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U.S. Environmental Protection Agency	19-P-0163
f AA \ Office of Inspector General	May 31 2019
I SSI
At a Glance
Why We Did This Project
The Improper Payments
Elimination and Recovery Act
of 2010 (IPERA) and the
Improper Payments Elimination
and Recovery Improvement Act
of 2012 require that each fiscal
year the Inspector General of
each agency determine
whether the agency is in
compliance with the law.
IPERA requires agencies to
annually estimate and report
improper payments for
programs and activities that are
deemed susceptible to
significant improper payments.
In addition, Office of
Management and Budget
Circular A-123, Appendix C,
states that the Office of
Inspector General should
evaluate the accuracy and
completeness of agency
reporting. Our audit focused on
the U.S. Environmental
Protection Agency's (EPA's)
compliance with these
requirements.
This report addresses the
following:
• Compliance with the law.
EPA Complied with Improper Payments Legislation
but Stronger Internal Controls Are Needed
What We Found
The EPA complied with IPERA in that it reported
all required information on improper payments,
but the EPA can improve the accuracy and
completeness of the information.
Improvement to processes
for preventing and detecting
improper payments will
result in better use of funds
for environmental and
supporting programs.
The EPA's estimated improper payments and
the improper payment error rate were
understated for fiscal year (FY) 2018. In the FY 2017 Agency Financial Report,
the EPA reported $12.37 million in estimated improper payments for grants. For
FY 2018, the EPA reported only $310,000 in estimated improper payments—
a decrease of nearly $12 million. We believe the improper payment amount
reported for FY 2018 is understated because our review of 25 payments, totaling
$4,418,774, identified an additional $1,912,275 in payments as improper due to
insufficient, or lack of documentation (see Appendix A for further details).
EPA staff did not effectively test drawdowns to verify whether costs were
allowable, allocable, reasonable and necessary; and did not use standard
operating procedures to substantiate the procedures performed.
Improvement to the testing of drawdowns and the statistical sample for grant
payments will aid in the better use of funds for environmental and supporting
programs.
Recommendations and Agency Corrective Actions
We recommend that the EPA revise the Office of the Chief Financial Officer's
grant improper payments review process to include internal controls for training
reviewers and annually verifying that reviewers are knowledgeable and proficient
in the identification and reporting of improper payments. We also recommend
that the Office of the Chief Financial Officer comply with the EPA's sampling and
estimation plan annually submitted to the Office of Management and Budget. The
agency agreed with our recommendations and indicated that corrective actions
were implemented in April 2019. We consider the recommendation resolved until
we confirm completion during next year's audit.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.oiq.
List of OIG reports.

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