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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Operating efficiently and effectively
EPA's Fiscal Years 2020
and 2019 (Restated)
Consolidated Financial
Statements
Report No. 21-F-0014
November 16, 2020
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Abbreviations
EPA
U.S. Environmental Protection Agency
FFMIA
Federal Financial Management Improvement Act of 1996
FMFIA
Federal Managers' Financial Integrity Act of 1982
FY
Fiscal Year
GAO
U.S. Government Accountability Office
OCFO
Office of the Chief Financial Officer
OIG
Office of Inspector General
OMB
Office of Management and Budget
U.S.C.
United States Code
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OIG Hotline@epa.gov
Learn more about our OIG Hotline.
EPA Office of Inspector General
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(202) 566-2391
www.epa.gov/oiq
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At a Glance
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act of
1994, which requires the
U.S. Environmental Protection
Agency's Office of Inspector
General to audit the financial
statements prepared by the
Agency each year. Our primary
objectives were to determine
whether:
• The EPA's consolidated
financial statements were
fairly stated in all material
respects.
• The EPA's internal controls
over financial reporting were
in place.
• EPA management complied
with applicable laws,
regulations, contracts, and
grant agreements.
The requirement for audited
financial statements was enacted
to help bring about improvements
in agencies' financial
management practices, systems,
and control so that timely,
reliable information is available
for managing federal programs.
This report addresses the
following:
• Operating efficiently and
effectively.
This report addresses a top EPA
management challenge:
• Fulfilling mandated reporting
requirements.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.
EPA's Fiscal Years 2020 and 2019 (Restated)
Consolidated Financial Statements
EPA Receives an Unmodified Opinion for FYs 2020 and 2019
We rendered an unmodified opinion on the
EPA's consolidated financial statements for
fiscal years 2020 and 2019 (restated), meaning
they were fairly presented and free of material
misstatement.
We found the EPA's
financial statements to be
fairly presented and free
of material misstatement.
Significant Deficiencies Noted
We noted the following significant deficiencies:
• The EPA continues to make misstatements and adjustment errors during its
consolidated financial statement and component financial statement
preparation processes.
• The EPA improperly recorded adjustments totaling over $141 million of
unearned revenue.
Compliance with Laws, Regulations, Contracts, and Grant
Agreements
We did not note any significant noncompliance with laws, regulations, contracts,
and grant agreements.
Recommendations and Planned Agency Corrective Actions
The EPA agreed with our recommendations but disagreed with some of the OIG
statements made about the first significant deficiency listed above. The EPA
disagreed that it was unable to detect errors and did not exercise due diligence.
The Agency also disagreed that it did not properly detect a $4 billion error. We
stand by our position that the lack of due diligence is evidenced by the errors
we found during this audit and that if the EPA had adequately prepared and
reviewed the adjustment, the error would not have been entered into the EPA's
accounting system.
List of OIG reports.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 16, 2020
MEMORANDUM
SUBJECT: EPA's Fiscal Years 2020 and 2019 (Restated) Consolidated Financial Statements
Report No. 21-F-0014
Attached is our report on the U.S. Environmental Protection Agency's fiscal years 2020 and 2019
(restated) consolidated financial statements. The project number for this audit was OA&E-FY20-0206.
We are reporting two significant deficiencies. Attachment 1 contains details on the significant
deficiencies. We did not note any instances of noncompliance. EPA managers, in accordance with
established EPA audit resolution procedures, will make final determinations on the findings in this audit
report.
The Agency agreed with the recommendations in this report. All recommendations are resolved, and no
final response to this report is required. If you submit a response, however, it will be posted on the OIG's
public 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 of 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.
FROM:
Paul C. Curtis, Director
Financial Directorate
TO:
Office of Audit
David Bloom, Deputy Chief Financial Officer
Attachments
1. Significant Deficiencies
2. Status of Prior Audit Report Recommendations
3. Status of Current Recommendations and Potential Monetary Benefits
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EPA's Fiscal Years 2020 and 2019 (Restated)
Consolidated Financial Statements
21-F-0014
Table of C
Inspector General's Report on EPA's Fiscal Years 2020
and 2019 (Restated) Consolidated Financial Statements
Report on the Financial Statements 1
Required Supplementary Information 2
Report on Internal Control over Financial Reporting 3
Tests of Compliance with Laws, Regulations, Contracts, and Grant Agreements 5
Prior Audit Coverage 6
Agency Response and OIG Assessment 6
Attachments
1. Significant Deficiencies 8
FINANCIAL STATEMENT PREPARATION
EPA Needs to Improve Its Financial Statement Preparation Processes 9
REVENUE
EPA Recorded Improper Adjustments to Superfund Special Account Unearned
Revenue in FYs 2020 and 2019 12
2. Status of Prior Audit Report Recommendations 14
3. Status of Current Recommendations and Potential Monetary Benefits 17
Appendices
I. EPA's FYs 2020 and 2019 (Restated) Consolidated Financial Statements 18
II. Agency Response to Draft Report 74
III. Distribution 80
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Inspector General's Report on
EPA's Fiscal Years 2020 and 2019 (Restated)
Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of the
U.S. Environmental Protection Agency, which comprise the consolidated balance sheets,
as of September 30, 2020, and September 30, 2019 (restated), and the related
consolidated statements of net cost, net cost by major program, changes in net position,
and custodial activity; the combined statement of budgetary resources for the years then
ended; and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in the
United States; this includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements
based upon our audit. We conducted our audit in accordance with auditing standards
generally accepted in the United States; 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 Bulletin 19-03, Audit Requirements
for Federal Financial Statements. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
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We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
The financial statements include expenses of grantees, contractors, and other federal
agencies. Our audit work pertaining to these expenses included testing only within the
EPA. The U.S. Department of the Treasury collects and accounts for excise taxes that are
deposited into the Leaking Underground Storage Tank Trust Fund. The Treasury is also
responsible for investing amounts not needed for current disbursements and transferring
funds to the EPA as authorized in legislation. Since the Treasury, and not the EPA, is
responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General is not independent with respect to amounts pertaining to
OIG operations that are presented in the financial statements. The amounts included for
the OIG are not material to the EPA's financial statements. The OIG is organizationally
independent with respect to all other aspects of the Agency's activities.
Opinion
In our opinion, the consolidated financial statements, including the accompanying notes,
present fairly, in all material respects, the consolidated assets, liabilities, net position, net
cost, net cost by major program, changes in net position, custodial activity, and combined
budgetary resources of the EPA as of and for the years ended September 30, 2020 and
2019, in conformity with accounting principles generally accepted in the United States.
Emphasis of Matter—Restatement Fiscal Year 2019
As described in Note 37, the EPA made certain restatements in its fiscal year 2019
financial statements to correct misstatements for Superfund cashout advances. Our
opinion is not modified with respect to these corrections.
Required Supplementary Information
Accounting principles generally accepted in the United States require that the information in
the Required Supplementary Information, Supplemental Information, and Management's
Discussion and Analysis sections be presented to supplemental EPAs financial statements.
Such information, although not a part of the basic consolidated financial statements, is
required by the OMB and the Federal Accounting Standards Advisory Board, which
consider it to be an essential part of the financial reporting that places the basic consolidated
financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the Required Supplementary Information,
Supplemental Information, and Management's Discussion and Analysis, in accordance with
auditing standards generally accepted in the United States, which consisted of inquiries of
management about the methods of preparing the information and comparing it for
consistency with management's responses to our inquiries, the basic consolidated financial
21-F-0014
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statements, and other knowledge we obtained during the audit of the basic consolidated
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Report on Internal Control over Financial Reporting
Opinion on Internal Control. In planning and performing our audit, we considered the
EPA's internal control over financial reporting by obtaining an understanding of the
Agency's internal control, determining whether internal control had been placed in
operation, assessing control risk, and performing tests of controls. We did this as a basis
for designing our audit procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on the financial statements and complying with OMB
audit guidance, but not for the purpose of expressing an opinion on effectiveness of
EPAs' internal control. Accordingly, we do not express an opinion on internal control
over financial reporting nor on management's assertion on internal control 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 19-03. We did
not test all internal controls relevant to operating objectives as broadly defined by the
Federal Managers' Financial Integrity Act of 1982, or FMFIA.
Material Weakness and Significant Deficiencies. Our consideration of the internal
control over financial reporting would not necessarily disclose all matters in the internal
control over financial reporting that might be significant deficiencies. A deficiency in
internal control over financial reporting exists when the design or operation of a control
does not allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect and correct misstatements on a timely basis. A
material weakness is a deficiency or combination of deficiencies in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement
of the entity's financial statements will not be prevented or detected and corrected on a
timely basis. A significant deficiency is a deficiency or a combination of deficiencies in
internal control over financial reporting that is less severe than a material weakness yet is
important enough to merit attention by those charged with governance.
Because of inherent limitations in internal control, misstatements, losses, or
noncompliance may nevertheless occur and not be detected. We noted certain matters,
which we discuss below, involving the internal control and its operation that we consider
to be significant deficiencies. These issues are summarized below and detailed in
Attachment 1.
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Significant Deficiencies
FINANCIAL STATEMENT PREPARATION
EPA Needs to Improve Its Financial Statement Preparation Processes
We found that the EPA continues to make misstatements and adjustment errors during its
consolidated financial statement and component financial statement preparation
processes. The OMB requires that information in the financial statements be presented in
accordance with generally accepted accounting principles. During its financial statement
preparation process, however, the EPA did not detect and correct multiple misstatements
and adjustment errors before they were entered into the EPA's accounting system or
statements. Not properly recording financial adjustments and not exercising due diligence
in the preparation of the financial statements compromise the accuracy of the financial
statements and the reliance on them to be free of material misstatement.
REVENUE
EPA Recorded Improper Adjustments to Superfund Special Account
Unearned Revenue in FYs 2020 and 2019
During our audit of the EPA's FYs 2020 and 2019 financial statements, we found that the
EPA improperly recorded adjustments totaling over $141 million of unearned revenue.
The U.S. Government Accountability Office's Standards for Internal Control in the
Federal Government requires accurate and timely recording of transactions and events. A
$120 million error, which impacted both the FYs 2020 and 2019 financial statements,
occurred because the Agency omitted relevant data in its analysis of its FY 2019
Superfund oversight accrual. A $21.5 million error, which impacted unearned revenue in
the FY 2020 financial statement, occurred because the Agency posted the adjustment to a
wrong account and incorrectly impacted unearned revenue. The EPA did not adequately
consider the effect that the adjustments would have on the FY 2020 financial statements.
Both errors could have been found and corrected if the Agency performed a more
complete analysis of its financial statement adjustments. When the EPA does not
properly analyze the effect of adjustments, it could materially misstate its financial
position and impact the reliability of its financial statements.
Attachment 2 contains the status of issues reported in prior years' reports on the EPA's
consolidated financial statements. The issues included in Attachment 2 should be
considered among the EPA's significant deficiencies for FY 2020. We reported less
significant internal control matters to the Agency during the course of the audit. We will
not issue a separate management letter.
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Comparison of EPA's FMFIA Report with Our Evaluation of Internal Control
OMB Bulletin 19-03 requires the OIG 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. The OIG is also required to identify material
weaknesses disclosed by the audit that were not reported in the Agency's FMFIA report.
For financial statement audit and financial reporting purposes, OMB Bulletin 19-03
defines material weaknesses in internal control as a deficiency or combination of
deficiencies in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be
prevented or detected and corrected on a timely basis.
Details concerning our findings on significant deficiencies can be found in Attachment 1.
Tests of Compliance with Laws, Regulations, Contracts, and
Grant Agreements
EPA management is responsible for complying with laws, regulations, contracts, and
grant agreements applicable to the Agency. As part of obtaining reasonable assurance
about whether the Agency's financial statements are free of material misstatement, we
performed tests of the Agency's compliance with certain provisions of laws, including
those governing the use of budgetary authority, regulations, contracts, and grant
agreements that have a direct effect on the determination of material amounts and
disclosures in the financial statements. We also performed certain other limited
procedures as described in Codification of Statements on Auditing Standards,
AU-C 250.14-16, "Consideration of Laws and Regulations in an Audit of Financial
Statements." OMB Bulletin 19-03 requires that we evaluate compliance with federal
financial statement system requirements, including the requirements referred to in the
Federal Financial Management Improvement Act of 1996, or FFMIA. We limited our
tests of compliance to these provisions and did not test compliance with all laws and
regulations applicable to the EPA.
Opinion on Compliance with Laws, Regulations, Contracts, and Grant Agreements
Providing an opinion on compliance with certain provisions of laws, regulations,
contracts, and grant agreements was not an objective of our audit and, accordingly, we do
not express such an opinion.
We did not identify any significant matters involving compliance with laws, regulations,
contracts, and grant agreements that came to our attention during the course of the audit.
Federal Financial Management Improvement Act Noncompliance
Under FFMIA, we are required to report whether the Agency's financial management
systems substantially comply with the federal financial management systems
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requirements, applicable federal accounting standards, and the United States Government
Standard General Ledger at the transaction level. To meet the FFMIA requirement, we
performed tests of compliance with FFMIA Section 803(a) requirements and used
OMB Memorandum M-09-06, Implementation Guidance for the Federal Financial
Management Improvement Act, dated January 9, 2009, to determine whether there was
any substantial noncompliance with FFMIA.
The results of our tests did not disclose any instances of noncompliance with FFMIA
requirements, including where the Agency's financial management systems did not
substantially comply with the applicable federal accounting standard.
We did not identify any significant matters involving compliance with laws, regulations,
contracts, or grant agreements related to the Agency's financial management systems that
came to our attention during the course of the audit.
Audit Work Required Under the Hazardous Substance Superfund Trust Fund
We also performed audit work to meet the requirements found in 42 U.S.C. § 961 l(k)
with respect to the Hazardous Substance Superfund Trust Fund and the stipulation to
conduct an annual audit of payments, obligations, reimbursements, or other uses of the
fund. The significant deficiencies reported above also relate to Superfund.
Prior Audit Coverage
During previous financial or financial-related audits, we reported weaknesses, as detailed
in Attachment 2, that impacted our audit objectives in the following areas:
• The EPA did not capitalize lab renovation costs.
