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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Fiscal Year 2007 and 2006
Financial Statements for the
Pesticide Registration Fund
Report No. 08-1-0149
May 5, 2008
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Sheree James
Ethel Lowery
Sheila May
Javier Negron
Demetrios Papakonstantinou
Abbreviations
EPA
FMFIA
IFMS
OIG
OMB
PRIA
Report Contributors: Paul Curtis
Wanda Whitfield
Bill Samuel
Sabrina Berry
Diane Forrest
Robert Hairston
U.S. Environmental Protection Agency
Federal Managers' Financial Integrity Act
Integrated Financial Management System
Office of Inspector General
Office of Management and Budget
Pesticide Registration Improvement Act
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
08-1-0149
May 5, 2008
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.
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. PRIA also requires the
establishment of decision time
review periods for pesticide
registration actions, and
requires the Office of Inspector
General to perform an analysis
of the Agency's compliance
with those review periods.
Fiscal Year 2007 and 2006 Financial Statements
for the Pesticide Registration Fund
PRIA Receives an Unqualified Opinion
We rendered an unqualified, or clean, opinion on EPA's Pesticide Registration
Fund Financial Statements for Fiscal Years 2007 and 2006, meaning that they
were fairly presented and free of material misstatement.
Compliance with Decision Time Review Periods
The Agency was in substantial compliance with the statutory decision time
frames.
Agency Comments
The Office of the Chief Financial Officer and the Office of Prevention, Pesticides,
and Toxic Substances had no comments on the 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.qov/oiq/reports/2008/
20080505-08-1-0149.pdf
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I s UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
^ WASHINGTON, D.C. 20460
PROl^
OFFICE OF
INSPECTOR GENERAL
May 5, 2008
MEMORANDUM
SUBJECT: Fiscal Year 2007 and 2006 Financial Statements for the
Pesticide Registration Fund
Report No. 08-1-0149
FROM: Paul C. Curtis
Director, Financial Statement Audits
TO: James B. Gulliford
Assistant Administrator for Prevention,
Pesticides, and Toxic Substances
Lyons Gray
Chief Financial Officer
This is our report on the audit of the U.S. Environmental Protection Agency's (EPA's) Fiscal
Year 2007 and 2006 financial statements for the Pesticide Registration Fund, conducted by the
EPA Office of Inspector General (OIG). This 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 $163,278.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. We have no objections to the further release of this report to
the public. This report will be available at http://www.epa.gov/oig.
If you or your staff have any questions, please contact me at (202) 566-2523 or
Curtis.Paul@epa.gov. or Wanda Whitfield at (202) 566-2533 or Whitfield.Wanda@epa.gov.
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Fiscal Year 2007 and 2006 Financial Statements for the
Pesticide Registration Fund
Table of C
Inspector General's Report on the Fiscal Year 2007 and 2006
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 3
Management's Discussion and Analysis Section of the Financial Statements 4
Prior Audit Coverage 4
Agency Comments 5
Attachment
1 Status of Recommendations and Potential Monetary Benefits 6
Appendices
A Fiscal Year 2007 and 2006 PRIA Financial Statements
B Distribution
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Inspector General's Report on the
Fiscal Year 2007 and 2006 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, 2007 and 2006, and the related statements of net cost, changes in net position, and
budgetary resources for the year then ended. These financial statements are the responsibility of
the U.S. Environmental Protection Agency's (EPA's) management. Our responsibility is to
express an opinion on these financial statements based upon our audit.
We conducted our audit in accordance with U.S. 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. 07-04, Audit Requirements for Federal Financial Statements. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, including accompanying notes, present fairly, in all
material respects, the assets, liabilities, net position, net costs, changes in net position, and
budgetary resources of the PRIA Fund, as of and for the years ended September 30, 2007 and
2006, in conformity with accounting principles generally accepted in the United States of
America.
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Evaluation of Internal Controls
As defined by OMB Bulletin No. 07-04, 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.
Compliance with applicable laws, regulations, and government-wide policies -
Transactions are executed in accordance with laws governing the use of budget authority,
government-wide policies, laws identified by OMB, and other laws and regulations that
could have a direct and material effect on the financial statements.
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.
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, determining whether
internal controls have been placed in operation, assessing control risk, and performing tests of
controls. We did this as a basis for designing our auditing procedures for the purpose of
expressing an opinion on the financial statements and to comply with OMB audit guidance, not
to express an opinion on internal control. Accordingly, we do not express an opinion on internal
control over financial reporting nor on management's assertion on internal controls included in
Management's Discussion and Analysis. We limited our internal control testing to those controls
necessary to achieve the objectives described in OMB Bulletin No. 07-04. 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 control over financial reporting that might be significant deficiencies.
