeler
Quentin Jones
David Devere
Malena Brookshire
John O'Connor
Judi Doucette
Sherri' L. Anthony
Bobbie P. Trent, Jr.
John Trefry
Leah Nikaidoh
Kevin Collins
18-P-0250
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Distribution
The Administrator
Deputy Administrator
Special Advisor, Office of the Administrator
Chief of Staff
Chief Financial Officer
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Director, Office of Continuous Improvement, Office of the Administrator
Deputy Chief Financial Officer
Associate Chief Financial Officer
EPA Claims Officer, Office of General Counsel
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of General Counsel
18-P-0250

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