• The EPA's internal controls over the accountable personal property inventory
process need improvement.
• Originating offices did not forward accounts receivable source documents in a
timely manner to the finance center.
• The EPA materially overstated earned revenue.
• The EPA should improve its efforts to resolve its long-standing cash differences
with the U.S. Treasury.
• The EPA improperly recorded e-Manifest receivables and earned revenue.
• The EPA needs to improve its financial statement preparation process.
Agency Response and OIG Assessment
The EPA agreed with our recommendations but disagreed with some of the OIG
statements made about the first significant deficiency discussed above and in
Attachment 1. The EPA disagreed that it was unable to detect errors and did not exercise
due diligence. The Agency also disagreed that it did not properly detect a $4 billion error.
We stand by our position that the lack of due diligence is evidenced by the errors we
21-F-0014
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found during this audit and that if the EPA had adequately prepared and reviewed the
adjustment, the error would not have been entered into the EPA's accounting system.
This report is intended solely for the information and use of the management of the EPA,
the OMB, and Congress, and it is not intended to be and should not be used by anyone
other than these specified parties.
Paul C. Curtis
Certified Public Accountant
Director, Financial Directorate
Office of Audit
Office of Inspector General
U.S. Environmental Protection Agency
November 9, 2020
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Attachment 1
Significant Deficiencies
Table of Contents
FINANCIAL STATEMENT PREPARATION
1 EPA Needs to Improve Its Financial Statement Preparation Processes 9
REVENUE
2 EPA Recorded Improper Adjustments to Superfund Special Account Unearned
Revenue in FYs 2020 and 2019 12
21-F-0014 8
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1—EPA Needs to Improve Its Financial Statement
Preparation Processes
We found that the EPA continues to make misstatements and adjustment errors during its
consolidated financial statement and component financial statement preparation processes. The
OMB requires that information in the financial statements be presented in accordance with
generally accepted accounting principles. During its financial statement preparation process,
however, the EPA did not detect and correct multiple misstatements and adjustment errors before
they were entered into the EPA's accounting system or statements. Not properly recording
financial adjustments and not exercising due diligence in the preparation of the financial
statements compromise the accuracy of the financial statements and the reliance on them to be
free of material misstatement.
OMB Circular A-136, Financial Reporting Requirements, Section II.3, requires that information
in the financial statements be presented in accordance with the generally accepted accounting
principles for federal entities issued by the Federal Accounting Standards Advisory Board's
Statement of Federal Financial Accounting Standards. In addition, the GAO's Standards for
Internal Control in the Federal Government defines the five components of internal control in
government, one of which is the standard for control activities. Under this standard, management
should design control activities to achieve objectives and respond to risks. The standard for
control activities requires appropriate documentation of transactions and internal controls.
Management is to clearly document internal control, all transactions, and other significant events
in a manner that allows the documentation to be readily available for examination. The standard
for control activities additionally requires accurate and timely recording of transactions and
events.
We reported in previous audits the need for the EPA to improve its financial statement
preparation process, as detailed in Attachment 2. However, we continue to find misstatements
and adjustment errors in the EPA's financial statement preparation processes. During our audit of
the EPA's FY 2020 consolidated financial statements, we found the following misstatements and
adjustment errors:
• Incorrect adjustments. The EPA incorrectly recorded an adjustment totaling
approximately $4 billion in its accounting system. The error occurred because the EPA's
preparation, analysis, and review of the adjustment before it was entered into the EPA's
accounting system did not detect or prevent the adjustment from being entered
incorrectly. The Agency subsequently recorded a financial statement adjustment to
mitigate the impact of the error.
• Misstated unearned revenue. The EPA misstated Superfund special account unearned
revenue balances by $120 million. The EPA made incorrect entries related to the removal
of the Superfund special account oversight accrual from its FY 2019 financial statements.
• Negative unexpended appropriations. The EPA made errors totaling approximately
$1.3 million that caused a negative balance in the "Unexpended Appropriations - Funds
21-F-0014
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from Dedicated Collections" line item in its FY 2020 balance sheet. The negative
amounts were the result of uncorrected errors that affect the equity accounts.
• Financial statement preparation errors. We found 26 errors in the EPA's FY 2020
draft financial statements. On multiple occasions, the EPA did not assign the correct
accounts to line items in the footnote disclosures, reported incorrect amounts, omitted
account activity, and was not consistent with prior year audited financial statements.
During audits of the EPA's component financial statements, we found the following
misstatements and errors:
• Toxic Substances Control Act Service Fee Fund financial statements for the period
from inception (June 22, 2016) through September 30, 2018. We found that the EPA
overstated its expenses from other appropriations by $8.4 million. The EPA made errors
in multiple iterations of its calculation for expenses from other appropriations.
Management did not have an adequate review process in place to ensure proper reporting
of costs incurred against other appropriations to support Toxic Substances Control Act
Service Fee Fund activities.
• FY 2019 Pesticide Registration Improvement Act Fund financial statements. We
found multiple instances where the EPA misstated its adjustments and financial
statements. We found that the Agency misreported contract expenses by approximately
$156,000, and statement of budgetary resources by approximately $48,000. We also
found that the EPA incorrectly calculated its payroll accrual.
• FY 2019 Hazardous Waste Electronic Manifest System Fund financial statements.
We found that the EPA misreported accounts receivable and earned revenue by
approximately $151,000, and accrued liabilities by approximately $183,000. We also
found various errors totaling at least $110,000.
The EPA did not detect and correct, during its financial statement preparation processes, the
errors and misstatements stated above. After we conducted account analyses of the activity and
questioned the Agency, staff stated that the EPA will prepare additional adjustments and revise
the current adjustments to correct the errors and misstatements we found. These issues highlight
the need for the EPA to strengthen its processes so that amounts and accounts are accurate and
properly posted in its accounting system, as well as to comply with federal accounting standards.
Failure to properly record financial adjustments and exercise due diligence in the preparation and
management review of the financial statements compromises the accuracy of the financial
statements and the reliance on them to be free of material misstatement.
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Recommendation
We recommend that the chief financial officer:
1. Develop a plan to strengthen and improve the preparation and management review of the
financial statements and adjustments entered into the accounting system so that errors and
misstatements are detected and corrected in a timely manner.
Agency Response and OIG Assessment
The EPA agreed with our recommendation; however, the EPA disagreed that it was unable to
detect errors and did not exercise due diligence. The Agency also disagreed that it did not
properly detect a $4 billion error. We stand by our position that the lack of due diligence is
evidenced by the errors we found during this audit and that if the EPA had adequately prepared
and reviewed the adjustment, the error would not have been entered into the EPA's accounting
system.
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2—EPA Recorded Improper Adjustments to Superfund Special
Account Unearned Revenue in FYs 2020 and 2019
During our audit of the EPA's FYs 2020 and 2019 financial statements, we found that the EPA
improperly recorded adjustments totaling over $141 million of unearned revenue. The GAO's
Standards for Internal Control in the Federal Government requires accurate and timely
recording of transactions and events. A $120 million error, which impacted both the FYs 2020
and 2019 financial statements, occurred because the Agency omitted relevant data in its analysis
of its FY 2019 Superfund oversight accrual. A $21.5 million error, which impacted unearned
revenue in the FY 2020 financial statements, occurred because the Agency posted the adjustment
to a wrong account and incorrectly impacted unearned revenue. The EPA did not adequately
consider the effect that the adjustments would have on the FY 2020 financial statements. Both
errors could have been found and corrected if the Agency performed a more complete analysis of
its financial statement adjustments. When the EPA does not properly analyze the effect of
adjustments, it could materially misstate its financial position and impact the reliability of its
financial statements.
OMB Circular A-136, Financial Reporting Requirements, Section II.3, requires that information
in the financial statements be presented in accordance with the generally accepted accounting
principles for federal entities issued by the Federal Accounting Standards Advisory Board's
Statement of Federal Financial Accounting Standards. In addition, the GAO's Standards for
Internal Control in the Federal Government defines the five components of internal control in
government, one of which is the standard for control activities. Under this standard, management
should design control activities to achieve objectives and respond to risks. The standard for
control activities requires appropriate documentation of transactions and internal controls.
Management is to clearly document internal control, all transactions, and other significant events
in a manner that allows the documentation to be readily available for examination. The standard
for control activities additionally requires accurate and timely recording of transactions and
events.
We found that the EPA improperly recorded adjustments in its FY 2020 draft financial
statements and its FY 2019 financial statements, as summarized in Table 1.
Table 1: Adjustments incorrectly affecting unearned revenue in fiscal year 2020 draft
financial statements
Fiscal year
affected
Description of error
Dollar amount
2019 and 2020
The Agency incorrectly impacted unearned revenue while removing the
Superfund oversight accrual in FY 2019. The issue carried over into
FY 2020.
$119,923,132.53
2020
The Agency made a FY 2020 draft financial statement adjustment as a
result of an OIG FY 2019 finding. The adjustment improperly impacted
unearned revenue when it should have impacted a receivable account.
21,498,292.10
TOTAL
$141,421,424.63
Source: OIG analysis of EPA data. (EPA OIG table)
In FY 2019, the Agency changed the way it accounted for Superfund special account activity.
Following the Agency's accounting change, it decided to remove the Superfund oversight
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accrual from its financial system. However, the FY 2019 adjustments of approximately
$120 million to remove the Superfund oversight accrual were not accurate.
In FY 2020, the EPA recorded two improper adjustments totaling over $141 million:
• A repeat of the approximately $120 million error from the incorrect Superfund
oversight accrual prior year adjustments in FY 2019. Since the Agency was no longer
posting the Superfund special account oversight accrual, this adjustment was incorrect.
• An approximately $21.5 million receivable adjustment in the unearned revenue
account. The adjustment resulted from an incomplete accounting entry that the OIG
identified in FY 2019. The Agency did not make the adjustment in FY 2019 and then
recorded an incorrect adjustment in its FY 2020 draft financial statements, decreasing
unearned revenue when it should have decreased a receivable account to eliminate
intragovernmental activity.
The EPA did not detect the $120 million or the $21.5 million error during its financial statement
preparation processes. These errors occurred because the Agency performed incomplete analyses
of the Superfund oversight accrual and other financial statement adjustments. When the EPA
does not properly analyze the effect of adjustments, it could materially misstate its financial
position and impact the reliability of its financial statements.
Recommendation
We recommend that the chief financial officer:
2. Develop a plan to evaluate and improve the EPA's process for preparing adjustments,
including an analysis of the impact of adjustments on general ledger accounts, and
improve the management review process to ensure general ledger impact is proper in the
financial statements.
Agency Response and OIG Assessment
The EPA agreed with our findings and recommendation and has completed corrective actions.
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Attachment 2
Status of Prior Audit Report Recommendations
The EPA explained to us that it continued to strengthen its audit and evaluation management
practices and procedures to address the OIG's audit and evaluation findings in a timely manner
and to complete corrective actions expeditiously and effectively. In FY 2020, the EPA's chief
financial officer, as the Agency follow-up official, continued to encourage senior managers to
evaluate the OIG's recommendations thoroughly, develop suitable and attainable corrective
actions, and implement the corrective actions in the agreed-upon time frame. The EPA also
accomplished other notable actions to strengthen its audit and evaluation management procedures:
• Worked closely with Agency audit follow-up coordinators during FY 2020 to ensure that
estimated milestone dates for planned corrective actions were being met and the required
certification memorandums were being submitted. Efforts by the Office of the Chief
Financial Officer were critical, significantly helping the OIG to accurately portray the
status of recommendations and associated corrective actions in our spring and fall
Semiannual Report to Congress.
• Continuously provides monthly reporting for the agencywide metric on the number of
planned corrective actions that were not completed by their estimated milestone date. The
intended purpose is to facilitate the implementation of Agency corrective actions to OIG
recommendations and decrease the number of late corrective actions.
• Developed an OIG and GAO tracker intended to provide Agency senior management
with visibility on OIG and GAO audits and evaluations. The tracker includes the most
recent audit and evaluation information. It is updated by the OCFO and distributed by the
Office of the Administrator monthly.
• Established the OIG GAO Audit Community SharePoint site that serves as a "one-stop-
shop" resource for the Agency's audit follow-up coordinators and liaisons. This
collaborative site includes audit and evaluation resources and reference materials, such as
standard operating procedures, audit templates, frequently asked questions, reporting
links and deadlines, and other useful information.
• Provided training during the OCFO Technical Series on the Agency's audit and
evaluation processes. The training included an update on existing and new processes for
OIG audit and evaluation work, specifically work completed under the Quality Standards
for Inspection and Evaluation, also called the "Blue Book."
• Held periodic meetings with Agency audit follow-up coordinators and liaisons to discuss
issues and concerns, emphasize adherence to corrective action milestone dates, and
reaffirm the need to keep the Management Audit Tracking System current.
• Began establishing a new tracking tool, called the Enterprise Audit Management System,
that will enable the Agency to track active OIG and GAO audits and evaluations and to
21-F-0014
14
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post information about audit and evaluation follow-up activities. This new tool will
accommodate data entry, tracking, and reporting for all phases of the audit and evaluation
life cycles.
The OCFO continues its commitment to improve the Agency's audit and evaluation management
practices and to engage early with the OIG on audit and evaluation findings to develop effective
corrective actions that address OIG recommendations; however, we continue to identify
significant deficiencies that remain outstanding in our financial statement audits. The table below
describes the recommendations from previous financial statement audits that remain either
unresolved or unimplemented.
Significant deficiency issues not fully resolved or implemented
EPA Did Not Capitalize Lab Renovation Costs
In our FY 2014 audit, we found that the EPA did not capitalize approximately $8 million of Research
Triangle Park lab renovations. As a result, the EPA did not properly classify the lab renovations as a
capital improvement. The Agency capitalized and booked the Research Triangle Park lab renovation
costs and related depreciation. One corrective action was partially completed: the EPA's Office of
General Counsel indicated continued agreement with its 1999 legal opinion regarding EPA construction
accounting but did not provide examples to guide the Agency's determinations of when renovation work
should be funded from Agency program appropriations or Building and Facilities funds. Corrective
actions for other recommendations related to this finding were initially due in September 2017; however,
the Agency revised the estimated milestone date to February 28, 2018. On July 18, 2018, the Office of
General Counsel stated that determining whether renovation work should be funded out of program
Agency dollars or Buildings and Facilities funds is very fact-specific; therefore, providing global
examples was not feasible. The Office of General Counsel has no further information to provide and
believes its review is complete. The OIG will continue to report the issue as not fully resolved.