Under standards issued by the American Institute of Certified Public Accountants and audit
requirements described in OMB Bulletin No. 07-04, a significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely affects the Agency's ability to
initiate, authorize, record, process, or report financial data reliably in accordance with generally
accepted accounting principles such that there is more than a remote likelihood that a
misstatement of the entity's financial statements that is more than inconsequential will not be
prevented or detected. A material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood that a material misstatement
of the financial statements will not be prevented or detected. Because of inherent limitations in
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any internal controls, misstatements, losses, or noncompliance may nevertheless occur and not
be detected.
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.
07-04. Our procedures were not designed to provide assurance on internal controls over reported
performance measures and, accordingly, we do not express an opinion on such controls.
We did not note any instances involving operations that we consider to be a significant
deficiency or noncompliance issue. However, as mentioned in the Prior Audit Coverage section
of this report, we will continue to disclose a significant deficiency concerning documentation of
the current accounting system and its automated application controls until EPA implements the
planned replacement automated accounting system.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 07-04 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.
For financial statement audit purposes, OMB defines material weaknesses in internal control as a
significant deficiency, or combination of significant deficiencies, that result in a more than
remote likelihood that a material misstatement of the financial statements will not be prevented
or detected.
The Agency reported that three material weaknesses had been identified for Fiscal Year 2007,
one of which has been corrected. All of these material weaknesses were identified by the OIG in
the course of the Audit of EPA's Fiscal Year 2007 and 2006 (Restated) Consolidated Financial
Statements (Audit Report 08-1-0032). These weaknesses do not impact PRIA.
Tests of Compliance with Laws and Regulations
In accordance with PRIA, the Administrator is required to publish a schedule of decision time
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.
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As part of obtaining reasonable assurance about whether the 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. However, we did not identify any
noncompliances that would result in a material misstatement to the audited financial statements.
Management's Discussion and Analysis Section of the
Financial Statements
Our audit work related to the information presented in Management's Discussion 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
Management's Discussion and Analysis. 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.
Prior Audit Coverage
During previous financial or financial-related audits, we reported the following reportable
conditions:
¦ We found that EPA did not timely obligate PRIA funds for worker protection activities.
¦ We identified a weakness in the Agency's documentation of adjustments to Integrated
Financial Management System (IFMS) entries.
¦ We identified a weakness in the Agency's preparation and quality control of the financial
statements and footnotes.
¦ We could not assess the adequacy of IFMS automated controls.
EPA began corrective action to ensure PRIA funds are obligated timely. Region 7 revised its
procedures for the procurement of outside printing needs. The revised procedures require that
print orders placed with the Government Printing Office are promptly forwarded to the
Cincinnati Finance Center to ensure that the obligations are recorded timely in IFMS. The
Office of Administration and Resources Management also agreed to review its internal
procedures and make any necessary changes to ensure that funds are obligated timely.
The Agency began corrective action to improve documentation of adjusting and correcting
entries in IFMS. EPA's Washington Finance Center updated its procedures to include
maintaining adequate source documentation when adjusting and correcting entries are made to
transactions already entered in IFMS. Washington Finance Center staff will include an
adjustment control sheet to document the reason for the adjustments and corrections. In addition,
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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).
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. EPA has made progress toward replacing IFMS, and expects to begin
implementation in Fiscal Year 2008. However, until EPA implements the planned replacement
automated accounting system that addresses past issues, we will continue to disclose a significant
deficiency concerning documentation of the current accounting system and its automated
application processing controls {Audit of EPA's Fiscal 2007 and 2006 (Restated) Consolidated
Financial Statements, Audit Report 08-1-0032).
The Office of the Chief Financial Officer and the Office of Prevention, Pesticides, and Toxic
Substances had no comments on the draft report.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
May 1, 2008
Agency Comments
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Attachment 1
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
No recommendations
Claimed
Amount
Agreed To
Amount
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
FYs 2007 and 2006 PESTICIDE REGISTRATION FUND
(PRIA)
FINANCIAL
STATEMENTS
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of Financial Management
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TABLE OF CONTENTS
Management's Discussion and Analysis 1
Principal Financial Statements 7
i
EPA's FY 2007 Annual PRIA Financial Statements
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Management's Discussion and Analysis
i
EPA's FY 2007 Annual PRIA Financial Statements
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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 Pesticide 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.