EPA's Internal Controls Over Accountable Personal Property Inventory Process Need
Improvement
In our FY 2014 audit, we noted that the EPA reported a $2.6 million difference between the amount of
accountable personal property recorded in the property management system (Maximo) and the amount
of physical inventory for FY 2014. The EPA also identified 573 property items not recorded in Maximo.
During our FY 2019 audit, we found that the Agency made significant progress to correct the differences
between the amount of personal property recorded in the Agency's property management system
(Sunflower) and the amount of physical inventory. While the Agency has taken steps to correct
weaknesses, not all corrective actions implemented were completely effective. For example, the Agency
was unable to provide supporting documentation for the investigations conducted by the Board of
Survey, which is part of the EPA's Facilities Management and Services Division that serves as a fact-
finding body to determine the circumstances and conditions of EPA property that is declared lost,
damaged, or destroyed. Because of the FY 2020 coronavirus pandemic, the Agency was unable to
physically access and provide us with supporting documentation related to the Board of Survey
investigations. As a result, we are unable to assess the effectiveness of the Agency's corrective actions.
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to the
Finance Center
In FY 2014, we found that the EPA and the U.S. Department of Justice did not forward accounts
receivable source documents to the Cincinnati Finance Center in a timely manner. During FY 2015, the
EPA's Office of Enforcement and Compliance Assurance issued a memorandum reminding the regions
to provide accounts receivable enforcement documentation to the finance center in a timely manner.
While we have noted some improvements in the finance center's timely receipt of legal documents, we
still identified instances of untimely receipt in FYs 2015 through 2020. Therefore, the Agency's
corrective actions are not completely effective, and we will continue to evaluate whether the finance
center receives legal source documents in a timely manner in FY 2021.
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EPA Materially Overstated Earned Revenue
During FY 2018, the EPA did not properly eliminate internal Working Capital Fund earned revenue of
$147 million. Based on our findings, we recommended that the chief financial officer update the EPA's
standard operating procedures for Working Capital Fund elimination entries to include verification of
entries and proper ending balances. During FY 2019, we found that the EPA updated its standard
operating procedures to include verification of entries and proper ending balances; however, the EPA's
FY 2019 Working Capital Fund elimination entry did not properly eliminate Working Capital Fund earned
revenue balances. During FY 2020, we found again that the EPA's Working Capital Fund elimination
entry did not properly eliminate Working Capital Fund earned revenue balances. Therefore, the EPA's
corrective action was not completely effective.
EPA Should Improve Its Efforts to Resolve Long-Standing Cash Differences with Treasury
During our FY 2018 audit, we found that the EPA had not resolved $2.2 million in long-standing cash
differences between the EPA and Treasury balances. Based on our finding, we recommended that the
chief financial officer require the Accounting and Cost Analysis Division and the Las Vegas and
Cincinnati finance centers to research and resolve cash differences. The Agency agreed with our finding
and recommendation. According to the Agency, corrective action was completed on September 13,
2019. During our FY 2020 audit, the EPA provided supporting documentation related to its corrective
actions. The support provided was not sufficient to show that the EPA cleared the FY 2018
long-standing differences. We also continue to find recurring differences in FY 2020. Therefore, we do
not consider the corrective actions complete.
EPA Improperly Recorded e-Manifest Receivables and Earned Revenue
During our FY 2019 audit, we found that the EPA did not properly record $15,682,808 of e-Manifest
receivables in FY 2019. The EPA did not establish proper accounting models to record account
receivables for e-Manifest fees, interest, and penalties or to recognize earned revenue from federal
versus nonfederal sources at the transaction level. As a result, the EPA is noncompliant with accounting
standards because account receivables and earned revenue are understated during the year.
Consequently, interest, penalties, and federal revenue are misstated in the financial statements.
Furthermore, the EPA is not in compliance with either Statement of Federal Financial Accounting
Standards 1, which requires the recognition of a receivable when a legal claim exists, or Statement of
Federal Financial Accounting System 7, which requires revenue recognition when the goods or services
were provided. We recommended that the chief financial officer update the accounting models to
properly record collections and not reduce an account receivable account; establish accounting models
to properly record e-Manifest accounts receivable and recognize earned revenue at the transaction
level; establish accounting models to properly classify and record interest, fines, penalties, and fees;
and establish accounting models to properly record receivables, collections, and earned revenue from
federal versus nonfederal vendors. The EPA agreed with our findings and recommendations. The
Agency's estimated completion date for corrective actions is September 30, 2021.
EPA Needs to Improve Its Financial Statement Preparation Process
During our FY 2019 audit, we found multiple instances whereby the Agency had major misstatements of
its financial transactions and financial statements. We recommended that the chief financial officer
evaluate and improve the EPA's process for preparing financial statements and provide accurate and
reliable supporting documentation for adjustments and corrections to the financial statements. The EPA
agreed with our findings and recommendations. The Agency's estimated completion date for corrective
actions was July 31, 2020, for Recommendation 1 and February 29, 2020, for Recommendation 2.
During FY 2020, we identified multiple instances in other FY 2019 financial statement audits whereby
the Agency had major misstatements of its financial transactions and financial statements. Therefore,
we do not consider these corrective actions complete.
Source: OIG analysis.
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Attachment 3
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec.
No.
Page
No.
Subject
Status*
Action Official
Planned
Completion
Date
11 Develop a plan to strengthen and improve the preparation and
management review of the financial statements and adjustments
entered into the accounting system so that errors and
misstatements are detected and corrected in a timely manner.
13 Develop a plan to evaluate and improve the EPA's process for
preparing adjustments, including an analysis of the impact of
adjustments on general ledger accounts, and improve the
management review process to ensure general ledger impact is
proper in the financial statements.
Chief Financial Officer
Chief Financial Officer
7/31/21
11/9/20
Potential
Monetary
Benefits
(in $000s)
" $1,072
$141,421
* C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
"The negative unexpended appropriations consists of approximately $1,072 million from Federal Insecticide, Fungicide, and Rodenticide Act funds and $199,450
from Hazardous Waste Electronic Manifest System funds. We are reporting monetary benefits for the Federal Insecticide, Fungicide, and Rodenticide Act funds
in this report, and the Hazardous Waste Electronic Manifest System amount will be reported separately in the fiscal year 2019 e-Manifest component financial
statement audit.
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EPA's FYs 2020 and 2019 (Restated)
Consolidated Financial Statements
Appendix I
EPA's Fiscal Year 2020 and 2019
Consolidated Financial Statements (With Restatement)
Financial Section
-------
Table of Contents
Principal Financial Statements .1
Notes to Financial Statements X
Note 1, Summary of Significant Accounting Policies 8 - 15
Note 2. Fund Balance with Treasury (FBWT) 15 - 16
Note 3, Cash and Other Monetary Assets 16
Note 4. Investments 16 - 17
Note 5. Accounts Receivable, Net 17
Note 6. Other Assets 17
Note 7. Direct Loans Receivable, Net 18 - 20
Note 8. Accounts Payable and Accrued Liabilities 21
Note 9. General Property Plant and Equipment 21 - 22
Note 10. Debt Due to Treasury. 22
Note 11. Stewardship Property, Plant and Equipment 23
Note 12. Custodial Liability 23
Note 13. Other Liabilities 24 - 25
Note 14. Leases 25 - 26
Note 15. FECA Actuarial Liabilities 26
Note 16. Cashout Advances, Superfund (Restated) 26
Note 17. Commitments and Contingencies .27 - 28
Note 18. Funds from Dedicated Collections (Unaudited) (Restated) 29 - 31
Note 19. Environmental Cleanup Costs 32
Note 20. State Credits 32 - 33
Note 21. Preauthorized Mixed Funding Agreements 33
Note 22. Custodial Revenues and Accounts Receivable 33
Note 23. Reconciliation of President's Budget to the Statement of Budgetary Resources 33
Note 24. Recoveries and Resources Not Available. Statement of Budgetary Resources 34
Note 25. Unobligated Balances Available. 34
Note 26. Undelivered Orders at the End of the Period 34
Note 27. Offsetting Receipts 35
Note 28. Transfers-In and Out, Statement of Changes in Net Position 35 - 36
Note 29. Imputed Financing 36
Note 30. Payroll and Benefits Payable 37
Note 31. Other Adjustments, Statement of Changes in Net Position 37
Note 32. Non-Exchange Revenue, Statement of Changes in Net Position 38
Note 33. Reconciliation of Net Cost of Operations to Budget (Restated) 39 - 41
Note 34. Amounts Held by Treasury (Unaudited) 42 - 45
Note 35. COVID-19 Activity ' 45
Note 36. Reclassified Financial Statements for Government-wide Reporting 45 - 50
Note 37. Restatement 50
Required Supplementary Information (Unaudited) 51 - 54
Deferred Maintenance 51
Supplemental Statement of Budgetary Resources 54
21-F-0014 19
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Principal Financial Statements
United States Environmental Protection Agency
Consolidated Balance Sheet
As of September 30,2020 and 2019 (Restated)
(Dollars in Thousands)
ASSKTS
Intragovemmental:
Fund Balance With Treasury (Note 2)
Investments (Note 4)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intrasovemmental
2020
10,823,112
5,969,666
51,872
198.268
17,042,918
Restated
2019
10.056,926
5.997.657
34.802
210.591
16,299.976
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Direct Loans Receivable. Net (Note 7)
Property. Plant and Equipment. Net (Note 9)
Other (Note 6)
Total \s.M'ls
10
10
503,725
500,886
196,470
263
659,668
671.207
8.209
7.714
; 18.41 i.ooo :
5 17.480.056
LIABILITIES
Intragovemmental:
Accounts Payable and Accrued Liabilities (Note 8)
$ 152,014 $
136.825
Debt Due to Treasury (Note 10)
221,652
266
Custodial Liability (Note 12)
72,018
36.494
Other (Note 13)
158.195
177.294
Total Intragovemmental
603,879
350,879
Accounts Payable and Accrued Liabilities (Note 8)
525.173
540.235
Pensions and Other Actuarial Liabilities (Note 15)
50,451
42,044
Environmental Cleanup Costs (Note 19)
38.383
32,810
Cashout Advances. Superfund (Note 16 and 37)
3,472.784
3,573,240
Commitments and Contingencies (Note 17)
38
-
Payroll and Benefits Payable (Note 30)
253,254
203.985
Other (Note 13)
149.681
140.549
Total Liabilities
5.093.643
4.883.742.
MCI POSITION
Unexpended Appropriations - Funds from Dedicated Collections (Note 18)
(189)
U 04)
Unexpended Appropriations - Other Funds
9,600,037
8 929 5n5
Cumulative Results of Operations - Funds from Dedicated Collections (Note 18
and 37)
3.307,079
3,170.594
Cumulative Results of Operations - Other Funds
410.430
497.399
Total Net Position
13.317.357
12.596.314
Total Liabilities and Net Position
$ 18.411.000 $
17.480.056
The accompanying notes are an integral part of these financial statements.
21-F-0014
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United States Environmental Protection Agency
Consolidated Statement of Net Cost
For the Fiscal Years Ending September 30, 2020 and 2019
(Dollars in Thousands)
Restated
2020 2019
COSTS
Gross Costs
Earned Revenue (Note 37)
$
9,335,328 $
514.164
8,883,930
338.757
NET COST OF OPERATIONS (Note 33 and 37)
$
8.821.164 $
8.545.173
The accompanying notes are an integral part of these financial statements.
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United States Kmironmental Protection Agency
Statement of Net Cost In Ma jor Program
For the l'iscal "S oar F.ndiug September JO, 2020
(Dollars in Thousands)
State &
Environmental Leaking Tribal
Programs & Underground Science £ Assistance
Management Storage Tanks Techno] B\ Superfund Agreements Other Totals
Costs:
Gross Costs
WCF Elimination
$ 2,721,796 $
97,770
$ 721,616
$ 1,505,804
$ 3,999,283
$ 563,190
(-274.191)
$9,609,519
(274.191)
Total Cost.
2,721,796
97,770
721,616
1,505,864
3.999.283
288,999
9.335.328
Less:
Earned Revenue
WCF Elimination
26,615
-
6,978
362,342
-
392,420
(274.191)
788.355
1*274.1911
Total Earned Revenue
t.t 1
6.978
362.342
118.229
514.164
M 1 < OST OF
Ol 1 K .HONS
$ 2.695.181 $
97.770
$ 714.638
$1,143,522
S 3.999.283
$ 170.770
S 8.821.164
I'nited States F'litironmental Protection Agency
Statement of Net ( ost by Ma jor Program
For the F iscal Year Knding September 30. 2019 (Restated)
(Dollars in Thousands)
Environmental
Programs &
Management
Leaking
Underground
Science &
State &
Tribal
Assistance
Agreements
Other
Totals
Costs:
Gross Costs
WCF Elimination
Total Costs
Less:
Earned Revenue (Note 37)
WCF Elimination
Total Earned "Revenue
M> I ( OST OF
OI'KR VI'IONS (Note
37)
$ 2,650,992 $
89 019
$ 709.019
$ 1,392,940
$3,876,041
$ 3^8,223
$9,110,234
..
_
(232.304)
(232,31)4)
2,650,992
89,019
709,019
1,392,940
3.876.041
165,919
8.883.93H
79,874
5,963
179,115
305.S87
570.839
-
1222.082)
.232.082)
79.874
5.963
179.115
73,805
338.757
S 2.571.118 S
89.019
S 703.056
$1,213,825
$3,876,041
$ 92.114
$8,545,173
The accompanying notes are an integral part of these financial statements.
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I 11 ifed States Kmironmental Protection Agency
Consolidated Statement of Changes in Net Position
Tortile Fiscal Year F.iuliii" September 30, 2020
(Dollars in Thousands)
Funds from
Dedicated
Collections
All Other
Funds
Consolidated
Total
Cumulative Results of Operations:
Net Position - Beginning of Period
$ 3,170,594
$ 497,399
$
3,667,993
Budgetary Financing Sources:
Other Adjustments (Note 31)
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 32)
Nonexchange Revenue - Other (Note 32)
Transfers In/Out
Transfers In/Out - Nonmonetary
Trust Fund Appropriations
(1.072)
(3)
90,116
239.795
(26,636)
544
1.076.535
8,458,703
42,081
(325)
(1.071.0071
(1.072)
8.458.700
90.116
239.795
15.445
219
5.528
Total Budgetary Financing Sources
1.379.279
7,429,452
8.808,731
Other Financing Sources (Non-K\change)
Imputed Financing Sources (Note 29)
Other Financing Sources
9,131
415
52,818
(415)
61,949
Total Other Financing Sources
9,546
52.403
61,949
Net Cost of Operations
$ (1,252,340)
S (7,568,824)
$
(8,821,164)
Net Change
136.485
(86.969)
49.516
Cumulative Results of Operations
$ 3.307.079
S 410.430
$
3.717.509
Funds from
Dedicated
Collections
All Other
Funds
Consolidated
Total
Unexpended Appropriations:
Net Position - Beginning of Period
$ (1,264)
$ 8,929,585
$
8,928,321
Budgetary Financing Sources:
Appropriations Received
Appropriation Transfers-In/Out
Other Adjustments (Note 31)
Appropriations Used
1.072
3
9,148,119
(18,964)
(8.458.703)
9.148.119
(17.892)
(8.458.700)
Total Budgetary Financing Sources
1.075
670,452
671,527
Total Unexpended Appropriations
("189"!
9.600.037
9,599,848
TOTAL NET POSITION
$ 3.306.890
$ 10.010.467
$
I3.3r.35"
The accompanying notes are an integral part of these financial statements.
4.
21-F-0014
23
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I 11 ifed States Kmii'onmental Protection Agency
Consolidated Statement of Changes in Net Position
For (7,224,524)
$
(8,545,173)
Net Change
204.358
(11.237)
193.121
Cumulative Results of Operations (Note 37)
S 3.170.594 !
£ 497.399
S
3.667.993
Funds from
Dedicated
Collections
All Other
Funds
Consolidated
Total
Unexpended Appropriations:
Net Position - Beginning of Period
S 2,790 !
S 8,058,744
$
8,061,534
Budgetary Financing Sources:
Appropriations Received
Appropriation Transfers-In 'Out
Other Adjustments (Note 31)
Appropriations Used
Total Budgetary Financing Sources
(4.054)
(4.054)
9,288.440
2,717
(229,890)
(8.190.426)
870,841
9,288,440
2,717
(229,890)
(8.194.480)
866.787
Total Unexpended Appropriations
(1.264)
8,929.585
8,928,321
TOTAL NET POSITION
$ 3.169.330 !
S 9.426.984
$
12.596.314
The accompanying notes are an integral part of these financial statements.
5.
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United States Kmironniental Protection Agency
Combined Statement of Ifudgetar^ Resources
For the Fiscal ^ ears Knding September 30, 2020 and 2019
(Dollars in Thousands)
2020
2019
HI IXIKT \RY RKSOl'RCKS
I Unobligated Balance From Prior Year Budget
Authority. Net (discretionary and mandatory)
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority (discretionary and mandatory)
Total Budgetary Resources
ST \Tl S OF HI DGFTARY RKSOl R( I S
New Obligations and Upward adjustments (total)
Unobligated Balance. End of Year:
Apportioned, Unexpired Accounts
Unapportioned. Unexpired accounts
Expired Unobligated Balance. End of Year
I Tnobligated Balance. End of Year (total):
Total Status ol' Budgetary Resources
OUTLAYS, NF1 AM) DISBURSEMENTS, MOT
Outlays. Net (total) (discretionary and mandatory)
Distributed Offsetting Receipts (-) (Note 27)
Agency Outlays, Net (discretionary and mandatory)
Disbursements, Net (total) (mandatory)
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
$ 5,808,190
10,737,950
398.507 _
S 16.944.647 $ 3.603.403 $ 16.073.983 S 2.545.077
20,914
3,576,684
5.805
$ 4,714,826 $ 1,461,572
10,801,690
1,083,500
557.467
11,304,380 $ 2,988,163
5,446,701 615,240
4.562
189.004
S 10,613,226 $ 2,524,163
5,273,498 20,914
917
186,342
5.640,267
615.240
5.460.757
20.914
; 16.944,647 $
3,603,403
$ 16.073.983 $
2.545.077
; 10,092,803
$ 9,648,346
(1.369.396)
(1.584.783)
; 8.723.407
S 8.063.563
$
221.381
$
264
The accompanying notes are an integral part of these financial statements.
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United States Kmii'oimicntal Protection Agency
Statement of Custodial Activity
For the Fiscal Years Knding September 30, 2020 and 2019
(Dollars in Thousands)
2020
2019
Revenue Aclivilv:
Sources of Cash Collections:
Fines and Penalties
$ 171.950 $
352.092
Other
(16.486)
(4.359)
Total Cash Collections
155.464
347,733
Accrual Adjustment
13.714
8.912
Totai Custodial Ri".emit' (Note 22)
$ 169.178 S
356.645
Disposition of Collections:
Transferred to Others (General Fund)
$ 155,055 $
347,711
Increases decreases in Amounts to be Transferred
14.123
8.934
Total Disposition of Collections
$ 169.178 S
356.645
Net Custodial Revenue Activity
$ - S
-
The accompanying notes are an integral part of these financial statements.
7.
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Reporting Entities
The KPA was created in 1970 by executive reorganization from various components of other federal agencies to better
marshal and coordinate federal pollution control efforts. The Agency is generally organized around the media and
substances it regulates - air, water, waste, pesticides, and toxic substances.
The FY 2020 financial statements are presented on a consolidated basis for the Balance Sheet Statement of Net Cost,
Statement of Net Costs by Major Program, and Statement of Changes in Net Position. The Statement of Custodial
Activity and the Statement of Budgetary Resources are presented on a combined basis. The financial statements
include the accounts of all funds described in this note by their respective Treasury fund group.
B. Basis of Presentalion
The accompanying financial statements have been prepared to report the financial position and results of operations of
the U. S. Environmental Protection Agency (the EPA or Agency) as required by the Chief Financial Officers Act of
1990 and the Government Management Reform Act of 1994. The reports have been prepared from the financial
system and records of the Agency in accordance with Office of Management and Budget (OMB) Circular No. A-136,
Financial Reporting Recpiirements. and the EPA accounting policies, which are summarized in this note.
C. Budgets and Budgetary Accounting
I. General Funds
Congress enacts an annual appropriation for State and Tribal \ssistance Grants (STAG), Buildings and Facilities
(B&F), and for payments to the Hazardous Substance Superfund to be available until expended. Annual
appropriations for the Science and Technology (S&T), Environmental Programs and Management (EPM) and for the
Office of Inspector General (OIG) are available for two fiscal years. When the appropriations for the General Funds
are enacted. Treasury issues a warrant for the respective appropriations. As the Agency disburses obligated amounts,
the balance of funds available in the appropriation is reduced at the U.S. Treasury (Treasury).
The EPA has three-year appropriation accounts and a no-year revolving fund account to provide funds to carry out
section 3024 of the Solid Waste Disposal Act. including the development, operation, maintenance, and upgrading of
the hazardous waste electronic manifest system. The Agency is authorized to establish and collect user fees for the
Hazardous Waste Electronic Manifest System Fund to recover the full cost of providing the hazardous waste
electronic manifest fund system related services.
The EPA receives two-year appropriated funds to cany out the Frank R. Lautenberg Chemical Safety for the 21"'
Century Act. Under the Act. the Agency is authorized to collect users fees (up to S25 million annually) from chemical
manufacturers and processor's. Fees collected will defray costs for new chemical reviews and a range of Toxic
Substances Control Act Service Fee Fund (TSCA) implementation activities for existing chemicals.
The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) established a Federal credit program
administered by the F.PA for eligible water and wastewater infrastructure projects. The program is financed from
appropriations to cover the estimated long-term cost of the loan. The long-term cost of the loans is defined as the net
present value of the estimated cash flows associated with the loans. A permanent indefinite appropriation is available
to finance the costs of re-estimated loans that occur in subsequent years after the loans are disbursed. The Agency
received two-year appropriations in fiscal years 2020 and 2019 to finance the administration portion of the program.
EPA re-estimates the risk on each individual loan annually. Proceeds issued by EPA cannot exceed forty-nine percent
of eligible project costs. Project costs must exceed a minimum of $20 million for large communities and $5 million for
communities with populations of 25.000 or less. After substantial completion of a project, the borrower may defer up
to five years to start loan repayment and cannot exceed thirty-five years for the final loan maturity date.
8.
21-F-0014
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Funds transferred from oilier federal agencies are processed as non-expenditure transfers. Clearing accounts and
receipt accounts receive no appropriated funds. .Amounts are recorded to the clearing accounts pending further
disposition. Amounts recorded to the receipt accounts capture amounts collected for or payable to the Treasury
General Fund.
II. Re\ohing Funds
Funding of the Reregislration and Expedited Processing Fund (FIFRA) is provided by fees collected from industry to
offset costs incurred by the Agency in carrying out this programs. Each year, the Agency submits an apportionment
request to OMR based on the anticipated collections of industry fees.
Funding of the Working Capital Fund (WCF) is provided by fees collected from other Agency appropriations and
other federal agencies to offset costs incurred for providing the Agency administrative support for computer and
telecommunication services, financial system services, employee relocation services, background investigations,
continuity of operations, and postage.
The EPA Damage Assessment and Restoration Revolving Fund was established through the U.S. Department of the
Treasury and OMB for funds received for critical damage assessments and restoration of natural resources injured as a
result of the Deepwater Horizon oil spill.
III. Special Funds
The Environmental Services Receipts Account Fund obtains fees associated with environmental programs. The
Pesticide Registration Improvement Act Funds (PRIA) collects pesticide registration service fees for specified
registration and amended registration and associated tolerance actions which set maximum residue levels for food and
feed.
IV. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit accounts pending further
disposition. Until a determination is made, these are not the EPA's funds. The amounts are reported to the U.S.
Treasury through the Government-Wide Treasury Account Symbol Adjusted Trial Balance System (GTAS).
V. Trust Funds
Congress enacts an annual appropriation for the Hazardous Substance Superfund, Leaking Underground Storage Tank
(LUST) and die Inland Oil Spill Programs accounts to remain available until expended. Transfer accounts for the
Superfund and LUST Trust Funds have been established to record appropriations moving from the Trust Fund to
allocation accounts for purposes of carrying out the program activities. As the Agency disburses obligated amounts
from the expenditure account, the Agency draws down monies from the Superfund and LUST Trust Funds held al
Treasury to cover the amounts being disbursed. The Agency draws down all the appropriated monies from the
Principal Fund of the Oil Spill Liability Trust Fund when Congress enacts the Inland Oil Spill Programs appropriation
amount to the EPA's Inland Oil Spill Programs account.
In 2015, the EPA established a receipt account for Superfund special account collections. Special accounts are
comprised of reimbursements from other federal agencies, state cost share payments under Superfund State Contracts
(SSCs), and settlement proceeds from Potentially Responsible Parties (PRPs) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) Section 122(b)(3). This allows the Agency to
invest the funds until drawdowns are needed for special accounts disbursements. The Agency updated posting models
and began to fully utilize this receipt account on January 31, 2019.
VI. Classified Activities
Accounting standards require all reporting entities to disclose that accounting standards allow certain presentations
and disclosures to be modified, if needed, to prevent the disclosure of classified information.
9.
21-F-0014
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
VII. Allocation Transfers
The EPA is a party to allocation transfers with other Federal agencies as both a transferring (parent) entity and/or a
receiving (child) entity. Allocation transfers are legal delegations for one entity of its authority to obligate budget
authority and outlay funds to another entity. A separate fund account (allocation account) is created in the U.S.
Treasury as a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of
balances are credited to this account, and subsequent obligations and outlays incurred by the child entity are charged
to this allocation account as they execute the delegated activity on behalf of the parent entity. Generally, all financial
activity related to allocation transfers (e.g., budget authority, obligations, outlays) is reported in the financial
statements of the parent entity from which the underlying legislative authority, appropriations and budget
apportionments are derived. The EPA allocates funds, as the parent, to the Center for Disease Control. The
EPA receives allocation transfers, as the child, from the Bureau of Land Management.
D. Basis of Accounting
Generally Accepted Accounting Rrinciples (GAAP) for federal entities is the standard prescribed by the Federal
Accounting Standards Advisory Board (FASAB), which is the official standard-setting body for the Federal
Government and the American Institute of Certified Public Accountants (AICPA), The financial statements are
prepared in accordance with GAAP for federal entities.
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 liabilities are incurred, without regard to receipt or
payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of
federal funds posted in accordance with OMB directives and the U.S. Treasury regulations.
EPA uses a modified matching principle since t I ral entities recognize unfunded liabilities (without budgetary
resources) in accordance FASAB Statement of Federal Financial Accounting Standards (SFFAS) No. 5 Accounting
for Liabilities of the Federal Government.
K. Revenues and Other Financing Sources
The following FPA policies and procedures to account for inflow of revenue and other financing sources are in
accordance with SFF AS No. 7, Accounting for Revenues and Other Financing Sources.
I. Superfund
The Superfund program receives most of its funding through appropriations that may be used within specific statutory
limits for operating and capital expenditures (primarily equipment). Additional financing for the Superfund program is
obtained through: reimbursements from other federal agencies, state cost share payments under Superfund State
Contracts (SSCs), and settlement proceeds from PRPs under CERCLA Section 122(b)(3) which are placed into
special accounts. Special accounts and corresponding interest are classified as mandatory appropriations due to the
'retain and use" authority under CERCLA 122(b) (3). Cost recovery settlements that are not placed in special accounts
are deposited in the Superfund Trust Fund.
II. Other Funds
Funds under the Federal Credit Reform Act of 1990 receive program guidance and funding needed to support loan
programs through appropriations which may be used within statutory limits for operating and capital expenditures.