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EPA's FY 2007 Annual PRIA Financial Statements
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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. PRIA
became effective on March 23, 2004, and the collection of registration fees were authorized
through FY 2008. PRIA was reauthorized with passage of the Pesticide Registration
Improvement Renewal Act (commonly referred to as PRIA II) on October 9, 2007. PRIA II
became effective retroactive to October 1, 2007, and the collection of registration fees are now
authorized through FY 2012. In order to help ensure a smooth transition (if PRIA II is not re-
authorized), PRIA II reduces the registration service fees by 40 percent in FY 2013 and then by
70 percent in FY 2014. For any application received after September 30, 2012, but before
September 30, 2014, 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 that the fee has been paid, fee waiver granted or in the
case of a 50% fee waiver, the fee has been paid and waiver granted. The legislation provides fee
waivers for certain categories of small businesses, minor uses2, and IR-4 petitions3. Applications
from federal and state agencies are exempt from registration service fees. 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 waiver 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.
Applications received prior to October 1, 2007 are covered by PRIA 1. Applications
received in FY08 will be covered by PRIA II and PRIA II contains the same audit provision as
PRIA 1. PRIA II imposed minimum payment requirements; requires the EPA to reject an
application for an unpaid fee; provides the ability to reject an application if it fails an initial
content screen and retain a portion of the fee; increased the fee categories or types of applications
1 Out of approximately 1600 completed PRIA actions inFY07, 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.
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EPA's FY 2007 Annual PRIA Financial Statements
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covered by PRIA from 90 to 140; allows the use of investment income; eliminated the 100% fee
waiver for small businesses; and increased the amount to support worker protection activities.
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 2007 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
infants and children exposed to pesticides and other toxins. Results from this work support
human and environmental risk assessments.
Specifically, in FY 2007, EPA research results directly influenced regulatory actions and
risk assessment decisions for pesticides to which the young and others are uniquely sensitive. To
decrease the potential for exposure in the young and others, research provided a suite of
biomarkers in saliva that can be used to determine pesticide exposures in children; determined
the impact on human health of reducing exposure to water borne pathogens in drinking water and
cumulative impact of air pollution reduction programs for children and older individuals; and
developed, evaluated, and applied a DNA-based molecular indicator method for characterizing
exposure to endocrine disrupting chemicals.
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
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EPA's FY 2007 Annual PRIA Financial Statements
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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 2007, the Agency's obligations charged against the Pesticide Registration
Fund for the cost of registration were $15.2 million and 59.5 workyears (all obligated by OPP).
Appropriated funds are used in addition to Registration funds. In FY 2007,
approximately $40.7 million in appropriated funds were obligated for registration activities. The
unobligated balance in the Fund at the end of FY 2007 was $10.3 million.
The Fund has two types of receipts: fee collections and interest earned on investments.
Of the $13.1 million in FY 2007 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 2007 President's budget.
Measure 1: Number of new active ingredients registered.
Results: In FY 2007, EPA registered 27 new active ingredients, of which 11 are
biopesticides, 6 are antimicrobials, and 10 are conventional pesticides with domestic uses.
OPP also established import tolerances for 2 conventional new active ingredients that
are not registered in the U.S. but found on importedfood products. This is in addition to the 27
total.
Measure 2: Progress in Registering Reduced-risk Pesticides.
Results: In FY 2007, EPA registered 13 reduced-risk new active ingredients, of which
11 were biological pesticides and 2 were conventional pesticides. Biological pesticides are
certain types of pesticides derivedfrom 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 11 biopesticides new active ingredients are
counted as reduced-risk pesticides. Conventional "reduced risk" pesticides have one or more of
the following advantages over currently registered pesticides: low impact on human health, low
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EPA's FY 2007 Annual PRIA Financial Statements
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toxicity to non-target organisms, low potential for groundwater contamination, lower use rates,
low pest resistance potential, and compatibility with integrated pest management strategies.
Measure 3: Number of New Food Uses Registered.
Results: EPA registered 233 new food uses for previously registered active ingredients.
Of these new uses, 200 were for conventional pesticides, 24 were for antimicrobial pesticides,
and 9 were for biopesticides.
Measure 4: Progress in Registering Reduced-risk New Uses.
Results: Included in the new uses registered are 4 reduced-risk, and 1 organophosphate
alternative.