The WIFIA program receives additional funding to support awarding, servicing and collecting loans and loan
guarantees through application fees collected in the program fund. WTFIA authorizes the EPA to charge fees to
recover all or a portion of the Agency's cost of providing credit assistance and the costs of retaining expert firms,
including financial, engineering, and legal services, to assist in the underwriting and servicing of federal credit
instruments. The fees are to cover costs to the extent not covered by congressional appropriations.
10,
21-F-0014
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I nifed States Kmironmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
The JHTFRA and PRIA funds receive funding through fees collected for services provided and interest on invested
funds and can obligate collections up to the amount of anticipated collections within the fiscal year on the approved
letter of apportionment The Hazardous Waste Electronic Manifest System Fund receives funding through fees
collected for use of the Hazardous Waste Electronic Manifest System and can obligate collections up to the amount of
anticipated collections on the approved letter of apportionment. The WCF receives revenue through fees collected for
services provided from the Agency program offices. Such revenue is eliminated with related Agency program
expenses upon consolidation of the Agency's financial statements.
Appropriated funds are recognized as other financing sources expended when goods and services have been rendered
w ithout regard to payment of cash. Other revenues are recognized when earned (i.e., when services have been
rendered).
F. Funds with the T reasury
The Agency does not maintain cash in commercial bank accounts. Cash receipts and disbursements are handled by
Treasury. The major funds maintained with Treasury are General Funds. Revolving Funds, Trust Funds, Special
Funds, Deposit Funds, and Clearing Accounts. These funds have balances available to pay current liabilities and
finance authorized obligations, as applicable.
(;. Investments in l .S. Government Securities
Investments in U.S. Government securities are maintained by Treasury and are reported at amortized cost net of
unamortized discounts. Discounts are amortized over the term of the investments and reported as interest income. No
provision is made for unrealized gains or losses on these securities because they generally are held to maturity (see
Note 4).
II. Marketable Securities
The Agency records marketable securities at cost as of the da te of receipt. Marketable securities are held by Treasury
and reported at their cost value in the financial statements until sold (see Note 4).
I. Accounts Kecchable and Interest Receivable
Superfund accounts receivable represent recover)" of costs from PRPs as provided under CERCLAas amended by the
Superfund ,Vmendments and Reauthorization Act of 1986 (SARA). Since there is no assurance that these funds will be
recovered, cost recovery expenditures are expensed when incurred (see Note 5). The Agency also records allocations
receivable from the Super&nd Trust Fund, which are eliminated in the consolidated totals.
The Agency records accounts receivable from PRPs for Superfund site response costs when a consent decree,
judgment administrative order, or settlement is entered. These agreements are generally negotiated after at least some,
but not necessarily all. of the site response costs have been incurred. It is the Agency's position that until a consent
decree or other form of settlement is obtained, the amount recoverable should not be recorded.
The Agency also records an accounts receivable from slates for a percentage of Superfund site remedial action costs
incurred by the Agency within those states, ^ks agreed to under SSCs, cost sharing arrangements may vary according
to whether a site was privately or publicly operated at the time of hazardous substance disposal and whether the
Agency response action was removal or remedial. SSC agreements are usually for 10 percent or 50 percent of site
remedial action costs, depending on who has the primary responsibility for the site (i.e., publicly or privately owned).
States may pay the full amount of their share in advance or incrementally throughout the remedial action process.
Most remaining receivables for non-Superfund funds represent penalties and interest receivable for general fund
receipt accounts, unbilled intragovernmental reimbursements receivable, and refunds receivable for the STAG
appropriation.
11.
21-F-0014
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
J. Advances and Prepayments
Advances and prepayments represent funds paid to other entities both internal and external to the Agency for which a
budgetary expenditure has not yet occurred.
K. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans receivable resulting from loans
obligated on or after October 1, 1991, are reduced by an a llowance equal to the present value of the subsidy costs
associated with these loans. The subsidy cost is calculated based on the interest rate differential between the loans and
Treasury borrowing, the estimated delinquencies and defaults net of recoveries offset by fees collected and other
estimated cash flows associated with these loans. Loan proceeds are disbursed pursuant to the terns of the loan
agreement Interest is calculated semi-annually on a per loan basis. Repayments are made pursuant to the terms of the
loan agreement with the option to repay loan amounts early.
L. Appropriated Amounts Held by Treasury
Cash available to the Agency that is not needed immediately for current disbursements of the Superfund and LUST
Trust Funds and amounts appropriated from the Superfund Trust Fund to the OIG and Science and Technology
appropriations, remains in the respective Trust Funds managed by Treasury.
M. Property, Plant, and Equipment
The EPA accounts for its personal and real property accounting records in accordance with SFFAS No. 6, Accounting
for Property, Plant and Equipment as amended. For EPA-held property, the Fixed Assets Subsystem (FAS) maintains
the official records and automatically generates depreciation entries monthly based on in-service dates.
A purchase of EPA-held or contractor-held personal property is capitalized if it is valued at $25 thousand or more and
has an estimated useful life of at least two years. For contractor-held property, depreciation is taken on a modified
straight-line basis over a period of six years depreciating 10 percent the first and sixth year, and 20 percent in years
two through five. For contractor-held property, detailed records are maintained and accounted for in contractor
systems, not in EPA's FAS. Acquisitions of EPA-held personal property are depreciated using the straight-line method
over the specific asset's useful life, ranging from two to fifteen years.
Personal property includes capital leases. To be defined as a capital lease, a lease, at its inception, must have a lease
term of two or more years and the lower of the fail- value or present value of the projected minimum lease payments
must be $75 thousand or more. Capital leases containing real property (therefore considered in the real property
category as well), have a S150 thousand capitalization threshold. In addition, the lease must meet one of the following
criteria: transfers ownership at the end of the lease to the EPA; contains a bargain purchase option; the lease tern is
equal to 75 percent or more of the estimated economic service life; or the present value of the projected cash flows of
the lease and other minimum lease payments is equal to or exceeds 90 percent of the fair value.
Superfund contract property used as part of the remedy for site-specific response action is capitalized in accordance
with the Agency's capitalization threshold. This property is part of the remedy at the site and eventually becomes part
of the site itself. Once the response action has been completed and the remedy implemented, the EPA retains control
of the property (i.e., pump and treat facility) for 10 years or less, and transfers its interest in the facility to the
respective state for mandatory operation and maintenance - usually 20 years or more. Consistent with the F.PA's 10-
year retention period, depreciation for this property is based on a 10-year useful life. However, if any property is
transferred to a state in a year or less, this property is charged to expense. If any property is sold prior to the EPA
relinquishing interest, the proceeds from the sale of that property shall be applied against contract payments or
refunded as required by the Federal Acquisition Regulations. An exception to the accounting of contract property
includes equipment purchased by the WOF. This property is retained in EPA's FAS. depreciated utilizing the straight-
line method based upon the asset's in-service date and useful life.
12.
21-F-0014
31
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Real property consists ofland. buildings, capital and leasehold improvements and capital leases. In FY 2017, the EPA
increased the capitalization threshold for real property, other than land, to $150 thousand from $85 thousand for
buildings and improvements and $25 thousand for plumbing, heating, and sanitation projects. The new threshold was
applied prospectively. Land is capitalized regardless of cost. Buildings are valued at an estimated original cost basis,
and land is valued at fair market value, if purchased prior to FY 1997. Real property purchased after FY 1996 is
valued at actual cost. Depreciation for real property is calculated using the straight-line method over the specific
asset's useful life, ranging from 10 to 50 years. Leasehold improvements are amortized over the lesser of their useful
life or the unexpired lease term. Additions to property and improvements not meeting the capitalization criteria,
expenditures for minor alterations, and repairs and maintenance are expensed when incurred.
Internal use software includes purchased commercial off-the-shelf software, contractor-developed software, and
software that was internally developed by Agency employees. In FY 2017, the EPA reviewed its capitalization
threshold levels for PP&E. The Agency performed an analysis of the values of software a ssets, reviewed capitalization
of other federal entities, and evaluated the materiality of software account balances. Based on the review, the Agency
increased the capitalization threshold from $250 thousand to $5 million to better align with major software acquisition
investments. The $5 million threshold was applied prospectively to software acquisitions and
modifications'enliancements placed into service after September 30, 2016. Software assets placed into service prior to
October 1,2016 were capitalized at the $250 thousand threshold. Internal use software is capitalized at Ml cost
(direct and indirect) and amortized using the straight-line method over its useful life, not exceeding five years.
Internal use software purchased or developed for the worki g capital fund is capitalized at $250 thousand and is
amortized using the straight-line method over its useful life, not exceeding five vears.
\. Liabilities
Liabilities represent the amount of monies or other resources that are more likely than not to be paid by the Agency as
the result of an Agency transaction or event that has already occurred and can be reasonably estimated. However, no
liability can be paid by the Agency without an appropriation or other collections authorized for retention. 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. Liabilities of the Agency arising from other than contracts can be abrogated by the
Government acting in its sovereign capacity.
G, Borrowing Payable to the Treasury
Borrowing payable to Treasury results from loans from Treasury to fund the non-subsidy portion of the WIFIA direct
loans. The Agency borrows the funds from Treasury when the loan disbursements agreed upon in the loan agreement
are made. Principal payments are made to Treasury periodically based on the collection of loan receivables.
P. Accrued Unfunded Annual Leave
Annual, sick and other leave is expensed as taken during the fiscal year. Annual leave earned but not taken at 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." Sick leave earned but not taken is not accrued as a liability; it is
expensed as it is used.
Q. Retirement Plan
There are two primary retirement systems for federal employees. Employees hired prior to January 1, 1987, 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, 1986. are
automatically covered by FERS and Social Security. Employees hired prior to January 1, 1987, 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.
13.
21-F-0014
32
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knried September 3(1, 2020 and 2019
(Dollars in Thousands)
Will* the issuance of SFFAS No. 5, Accounting for 1 labilities 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.
R. Prior Period Adjustments and Restatements
Prior period adjustments, if any. are made in accordance with SFFAS No. 21, Reporting Corrections of Errors and
Changes in Accounting Principles. Specifically, prior period adjustments will only be made for material prior period
errors to: (1) the current period financial statements, and (2) the prior period financial statements presented for
comparison. Adjustments related to changes in accounting principles will only be made to the current period financial
statements, but not to prior period financial statements presented for comparison.
S. Deepwater Horizon Oil Spill
The April 20, 2010 Deepwater Horizon (DWH) oil spill was the largest oil spill in U.S. history. In the wake of the
spill, the National Contingency Plan regulation was revised to reflect the EPA's designation as a DWH Natural
Resource Trustee. The DWH Natural Resources Damage Assessment is a legal process pursuant to the Oil Pollution
Act and the April 4,2016 Consent Decree between the U.S., the five Gulf states, and BP entered by a federal court in
New Orleans. Under the Consent Decree, a payment schedule was set forth for BP to pay $7.1 billion in natural
resource damages. The NRDA trustees are then jointly responsible to use those funds in the manner set forth in
Appendix 2 of the Consent Decree to restore natural resources injured by the DWH oil spill. In FY 2016, the EPA
received an advance of $184 thousand from BP and $2 million from the U.S. Coast Guard, to participate in addressing
injured natural resources and service resulting from the Deepwater Horizon Oil Spill. In FY 2017 and 2018, the EPA
returned the unused balance of fund amounts of $900 and $440 thousand, respectively, to the U.S. Coast Guard for
deposit in the Oil Spill Liability Trust Fund. As additional projects are identified, the F.PA may continue to receive
funding through the 2016 Consent Decree to implement its DWH NRDA Trustee responsibilities in the Agency's
Damage Assessment and Restoration Revolving Trust Fund,
T. Puerto Rico Insolvency
In February 2016. the Puerto Rico Aqueduct and Sewer Authority (PRASA) requested a restructuring of the Clean
Water (CW) and Drinking Water (DW) SRF debt due to a lack of cash flows and inability to access the municipal
bond market. PRASA is the primary water utility for Puerto Rico and. at the time of their request, the debt outstanding
to the SRFs was $547 million. Annual debt service to the SRFs is approximately $37 million per year.
In June 2016, the EPA and the Puerto Rico SRFs agreed to a 1-year forbearance on principal and interest payments.
Since that time, the forbearance agreement was extended multiple times with a final expiration date of July 31.2019.
In May 2017. following PRASA's fiscal plan approval by the Puerto Rico Oversight. Management, and Economic
Stability Act (PROMESA) oversight board created by Congress, the EPA, and the Puerto Rico SRFs began
negotiations with PRASA on restructuring current debt and setting terms for future debt.
14.
21-F-0014
33
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I nifed States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Negotiations concluded on July 26, 2019, when the Puerto Rico CW and DW SRF programs closed on loan
agreements that restructure 200 delinquent loans held by PRASA and total approximately S571 million in principal.
The restructuring agreements supersede the forbearance and ensure the repayment of PRASA's SRF loans. The
restructuring also means that PRASA will once again be eligible to apply for financial assistance from the PR SRFs.
On August 18, 2020, the Puerto Rico CW SRF program signed a $163 million loan with PRASA to provide funding
for 28 wastewater projects. The loan offers a 30-vear amortization, with a 1.0% annual interest rate payable on
January 1 and July 1 of each year.
The Puerto Rico DW SRF program expects to soon sign a $46 million loan with PRASA to provide funding to 5
drinking water projects. The loan offers a 30-year amortization, with a 1.0% annual interest rate payable on January 1
and July 1 of each year,
U. Use of F.stimates
The preparation of financial statements requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, including environmental and grant liabilities, and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
V. Reclassifications and Comparati>e Figures
Certain reclassifications have been made to the prior year's financial statements to enhance comparability with the
current year's financial statements in accordance with Office of Management and Budget (QMB) Circular No. A-136,
Financial Reporting Requirements revised August 27, 2020. As a result Net Disbursements for Non-Budgetary Credit
Reform Financing Account has been added to the Statement of Budgetary Resources.