6 EPA's FY 2007 Annual PRIA Financial Statements
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PRINCIPAL
FINANCIAL STATEMENTS
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EPA's FY 2007 Annual PRIA Financial Statements
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TABLE OF CONTENTS
Financial Statements
Balance Sheet 9
Statement of Net Cost 10
Statement of Changes in Net Position 11
Statement of Budgetary Resources 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
Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing) 20
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EPA's FY 2007 Annual PRIA Financial Statements
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Environmental Protection Agency
PRIA
Balance Sheet
For the Years Ended September 30, 2007 and 2006
(Dollars in Thousands)
FY 2007 FY 2006
ASSETS
Intragovernmental
Fund Balance With Treasury (Note 2) $ 16,407 $ 16,243
Total Intragovernmental $ 16,407 $ 16,243
Property, Plant & Equipment, Net (Note 4) 249 131
Total Assets $ 16,656 $ 16,374
LIABILITIES
Intragovernmental
Accounts Payable & Accrued Liabilities 234 86
Other (Note 3) 45_ 45_
Total Intragovernmental $ 279 $ 131
Accounts Payable & Accrued Liabilities 1,024 402
Payroll & Benefits Payable (Note 5) 745 633
Other (Note 3) 15,119 15,763
Total Liabilities $ 17,167 $ 16,929
NET POSITION
Cumulative Results of Operations (511) (555)
Total Net Position (511) (555)
Total Liabilities and Net Position $ 16,656 $ 16,374
The accompanying notes are an integral part of these statements.
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EPA's FY 2007 Annual PRIA Financial Statements
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Environmental Protection Agency
PRIA
Statement of Net Cost
For the Years Ended September 30, 2007 and 2006
(Dollars in Thousands)
FY 2007 FY 2006
COSTS
Gross Cost (Note 8) $ 14,194 $ 9,908
Expenses from Other Appropriations (Note 6) 41,636 39,595
Total Costs
$ 55,830 $
49,503
Less:
Earned Revenues, (Notes 7 and 8)
13,812
9,530
NET COST OF OPERATIONS (Note 8)
$ 42,018 $
39,973
The accompanying notes are an integral part of these statements.
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EPA's FY 2007 Annual PRIA Financial Statements
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Environmental Protection Agency
PRIA
Statement of Changes in Net Position
For the Years Ended September 30, 2007 and 2006
(Dollars in Thousands)
Net Position - Beginning of Period
Budgetary Financing Sources:
Income from Other Appropriations (Note 6)
Total Budgetary Financing Sources
Other Financing Sources:
Imputed Financing Sources
Total Other Financing Sources
Net Cost of Operations
Net Change
Net Position - End of Period
FY 2007 FY 2006
$ (555) $ (454)
41,636 39,595
$ 41,636 $ 39,595
426_ 277_
$ 426 $ 277
(42,018) (39,973)
44 (101)
$ (5117 $ (555)
The accompanying notes are an integral part of these statements.
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EPA's FY 2007 Annual PRIA Financial Statements
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Environmental Protection Agency
PRIA
Statement of Budgetary Resources
For the Years Ended September 30, 2007 and 2006
(Dollars in Thousands)
FY 2007 FY 2006
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1: $ 12,340 $ 9,229
Recoveries of Prior Year Unpaid Obligations - 29
Budgetary Authority:
Appropriations 13,167 13,777
Total Budgetary Resources $ 25,507 $ 23,035
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct $ 15,247 $ 10,695
Total Obligations Incurred 15,247 10,695
Unobligated Balances:
Apportioned 10,260 12,340
Total Status of Budgetary Resources $ 25,507 $ 23,035
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 3,902 $ 2,647
Total Unpaid Obligated Balance, Net 3,902 2,647
Obligations Incurred, Net 15,247 10,695
Less: Gross Outlays (13,003) (9,411)
Less Recoveries of Prior Year Unpaid Obligations, Actual (29)
Total, Change in Obligated Balance 6,146 3,902
Obligated Balance, Net, End of Period:
Unpaid Obligations 6,146 3,902
Total, Unpaid Obligated Balance, Net, End of Period $ 6,146 $ 3,902
NET OUTLAYS
Net Outlays:
Gross Outlays $ 13,003 $ 9,411
Less Distributed Offsetting Receipts (Note 1 Section K) (13,167) (13,777)
Total, Net Outlays $ (164) $ (4,366)
The accompanying notes are an integral part of these statements.
12
EPA's FY 2007 Annual PRIA Financial Statements
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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 (which
amended the Federal Insecticide, Fungicide, and Rodenticide Act — FIFRA), 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 Pesticide Registration
Improvement Renewal Act (commonly referred to as PRIA II) extended the authority to collect
pesticide registration service fees through FY 2012. PRIA II became effective October 1, 2007.
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 2007 and 2006 were $41,636 thousand and $39,595 thousand,
respectively. This amount was included as Income from Other Appropriations on the Statements
of Changes in Net Position and as Expenses from Other Appropriations on the Statement of Net
Cost for FYs 2007 and 2006.
13
EPA's FY 2007 Annual PRIA Financial Statements
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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 2007 and 2006, PRIA received funding from fees collected from registrants requesting
pesticide registrations. For FYs 2007 and 2006, 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.
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 2 tol5 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, 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 2007 Annual PRIA Financial Statements
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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 SFFAS No. 5, "Accounting for Liabilities of the Federal Government,"
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 that the employing agencies 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 (OPM), as administrator of the CSRS and FERS, the Federal Employees
Health Benefits Program, and the Federal Employees Group Life Insurance Program, provide
Federal agencies with the actuarial cost factors to compute the liability for each program.
K. Offsetting Receipts
The FY 2007 OMB Circular A-136 Financial Reporting Requirements states that the amount of
distributed offsetting receipts reported in the Statement of Budgetary Resources (SBR) 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.
15
EPA's FY 2007 Annual PRIA Financial Statements
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Note 2. Fund Balance with Treasury:
FY 2007 FY 2006
Revolving Funds: Entity Assets $ 16,407 $ 16,243
Note 3. Other Liabilities:
For FYs 2007 and 2006, the Payroll and Benefits Payable, non-Federal, are presented on a
separate line of the Balance Sheet and in a separate footnote (see Note 5 below).
FY 2007 FY 2006
Other Intragovernmental Liabilities - Covered
by Budgetary Resources
Employer Contributions - Payroll $ 45 $ 45
Total $ 45 $ 45
Other Non-Federal Liabilities - Covered by
Budgetary Resources
Advances from Non-Federal Entities $ 15,119 $ 15,763
Total $ 15,119 $ 15,763
Note 4. Property, Plant and Equipment:
Plant, property and equipment consists of EPA-Held personal property.
As of September 30, 2007 and 2006, Property, Plant and Equipment consist of the following:
FY 2007 FY 2006
Acquisition Accumulated Net Book Acquisition Accumulated Net Book
Value Depreciation Value Value Depreciation Value
EPA-Held Equipment $ 403 $ (154) $ 249 $ 238 $ $ (107) $ 131
16
EPA's FY 2007 Annual PRIA Financial Statements
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Note 5. Payroll and Benefits Payable, non-Federal:
FY 2007 FY 2006
Covered by Budgetary Resources
Accrued Payroll Payable to Employees $ 144 $ 105
Withholdings Payable 96 94
Thrift Savings Plan Benefits Payable 7 7
Total $ 247 $ 206
Not Covered by Budgetary Resources
Unfunded Annual Leave $ 498 $ 427
Total $ 498 $ 427
At various periods throughout FYs 2007 and 2006, 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 2007 and 2006.) 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 2007 and 2006. The
liabilities covered by budgetary resources (both intragovernmental and non-Federal) represent
unpaid payroll and benefits at year-end. At the end of FY 2007, about 130 employees were
charging all or part of their salary and benefits to PRIA. As of September 30, 2007, these
liabilities were $45 thousand and $247 thousand for employer contributions and accrued funded
payroll and benefits as compared to FY 2006's balances of $45 thousand and $206 thousand,
respectively.
In contrast, the unfunded annual leave liability is a longer term liability than the funded
liabilities. At various periods throughout FYs 2007 and 2006, approximately 130 employees in
total have been under PRIA's accountability. As of September 30, 2007 and 2006 liability
balances for unfunded annual leave were accrued to cover these 130 employees for a total of
$498 thousand and $427 thousand, respectively.
17
EPA's FY 2007 Annual PRIA Financial Statements
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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 2007 and 2006, 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 2007 and 2006 (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 2007 and 2006 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
14,000 1
13 12,000
E
5 10,000
o
£ 8,000
o
J 6,000
o
j> 4,000
E
= 2,000
o 4
Months
FY07 Hours
FY06 Hours
18
EPA's FY 2007 Annual PRIA Financial Statements
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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
proportionately to total programmatic expenses. As illustrated below, this estimate does not
impact the PRIA's Net Position.