Note 2. Fund Balance With Treasury (FBWT)
Fund Balance with Treasury as of September 30, 2020 and 2019 consists of the following:
2020 2019
Entity
Non-Entitv
Entity
Non-Fntitv
Assets
Assets
Total
Assets
Assets
Total
Trust Funds:
Superfund
$ 152,246
$
$ 152.246
$ 77,906
$
$ 77.906
LUST
28,191
-
28,191
21,902
-
21.902
Oil Spill & Misc.
12.643
-
12.643
12,109
-
12.109
Revuhins Funds:
FIFR\ Tolerance
52,574
-
52,574
58.133
-
58,133
Working Capital
87,215
-
87,215
129,185
-
129.185
Credit Reform Financing
-
-
-
-
-
-
E-Manifest
10,790
-
10,790
8,029
-
8,029
WIFIA
6
-
6
2
-
2
NRDA
1,916
-
1,916
1,551
-
1,551
Vppropriated
9,936,774
-
9,936.774
9,236.309
-
9,236,309
Other Fund Types
535.447
5.310
540.757
507.871
3.929
511.800
Total
SI 0.817.802
$ 5.310
SI 0.823.112
$10,052,997
$ 3.929
$10,056,926
15.
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Entity fund balances, except for special fund receipt accounts, are available to pay current liabilities and to finance
authorized purchase commitments (see Status of Fund Balances below), Entity Assets for ()ther Fund Types consist of
special purpose funds and special fund receipt accounts, such as the Pesticide Registration funds and the
Environmental Services receipt account. The Non-Entitv Assets for Other Fund Types consist of clearing accounts
and deposit funds, which are either awaiting documentation for the determination of proper disposition or being held
by the EPA for other entities.
Status of Fund Balances: 2020 2019
Unobligated \niounls in Fund Balance:
Available for Obligation S 6,094,950 $ 5,294,411
Unavailable for Obligation 191,669 187,260
Net Receivables fern Invested Balances (5,033,099) (5.096,874)
Balances in Treasury Trust Fund (Note 34) 19,840 14,912
Obligated Balance not vet Disbursed 9,025.670 9.160,730
Non-Budgetary FBWT 524,082 496.487
Total S 10.823,112 S 10.056,926
The funds available for obligation may be apportioned by OMB for new obligations at the beginning of the following
fiscal year. Funds unavailable for obligation are mostly balances in expired funds, which are available only for
adjustments of existing obligations. For September 30, 2020 and 2019, no differences existed between Treasury's
accounts and the EPA's statements for fund balances with Treasury.
Note 3. Cash and Other Monetary Assets
As of September 30, 2020 and 2019, the balance in the imprest fund was $10 thousand.
Note 4. Investments
As of September 30, 2020 and 2019, investments related to Superfund and LUST consist of the following:
Amortized
(Premium) Interest Investments, Market
Cost Discount Receivable Net Value
Intragovernmental Securities:
Non-Marketable FY 2020 $ 5,828,179 (135,189) 6,298 5,969,666 $ 5,969,666
Non-Marketable FY 2019 $ 6,024,413 32,170 5,414 5,997,657 $ 5,997,657
CERCLA as amended by SARA authorizes the EPA to recover monies to clean up Superfund sites from responsible
parties (RPs). Some RPs file for bankruptcy under Title 11 of the U.S. Code. In bankruptcy settlements, the EPA is an
unsecured creditor and is entitled to receive a percentage of the assets remaining after secured creditors have been
satisfied. Some RPs satisfy their debts by issuing securities of the reorganized company. The Agency does not intend
to exercise ownership rights to these securities, and instead will convert them to cash as soon as practicable. All
investments in Treasury securities are funds from dedicated collections (see Note 18).
The Federal Government does not set aside assets to pay future benefits or other expenditures associated with funds
16.
21-F-0014
35
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
from dedicated collections, l ite cash receipts collected from the public for dedicated collection funds are deposited in
the U.S. Treasury, which uses the cash for general Government purposes. Treasury securities are issued to the EPA as
evidence of its receipts. Treasury securities are an asset to the EPA and a liability to the U.S. Treasury. Because the
EPA and the U.S. Treasury are both parts of the Government, these assets and liabilities offset each other from the
standpoint of the Government as a whole. For this reason, they do not represent an asset or liability in the U.S.
Government-wide financial statements.
Treasury securities provide the EPA with authority to draw upon the U.S. Treasury to make future benefit payments or
other expenditures. When the EPA requires redemption of these securities to make expenditures, the Government
finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from
the public or repaying less debt or by curtailing other expenditures. This is the same way that the Government
finances all other expenditures.
Note 5. Accounts Receivable, Net
Accounts Receivable as of September 30, 2020 and 2019, consist of the following:
2020 2019
Intragovernmental:
Accounts & Interest Receivable
$ 54,470 $
34,802
Less: Allowance for Uncollectible
(2.598)
-
Total
$ 51.872 $
34.802
Non-Federal:
Unbilled Accounts Receivable
$ 130.449 $
109,545
Accounts & Interest Receivable
2,556,734
2.573,004
Less: Allowance for Uncollectible
(2.183.458)
(2.181.663)
Total
S 503,725 $
500.886
The Allowance for Uncollectible Accounts is determined both on a specific identification basis, as a result of a case-
bv-case review of receivables, and on a percentas
»e basis for receivables not specifically identified.
Note 6. Other Assets
Other Assets as of September 30, 2020 and 2019, consist of the following:
2020 2019
Inlrsigovernmental:
Advances to Federal Agencies $ 198,229 $ 210,498
Ach anees for Postage 39 93
Total $ 198.268 $ 210.591
Non-Federal:
Travel Advances S 77 $ 90
Other Advances 7.844 7,607
Inventory Purchased for Resale 288 |7
Total S 8.209 $ 7.714
17.
21-F-0014
36
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 7. Direct Loans Receivable, Net
Direct Loans Receivable disbursed from obligations made after FY 1991 are governed by the Federal Credit Reform
Act which mandates that the present value of the subsidy costs (i.e.. interest rate differentials, interest subsidies,
anticipated delinquencies, and defaults) associated with direct loans be recognized as a cost in the year the loan is
disbursed. The net loan present value is the gross loan receivable less the subsidy present value. EPA does not have
any loans obligated prior to 1992.
EPA administers the WIFIA Direct Loans program. In fiscal year 2020 and 2019, the Agency received bonrowmg
authority of S3,6 billion and S2.5 billion respectively for the non-subsidy portion of loan proceeds disbursed. The
cumulative loan limit for the WIFIA Loan Program through fiscal year 2020 is $28.6 billion. For the fiscal year ended
September 30, 2020 and 2019, the Agency closed $3.2 billion and $2.5 billion in WIFIA loans, respectively.
Interest on the loans is accrued based on the terms of the loan agreement. For the fiscal years ended September 30,
2020 and 2019, the WIFIA program has incurred $9.7 and $7.3 million in administrative expenses, respectively.
Obligated after FY 1991
Direct Loan Program
2020 Loans
Receivable,
(Truss
Intel esl
Receivable
Foreclosed
Property/
Mlowance
for
Loan Losses
Allowance Cor
Subsid>
Cost
Value of Assets
Related to
Direct
I.oans. Net
WIFIA
220,970
(24 50(0 $
196,470
Direct Loan Program
WIFIA
2019 Loans
Receivable, Interest
Gross Receivable
261 -
Foreclosed
Pro perty/
\llow ance
for
Loan Losses
Value of Assets
Allowance for Related to
Subsidy Direct
Cost Loans, Net
2 $
263
Total Amount of Direct Loans Disbursed (Post-1991)
Direct Loan Program 2020 2019
WIFIA $ 220,970 261
Subsidy Kxpense lor Direct I.oans b\ Program and Component
Subsidy Expense for New Direct Loans Disbursed
2020 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA $ - - - (1,043) $ (1,043)
18.
21-F-0014
37
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I nited States Kmiroiimeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
2019 Interest Fees and Other Other Subsidy
l)ii ect I oan Program Differential Defaults Collections Costs Total
WIFIA $
-
-
2 3
; 2
Modifications and Reestimates
2020
Interest
Total
Rate
Technical
Total
Direct Loan Program
Modifications
Reestimates
Reestimates
Reestimates
WIFIA
S
-
(23,459) 3
5 (23,459)
2019
Interest
Total
Rate
Technical
Total
Direct Loan Program
Modifications
Reestimates
Reestimates
Reestimates
WIFIA
$
-
4 3
5 4
Total Direct Loans Subsidy Expense
Direct Loan Program 2020
2019
WIFIA $ 1,043
-
Budget Subsidy Rates for Direct Loans for the Current Year
Cohort
2020 Interest
Fees and Other
Other Subsidy
Direct Loan Program Differential
Defaults
Collections
Costs
Total
WIFIA 0%
.75%
0%
0%
.75%
2019 Interest
Fees and Other
Other Subsidy
Direct Loan Program Differential
Defaults
Collections
Costs
Total
WIFIA 0% .80% 0% 0% .80%
The subsidy rates disclosed pertain to the current year's cohort. The rates cannot be applied to the direct loans
disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported
in the current year could result from disbursement of loans from both current year cohorts and prior year cohorts. The
subsidy expense reported in the current year also includes modifications and re-estimates.
19.
21-F-0014
38
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Schedule for Reconciling Subsidy Cost Allowance Balances
Beginning Balance, Changes and Ending Balance
Beginning Balance of the Subs id}' Allowance
$
2020
2 $
2019
Add: Subsidy Expense for Direct Loans Disbursed During the Reporting Years
by Component
Default Costs (Net of Recoveries)
Fees and Other Collections
Other Subsidy Costs
(1.043)
(1,043)
2
Total of the Above Subsidy Expense Components
2
Adjustments
I oan Modifications
Foreclosed Property Acquired
Loans Written Off
Subsidy Allowance Amortization
Other ; ;
Ending Balance of the Subsidy Cost Allowance Before Reestimates
Add or Subtract Subsidy Reestimates by Component
Interest Rate Reestimate
Technical/Default Reestimate (23.459) ;
Total of the \.bo\e Reestimate Components (23.459) ;
Ending Balance ol'the Subsidy Cost Allowance S (24.500) S 2
The economic assumptions of the \YTFIA upward and downward adjustments were a reassessment of risk levels as
well as estimated changes in future cash flows on loans. Actual interest rates used for FY 2020 loan disbursements
were lower than the interest rate assumptions used during the budget formulation process at loan origination.
20,
21-F-0014
39
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 8. Accounts Payable and Accrued Liabilities
Hie Accounts Payable and Accrued Liabilities are current liabilities and consist of the followin
g amounts as
of September 30. 2020 and 2019:
2020
2019
IntrugouTnnu-iifal:
Accounts Payable
$ 7,001
$ 5,719
Liability for Allocation
-
226
Accrued Liabilities
145.013
130.880
'lotal
$ 152.014
S 136.825
2020
2019
Non-Federal:
Accounts Payable
$ 52,693
$ 68,012
Advances Payable
(3,787)
(2.454)
Interest Payable
5
5
Grant Liabilities
317.258
325.335
Other Accrued Liabilities
159.004
149,337
Total S 525,173 $ 540.235
Other Accrued Liabilities are mostly comprised of contractor accruals.
Note 9. General Property, Plant and Equipment, Net
General property, plant, and equipment (PP&E) consist of software, real property, EPA-held and contractor-held
personal property, and capital leases.
As of September 30, 2020, General PP&E Cost consisted of the following:
2020
EPA-
Contractor
Land
Held
Software
Software
Held
and
C , t 1
Eauimnent
(production)
(development)
Euuinment
Buildings
Le e
Total
Balance,
Beginning of
Year
$ 304,453
$ 439,787
$ 27,046
$ 44,707
$ 794,192
$ 24,485
$ 1,634,670
Additions
36,393
-
18,794
1.581
18,184
-
74,952
Dispositions
(19.777)
-
-
(5.633)
(10,056)
-
(35,466)
Revaluations
-
-
-
(6.760)
-
-
(6.760)
Balance, Fnd
of Year
$ 321.069
$ 439.787
S 45.840
S 33.895
S 802.320
$ 24.485
$ 1.667396
21.
21-F-0014
40
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ended September 3(1, 2020 and 2019
(Dollars in Thousands)
As of September 30, 2020, General PP&E Accumulated Depreciation consisted of the following:
2020
EPA- Contractor Land
Held Software Software Held and Capita!
Equipment (production) (de\elopmcnf) Equipment Buildings Leases Total
Balance,
Beginning of
Year $ 212,886 $ 398,613 $ - S 28,593 $ 303,239 S 20,132 $ 963,463
Dispositions (18,780) - - ... (18,780)
Revaluations ... (2.823) - - (2.825)
Depreciation
Expense 23.889 21.889 - 71b 18.560 816 65.870
Balance, End
of Year S 217.995 $ 420.502 $ S 26.484 S 321.799 S 20.948 S 1.007.728
As of September 30, 2020, General PP&E, Net consisted of the following:
2020
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (production) (development) Equipment Buildings Leases Total
Balance, End
of Year. .Net $ 103.074 S 19.285 S 45.840 S 7.411 S 480.521 S 3.537 S 659.668
Note 10, Debt Due to Treasury
All debt is classified as not covered by budgetary resources, except for direct loan and guaranteed loan financing
account debt to Treasury and that portion of other debt covered by budgetary resources at the Balance Sheet date.
EP A borrows funds from The Bureau of Public Debt right before funds are disbursed to the borrower for the non-
subsidy portion of WIFIA loam. As of September 30, 2020 and 2019. the EPA had debt due to Treasury consisting
entirely of funds borrowed to finance the non-subsidy portion of the WIFIA Direct Loan Program of:
2019 2020
Beginning Net Ending Net Ending
Balance Borrowing Balance Borrowing Balance
Debt to the
Treasury S $ 266 $ 266 S 221.386 S 221.652
22.
21-F-0014
41
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Fnded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 11. Stewardship Property. Plant and Equipment
The Agency acquires title to certain property and property rights under the authorities provided in Section 104(j)
CERCLA related to remedial clean-up sites. The property rights are in the form of fee interests (ownership) and
easements to allow access to clean-up sites or to restrict usage of remediated sites. The Agency takes title to the land
during remediation and transfers it to state or local governments upon the completion of clean-up. A site with "land
acquired" may have more than one acquisition property. Sites are not counted as a withdrawal until all acquired
properties have been transferred under the terms of 104(j).