Income From Other
Appropriations
Expenses From Other
Appropriations
Net
Effect
FY 2007 $
41,636
$
41,636
$
0
FY 2006 $
39,595
$
39,595
$
0
Note 7. Exchange Revenues, Statement of Net Cost
For FYs 2007 and 2006, the exchange revenues reported on the Statement of Net Cost consists of
non-Federal amounts.
Note 8. Intragovernmental Costs and Exchange Revenue
FY 2007 FY 2006
COSTS:
Intragovernmental $ 3,118 $ 2,101
With the Public 11,076 7,807
Expenses from Other Appropriations 41,636 39,595
Total Costs $ 55,830 $ 49,503
REVENUE:
With the Public 13,812 9,530
Total Revenue $ 13,812 $ 9,530
NET COST OF OPERATIONS $ 42,018 $ 39,973
Intragovernmental costs relate to the source of the goods or services not the classification of the
related revenue.
19
EPA's FY 2007 Annual PRIA Financial Statements
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Note 9. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of
Financing)
FY 2007 FY 2006
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 15,247 $ 10,695
Less: Spending Authority from Offsetting Collections and Recoveries (29)
Obligations, Net of Offsetting Collections $ 15,247 $ 10,666
Less: Offseting Receipts (Note 1 Section K) (13,167) (13,777)
Net Obligations 2,080 (3,111)
Other Resources
Imputed Financing Sources $ 426 $ 277
Income from Other Appropriations (Note 6) 41,636 39,595
Net Other Resources Used to Finance Activities $ 42,062 $ 39,872
Total Resources Used To Finance Activities $ 44,142 $ 36,761
RESOURCES USED TO FINANCE ITEMS
NOT PART OF NET COST OF OPERATIONS
Change in Budgetary Resources Obligated $ (1,432) $ (1,136)
Offsetting Receipts Not Affecting Net Cost (Note 1 Section K) 13,167 13,777
Resources that Finance Asset Acquistion (165)
Total Resources Used to Finance Items Not
Part of the Net Cost of Operations $ 11,570 $ 12,641
Total Resources Used to Finance the Net
Cost of Operations $ 55,712 $ 49,402
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 70 53
Increase in Public Exchange Revenue Receivable $ (13,812) $ (9,530)
Total Components of Net Cost of Operations that
Requires or Generates Resources in the Future $ (13,742) $ (9,477)
Components Not Requiring/Generating Resources:
Depreciation and Amortization 48 48
Total components of Net cost of Operations that Will Not
Require or General Resources 48 48
Total components of Net cost of Operations that Will Not Require
or Generate Resources in the Current Period (13,694) (9,429)
Net Cost of Operations $ 42,018 $ 39,973
20
EPA's FY 2007 Annual PRIA Financial Statements
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Appendix B
Distribution
Office of the Administrator
Chief Financial Officer
Agency Followup Official (the CFO)
Deputy Chief Financial Officer
Agency Followup Coordinator
General Counsel
Assistant Administrator for Prevention, Pesticides, and Toxic Substances
Assistant Administrator for Administration and Resources Management
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Director, Office of Pesticide Programs, Office of Prevention, Pesticides, and Toxic Substances
Deputy Director, Office of Pesticide Programs, Office of Prevention, Pesticides, and
Toxic Substances
Director, Biopesticides and Pollution Prevention Division, Office of Prevention, Pesticides,
and Toxic Substances
Director, Special Review and Reregistration Division, Office of Prevention, Pesticides,
and Toxic Substances
Director, Registration Division, Office of Prevention, Pesticides, and Toxic Substances
Director, Antimicrobials Division, Office of Prevention, Pesticides, and Toxic Substances
Director, Information Technology and Resources Management Division, Office of Prevention,
Pesticides, and Toxic Substances
Director, Office of Human Resources, Office of Administration and Resources Management
Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Director, Research Triangle Park Finance Center
Director, Cincinnati Finance Center
Director, Las Vegas Finance Center
Director, Washington Finance Center
Audit Followup Coordinator, Office of the Chief Financial Officer
Audit Followup Coordinator, Office of Prevention, Pesticides, and Toxic Substances
Audit Followup Coordinator, Office of Administration and Resources Management
Audit Liaison, Washington Finance Center
Deputy Inspector General
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