As of September 30, 2020 and 2019, the Agency possessed the following land and land rights:
2020 2019
Supcrfund Sites with Easements:
Beginning Balance
S 40
$
39
Additions
3
1
Withdrawals
_
Ending Balance
S 43
$
40
SuperTund Sites with Land Acquired:
Beginning Balance
Additions
$ 31
1
$
32
Withdrawals
_
(1)
Ending Balance
S 32
$
31
Note 12. Custodial Liability
Custodial Liability represents the amount of net accounts receivable that, when collected, will be deposited to the
Treasury General Fund. Included in the custodial liability are amounts for fines and penalties, interest assessments,
repayments of loans, and miscellaneous other accounts receivable. As of September 30, 2020 and 2019, custodial
liability is approximately $72,018 and $36,494 thousand, respectively.
23.
21-F-0014
42
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2020:
Cohered by
Not Covered
Budget ur\
by
Resources
Resources
Total
Current
Employer Contributions & Payroll Taxes
$ 23,764
$
$
23.764
WCF Advances
1.154
-
1,154
Other Advances
14.843
-
14,843
Advances HRSTF Cashout
81
-
81
Deferred HRSTF Cashout
86.619
-
86,619
i\on-( urrent
Unfunded FECA Liability
-
9,225
9,225
I Wunded Unemployment Liability
-
97
97
Direct Loans Subsidy Liability
-
412
412
Payable to Treasury Judgement Fund
-
2?.000
22.000
Total intragovernmental
S 126.461
S M.7-)
$
158.195
Other Liabilities - Non-Federal
Current
Unearned Advances. Non-Federal
$ 141,368
$
$
141,368
Liability for Deposit Funds, Non-Federal
5,944
-
5,944
Capital Lease Liability
-
399
399
JNon-Curreni
Capital Lease Liability
-
1.970
1.970
Total Non-Federal
S 147.312
S 2.369
$
149.681
21-F-0014
43
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Other Liabilities consist of the following as of September 30, 2019:
Covered by Not Covered
Budgetary by
Resources Resources Total
Current
Employer Contributions & Payroll Taxes
$
19.161 S
-
$
19.161
WCF Advances
3.504
-
3.504
Other Advances
6.062
-
6.062
Advances HRSTF Cashout
82
-
82
Deferred HRSTF Cashout
117.256
-
117,256
Non-Current
Unfunded FECA Liability
-
9,229
9,229
Payable to Treasury Judgement Fund
-
22.000
22.000
Total Inlragoverninental
$
146.065 S
31.229
$
177.294
Other Liabilities - Non-Federal
Current
Unearned Advances. Non-Federal
$
134,076 S
-
S
134.076
Liability for Deposit Funds. Non-Federal
3,769
-
3.769
Capital Lease Liability
-
343
343
Non-C urreiil
Capital Lease Liability
-
2.361
2.361
Total Non-Federal
$
137.845 S
2.704
$
140.549
Liabilities not covered by budgetary resources require future congressional action whereas liabilities covered by
budgetary resources reflect prior congressional action. Regardless of when the congressional action occurs, when the
liabilities are liquidated. Treasury will finance the liquidation in the same way that it finances all other disbursements,
using some combination of receipts, other inflows, and borrowing from the public (if there is a budget deficit).
Note 14. Leases
The value of assets held under Capital Leases as
of September 30, 2020 and 2019, are as follows:
Capital Leases:
2020
2019
Summary of Assets tinder Capital Lease:
Real Property
$ 24,485 $
24,485
Personal Property
-
-
Total
24.485
24.485
Accumulated Amortization
S 20.948 $
20.132
25,
21-F-0014
44
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
The HP A has one capital tease for land and buildings housing scientific laboratories. This lease includes a base rental
charge and escalation clauses based upon either rising operating costs and or real estate taxes. The base operating
costs are adjusted annually according to escalators in the Consumer Price Indices published by the Bureau of Labor
Statistics. U.S. Department of Labor. The EPA's lease will terminate in FY 2025.
Future Payments Due
Fiscal Year Capital Leases
2.021 $ 786
2022 786
2023 786
2024 785
2025 262
Total Future Minimum Lease Payments 3.405
Less: Imputed Interest (1.036)
.Net Capital Lease I.iahiMt\ 2;360
Liabilities not Covered by Budgetary Resources $ 2.3(>9
The capital lease payments have been adjusted to reflect payments in the lease agreement. Per the lease agreement
yearly lease payments of $4,215 thousand are due for 20 years from 1995 until 2015. Upon exercise of a 10-vear
renewal, the yearly lease payment will be S786 thousand from 2015 until 2025.
Note 15. FKCA Actuarial Liabilities
The Federal Employees" Compensation Act (FECA) provides income and medical cost protection to covered Federal
Chilian employees injured on the job, employees who have incurred a work-related occupational disease, and
beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Annually, the
EPA is allocated the portion of the long-term FECA actuarial liability attributable to the entity. The liability is
calculated to estimate the expected liability for death, disability, medical and miscellaneous costs for approved
compensation cases. The liability amounts and the calculation methodologies are provided by the Department of
Labor.
The FECA Actuarial Liability as of September 30, 2020 and 2019, was S50.451 thousand and $42,044 thousand,
respectively. The estimated future costs are recorded as an unfunded liability. The FY 2020 present value of these
estimated outflows is calculated using a discount rate of 2.414 percent in the first year, and 2.414 percent in the years
thereafter. The estimated future costs are recorded as an unfunded liability.
Note 16. Cashout Advances, Superfund (Restated)
Cashout advances are funds x'eceived by the EPA, a state, or another responsible party under the terms of a settlement
agreement (e.g., consent decree) to finance response action costs at a specified Superfund site. Under CERCLA
Section 122(b)(3). cash-out funds received by the EPA are placed in site-specific, interest bearing accounts known as
special accounts and are used for potential future work at such sites in accordance with the terms of the settlement
agreement Funds placed in special accounts may be disbursed to PRPs, to states that take responsibility for the site, or
to other Federal agencies to conduct or finance response actions in lieu of the EPA without further appropriation by
Congress. As of September 30, 2020 and 2019, cash-out advances total 83,472,784 thousand and $3,573,240
(Restated) thousand, respectively. See Note 37 for the restatement of the 2019 balance.
26.
21-F-0014
45
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 17. Commitments and Contingencies
The EPA may be a party in various administrative proceedings, actions and claims brought by or against it. These
include:
a) Various personnel actions, suits, or claims brought against the Agency by employees and others.
b) Various contract and assistance program claims brought against the Agency by vendors, grantees and others.
c) The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to include the collection
of fines and penalties from responsible parties.
d) Claims against recipients for improperly spent assistance funds which may be settled by a reduction of future
EPA funding to the grantee or the provision of additional grantee matching funds.
As of September 30, 2020. there were $38 thousand of accrued liabilities for commitments and potential loss
contingencies. As of September 30, 2019, there was no accrued liabilities for commitments and potential loss
contingencies.
A. Gold King Mine
On August 5, 2015. EPA and its contractors were conducting an investigation under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) of the Gold King Mine, an inactive mine in
Colorado, when a release of acid mine drainage occurred. While the EPA team was excavating above the mine adit,
water began leaking from the mine adit. The small leak quickly turned into a significant breach, releasing
approximately three million gallons of mine water into the North Fork of Cement Creek, a tributary of the Animas
River, "llie plume of acid mine water traveled from Colorado's Animas River into New Mexico's San Juan River,
passed through the Navajo Nation, and deposited into T Utah's Lake Powell. As of June 30, 2020, EPA has received
claims under the Federal Tort Claims Act from individuals and businesses situated on or near the affected waterways
for alleged lost wages, loss of business income, agricultural and livestock losses, property damage, diminished
property value, and personal injury. The amounts estimated related to the Gold King Mine are S2 billion but they are
only reasonably possible, and the final outcomes are not probable.
B. Flint, Michigan
The EPA has received claims from over 7.000 individuals under the Federal Tort Claims Act for alleged injuries and
property damages caused by the EPA's alleged negligence related to the water health crisis in Flint, Michigan. There
is no estimated loss amounts related to the water health crisis and they are only reasonably possible and the final
outcomes are not probable.
C. Superfund
Under CERCLA Section 106(a), the EPA issues administrative orders that require parties to clean up contaminated
sites. CERCLA Section 106(b) allows a party that has complied with such an order to petition the EPA for
reimbursement from the fund of its reasonable costs of responding to the order, plus interest. To be eligible for
reimbursement the party must demonstrate either that it was not a liable party under CERCLA Section 107(a) for the
response action ordered, or that the Agency's selection of the response action was arbitrary and capricious or
otherwise not in accordance with law. The amounts related to Superfund are S20 million, but they are only reasonably
possible, and the final outcomes are not probable.
D. Em iroiunental Liabilities
As of September 30. 2020. there is one case pending against the EPA that is reported under Environmental Liabilities;
Bob's Home Service Landfill amount is $900 thousand but it is only reasonable possible, and the final outcome is not
probable. Secondly, in January 2020. the CDPHE found several violations of Colorado hazardous waste laws after
27.
21-F-0014
46
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
inspecting an EPA lab where Region 8 and OECA's NEIC are co-located. $38 thousand of the penalty amount has
been accrued, which is categorized under probable.
E. Judgement Fund
In cases that are paid by the U.S. Treasury Judgment Fund, the EPA must recognize the full cost of a claim regardless
of which entity is actually paying the claim. Until these claims are settled or a court judgment is assessed and the
Judgment Fund is determined to be the appropriate source for the payment, claims that are probable and estimable
must be recognized as an expense and liability of the Agency. For these cases, at the time of settlement or judgment,
the liability will be reduced and an imputed financing source recognized. See Interpretation of Federal Financial
Accounting Standards No. 2, Accounting for Treasury Judgment Fund Transactions. The EPA has a $22 million
liability to the Treasury Judgment Fund for a payment made by the Fund to settle a contract dispute claim. As of
September 30, 2020, there is no other case pending in the court.
F. Other Commitments
EPA has a commitment to fund the United Stats Government's payment to the Commission of the North American
Agreement on Environmental Cooperation between the Governments of Canada, the Government of the United
Mexican States, and the Government of the United States of America (commonly referred to as CEC). According to
the terms of the agreement, each government pays an equal share to cover the operating costs of the CEC. EPA paid
$2.5 million to the CEC in the period ending September 30, 2020 and $2.5 million in the period ending September
2019.
EPA has a legal commitment under a noncancelable agreement, subject to the availability of funds, with the United
Nations Environmental Program (UNEP). This agreement enables EPA to provide funding to the Multilateral Fund for
the Implementation of the Montreal Protocol. EPA made payments totaling $8.3 million in the period ending
September 2020 and $8.3 million in the period ending September 2019.
28,
21-F-0014
47
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Fnded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 18. Funds from Dedicated Collections (Unaudited) (Restated)
Other Funds
Total Funds
Environmental
from Dedicated
from Dedicated
Services
LUST
Suoerfund
Collections
Collections
Balance sheet as of September 30,2020
Assets
Fund Balance with Treasury
$ 518,165 $
28,191
$ 152,246
$ 95,212
$ 793.814
Investments
-
895 016
5,074.650
-
5,9o9.666
Accounts Receivable, Net
-
82,281
346.291
27,135
455,707
Other Assets
424
44.685
201.757
246.866
Total Assets
518.165
1.005.912
5/17.872
324.104
7.466.053
Other Liabilities
89.348
3.768.226
301.589
4.159.163
Total Liabilities
-
89,348
3.768."'26
301.589
4.159.163
Unexpended Appropriations
(2)
(187)
(189)
Cumulative Results of Operations
518.165
916.564
1.849.646
22 702
3.307.077
Total Liabilities and Net Position
518.165
1.005.912
5.617.870
324.104
7.466.051
Statement of Net ( ost for the Fiscal
Year KmlecJ September 30, 2020
Gross Program Costs
-
97,770
1,505.864
116 583
1,720,217
Less: Earned Revenues
-
-
362.428
105.449
467.S77
Net Costs of Operations $ S 97.770 S 1.143,43b S 11.134 S 1.252.34!)
Stalemenl of Changes ill Nil Position
lor the Fiscal ^ oar l-juled September
30,2020
Net Position, Beginning of Period
$
491,972 $
788,492 $
1,863,347 $
25,519 $
3,169.330
Nonexchange Revenue - Securities
Investments
-
6.282
83,301
533
9o,ik.
Nonexchange Revenue
26,193
219,210
3.225
(8,833)
239.795
Other Budgetary Finance Sources
-
-
1.033.974
15,697
1.049.&71
Other Financing Sources
-
350
*3.237
729
10,316
Net Cost of Operations
_
(97.770)
(1.143.436)
111,134)
(1.252.340)
Change in Net Position
Net Position
26.193
128.072
C13.609)
(3.008)
137.S58
$
51S.165 $
916.564 S
1,840,1.48 $
22.511 $
3.306.888
29.
21-F-0014
48
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I nited States Kmironmeiital Protection Agency
Notes to the Finimcfcil Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Other lunds Total I' unds
Environmental from Dedicated from Dedicated
Services LUST Superfund Collections Collections
Balance sheet as of September 30,2019
(Restated)
Assets
Fund Balance with Treasury $
491,972 $
21,902 $
77,906 $
95,702 $
687.482
Investments
-
773,397
5,224,260
-
5,997.657
Accounts Receivable, Net
-
92,029
357.002
1,198
45t».82«:>
Other Assets
176
50.709
7,256
64.141
Total Assets
491.972
887,504
5.710.477
104.156
7,200,10°
Other Liabilities ("Note 37)
3.S .1
78.639
4.0 > S.7S1
Total Liabilities
.( 1
3.S .1 !
78.639
4.1H0./M
Unexpended Appropriations
(2)
(1,262)
11,264)
Cumulative Results of t )perations
491.972
/88.4
1.863.349
26.779
2.170.50-'
Total Liabilities and Net Position
491.972
SS7. 14
5.716.477
104.156
7.200.109
(Note 37)
Statement of Net Cost lor the fiscal
Year Kndcd September 30, 2019
(Restated)
Gross Program Costs
-
89,019
1 392140
82,165
1.564.124
Less: Earned Revenues (Note 37)
mus
04.362
243.477
Net Costs of Operations $
$
89.019 $
1.213 K2S $
17.803 S
1.320.647
Statement of Changes in Net Position
for the fiscal \ ear Kndcd September
30, 2019 (Restated)
Net Position, Beginning of Period $
469,191 $
623,356 $
1,856,334 $
20,145 $
2,969,026
Nonexchange Revenue - Securities
Investments
-
If, 183
117,318
1,198
134 f>99
Nonexchange Revenue
22,781
^37,962
6.1Q7
3,314
270 2S4
Other Budgetary Finance Sources
-
-
1,080,982
18.384
1,099,366
Other Financing Sources
-
10
16.341
281
10,032
Nit Cost of Operations (Note 37)
-
('89.0191
fl.213,825)
(17,803!
(1 320 647)
Change m Net Position
22.781
165.136
7.013
5 374
200 304
Net Position (Note 37) $
491.972 $
788.492 S
1.863.347 $
25.519 $
3.169.330
A. Funds from Dedicated Collections
i. Environmental Services Receipt Account:
The Environmental Services Receipt Account, authorized by a
1990 act, "To amend the Clean Air Act (P.L. 101-
549)." was established for the deposit of fee receipts associated with environmental programs, including radon
measurement proficiency ratings and training, motor vehicle engine certifications, and water pollution permits.
Receipts in this special fund can only be appropriated to the S&T and EPM appropriations to meet the expenses of the
programs that generate the receipts if authorized by Congress in the Agency's appropriations bill.
ii. I.caking I ntlergroittifl Storage Tank (IJ. ST) Trust Fund:
The LUST Trust Fund was authorized by the SARA as amended by the Omnibus Budget Reconciliation Act of 1990.
The LUST appropriation provides funding to prevent and respond to releases from leaking underground petroleum
tanks. The Agency oversees cleanup and enforcement programs which are implemented by the states. Funds are
30,
21-F-0014
49
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I nifed States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
allocated to the states through cooperative agreements and prevention grants to inspect and clean up those sites posing
the greatest threat to human health and the environment. Funds are used for grants to non-state entities including
Indian tribes under Section 8001 of the Resource Conservation and Recovery Act.
iii. Superfund Trust Fund:
In 1980, the Superfund Trust Fund, was established by CERCLAto provide resources to respond to and clean up
hazardous substance emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund
financing is shared by federal and state governments as well as industry. The EPA allocates funds from its
appropriation to the Department of Justice to carry out CERCLA. Risks to public health and the environment at
uncontrolled hazardous waste sites qualifying for the Agency's National Priorities List (NPL) are reduced and
addressed through a process involving site assessment and analysis and the design and implementation of cleanup
remedies. NPL cleanups and removals are conducted and financed by the EPA private parties, or other Federal
agencies. The Superfund Trust Fund includes Treasury's collections, special account receipts from settlement
agreements, and investment activity.
B. Other Funds from Dedicated Collections
L Inland Oil Spill Programs A ccount:
The Inland Oil Spill Programs Account was authorized by the Oil Pollution Act of 1990 (OPA). Monies are
appropriated from the Oil Spill Liability Trust Fund to the EPA's Inland Oil Spill Programs Account each year. The
Agency is responsible for directing, monitoring and providing technical assistance for major inland oil spill response
activities. This involves setting oil prevention and response standards, initiating enforcement actions for compliance
with OP A and Spill Prevention Control and Countermeasure requirements, and directing response actions when
appropriate. The Agency carries out research to improve response actions to oil spills including research on the use of
remediation techniques such as dispersants and bioremediation. Funding for specific oil spill cleanup actions is
provided through the U.S. Coast Guard from the Oil Spill Liability Trust Fund through reimbursable Pollution
Removal Funding Agreements (PRFAs) and other inter-agency agreements.
ii. Pesticide Registration Fund:
The Pesticide Registration Fund authorized by a 2004 Act, '"Consolidated Appropriations Act (P.L. 108-199)," and
reauthorized until September 30,2023. for the expedited processing of certain registration petitions and associated
establishment of tolerances for pesticides to be used in or on food and animal feed. Fees covering these activities, as
authorized under the FIFRA Amendments of 1988, are to be paid by industry and deposited into this fund group.
Hi. Reregistration and Expedited Processing Fund:
The Revolving Fund, was authorized by the FIFRA of 1972, as amended by the FIFRA Amendments of 1988 and as
amended by the Food Quality Protection Act of 1996. Pesticide maintenance fees are paid by industry to offset the
costs of pesticide re-registration and reassessment of tolerances for pesticides used in or on food and animal feed, as
required by law.
iv. Tolerance Revolving Fund-
The Tolerance Revolving Fund was authorized in 1963 for the deposit of tolerance fees. Fees were paid by industry
for Federal services to set pesticide chemical residue limits in or on food and animal feed. Fees collected prior to
January 2. 1997 were accounted for under this fund. Presently, collection of these fees is prohibited by statute enacted
in the Consolidated Appropriations Act. 2004 (P.L. 108-199).
v. Hazardous Waste Electronic Manifest System
The Hazardous Waste Electronic Manifest System Fund, authorized in 2014, receives funding through fees collected
for use of the Hazardous Waste Electronic Manifest System.
31.
21-F-0014
50
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 19. Environmental Cleanup Costs
Annually, the EPA is required to disclose its audited estimated future costs associated with:
a) Cleanup of hazardous waste and restoration of the facility when it is closed, and
b) Costs to remediate known environmental contamination resulting from the Agency's operations.
The EPA has 30 sites for which it is responsible for clean-up costs incurred under federal, state, and/or local
regulations to remove, contain, or dispose of hazardous material found at these facilities.
The EPA is also required to report the estimated costs related to:
a) Clean-up from federal operations resulting in hazardous waste
b) Accidental damage to nonfederal property caused by federal operations, and
c) Other damage to federal property caused by federal operations or natural forces.
The key to distinguishing between future clean-up costs v ersus an environmental liability is to determine whether the
event (accident damage, etc.) has already occurred md vsh ther we can reasonably estimate the cost to remediate tire
site.
The EPA has elected to recognize the estimated total clean-up cost as a liability and record changes to the estimate in
subsequent years.
As of September 30, 2020. the EPA has one site that requires clean up stemming from its activities. The claimants"
chances of success are characterized as reasonably possible with costs amounting to $900 thousand that may be paid
out of the Treasury Judgment Fund. Secondly, in January 2020, the CDPHE found several violations of Colorado
hazardous waste laws after inspecting an EPA lab where Region 8 and OECA's XITC are co-located. S38 thousand of
the penalty amount has been accrued, which is categorized under probable.
A. Accrued Clean-up Cost
The EPA has 30 sites for which it is required to fund the environmental cleanup. As of September 30, 2020, the
estimated costs for site clean-up were S38.4 million unfunded, and $1,836 thousand funded, respectively. In 2019 the
estimated costs for site clean-up were $32.8 million unfunded, and $551 thousand funded, respectively. Since the
clean-up costs associated with permanent closure were not primarily recovered through user fees, the EPA has elected
to recognize the estimated total clean-up cost as a liability and record changes to the estimate in subsequent years.
In FY 2020, the estimate for unfunded clean-up cost increased by $5.6 million from the FY 2019 estimate. This is
primarily due to additional anticipated lab cleanup actions in facilities that resulted in estimates of future clean-up
costs in various regions to increase.
Note 20. State Credits
Authorizing statutory language for Supcrfund and related Federal regulations requires states to enter into Superfund
State Contracts (SSC) when the EPA assumes the lead for a remedial action in their state. The SSC defines the state's
role in the remedial action and obtains the state's assurance that it will share in the cost of the remedial action. Under
Superfund's authorizing statutory language, states will provide the EPA with a 10 percent cost share for remedial
action costs incurred at privately owned or operated sites, and at least 50 percent of all response activities (i.e.,
removal, remedial planning, remedial action, and enforcement) at publicly operated sites. In some cases, states may
use EPA-approved credits to reduce all or part of their cost share requirement that would otherwise be borne by the
states. The credit is limited to state site-specific expenses the EPA has determined to be reasonable, documented,
direct out-of-pocket expenditures of non-Federal funds for remedial action.
32.
21-F-0014
51
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knried September 3(1, 2020 and 2019
(Dollars in Thousands)
Once the EPA has reviewed and approved a state's claim for credit, the state must first apply the credit at the site
where it was earned. The state may apply any excessiremaining credit to another site when approved by the EPA. As
of September 30, 2020 and 2019, the total remaining state credits have been estimated at S20.2 million, and S21.3
million, respectively.
Note 21, Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements. PRPs agree to perform response actions at their sites with
the understanding that (lie EPA will reimburse them a certain percentage of their total response action costs. The
EPA's authority to enter into mixed funding agreements is provided under CERCLA Section 111(a) (2). Under
CERCLA Section 122(b)(1), as amended by SARA, PRPs may assert a claim against the Superfund Trust Fund for a
portion of the costs they incurred while conducting a preauthorized response action agreed to under a mixed funding
agreement. As of September 30,2020. the EPA had three outstanding preauthorized mixed funding agreements with
obligations totaling $11.5 million. As of September 30, 2019, the EPA had three outstanding preauthorized mixed
funding agreements with obligations totaling $6.3 million. A liability is not recognized for these amounts until all
work has been performed by the PRP and has been approved by the EPA for payment Further, the EPA will not
disburse any funds under these agreements until the PRP's application, claim and claims adjustment processes have
been reviewed and approved by the EPA,
Note 22. Custodial Revenues and Accounts Receivable
The EPA uses the accrual basis of accounting for the collection of fines, penalties and miscellaneous receipts.
Collectibility by the EPA of the fines and penalties is based on the respondents' willingness and ability to pay. As of
September 30, 2020 and 2019 Custodial Revenues and Accounts Receivable are:
2020 2019
Fines, Penalties and Other Miscellaneous Receipts
$ 169.178
$
356.645
Accounts Receivable lor Fines, Penalties and Other Miscellaneous
Receipts:
Accounts Receivable
$ 191,307
$
166,089
Less: Allowance for Uncollectible Accounts
(141.118)
(129.6801
Total
S 50.189
$
36.409
Note 23, Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited FY 2020 Statement of Budgetary
Resources, will be reconciled to the amounts included in die FY 2020 Budget of the United States Government when
they become available. The Budget of the United States Government with actual numbers for FY 2020 has not vet
been published. We expect it will be published by early 2021, and it will be available on the Office of Management
and Budget website at https: %w w.w hitehouse.gov/
The actual amounts published for the year ended September 30, 2019 are listed immediately below (dollars in
millions):
FY 2019
Budgetary
Offsetting
Resources
Obligations
Receipts
Net Outlays
Statement of Hudgetarv Resources
$ 18.619
$ 13.137
$ 1.585
$ 9.648
Reported in the Budget of the I .S. Government
$ 18.424
$ 13.086
$ 1.585
$ 9.647
21-F-0014
52
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United States Kmironmcntal Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 24. Recoveries and Resources Not Available. Statement of Budgetary Resources
Recoveries of Prior Year Obligations. Temporarily Not Available, and Permanently Not Available on the Statement of
Budgetary Resources consist of the following amounts as of September 30, 2020 and 2019:
2020 2019
Unobligated Balance Brought Forward, Oct 1. S 5.460.757 $ 4.479.928
Adjustments to Budgetary Resources Made Durring the Current Year
Downward Adjustments of Prior Year Undelivered Orders 339,024 225,842
Downward Adjustments of Prior Year Delivered Orders 26,546 16,035
Other Adjustments (18.137i (6.979)
Total' 347,433 234,898
Unobligated Balance from Prior Year Budget Authority, Net
(discretionary and mandatory) S 5.808.190 $ 4.714.826
Temporarily Not Available-Rescinded Authority $ (2.000) S (4.592)
Permanently Not Available:
Rescinded* Authority $ - $ 210,529
Cancelled Authority IJ140 19.588
Total Permanently Not Available S 1 > 140 S 230.117
Note 25. Unobligated Balances Available
Unobligated balances are a combination of two lines on the Statement of Budgetary Resources: Apportioned.
Unobligated Balances and Unobligated Balances Not Available. Unexpired unobligated balances are available to be
apportioned by the OMB for new obligations at the beginning of the following fiscal year. The expired unobligated
balances are only available for upward adjustments of existing obligations.
The unobligated balances available consist of the following as of September 30, 2020 and 2019:
2020 2019
Unexpired Unobligated Balance $ 6,066,503 $ 5.295.329
Expired Unobligated Balance 189.004 186.342
Total ~ $ 6.255.507 S 5.481.671
Note 26. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders as of September 30, 2020 and 2019, were $15.8 billion and
$12,7 billion, respectively.
34.
21-F-0014
53
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 27. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fond, or trust fund receipt accounts offset gross
outlays. As of September 30, 2020 and 2019, the following receipts were generated from these activities:
2020 2019
Trust Fund Recoveries
S 237,778 1
J 73.266
Special Fund Services
51,502
22,778
Trust Fund Appropriation
1,076,535
1,455,299
Miscellaneous Receipt and Clearing Accounts
3.581
33.440
Total
S 1.369.396 S
i 1.584.783
Note 28. Transfers-Ill and Out, Statement of Changes in Net Position
A. Appropriations Transfers, In/Out:
As of September 30, 2020 and 2019. the Appropriation Transfers under Budgetary Financing Sources on the
Statement of Changes in Net Position are comprised of non-expenditure transfers that affect Unexpended
Appropriations for non-invested appropriations. These amounts are included in the Budget Authority, Net Transfers
and Prior Year Unobligated Balance, and Net Transfers lines on the Statement of Budgetary Resources, Details of the
Appropriation Transfers on the Statement of Changes in Net Position and reconciliation with the Statement of
Budgetary Resources follow for September 30, 2020 and 2019:
2020_ 2019
Net Transfers from Invested Funds
Transfer to the Department of Transportation
Transfers to Another Agency
Total of Net Transfers on the Statement of Budgetary Resources
$ 1,396,692 $
1,572,990
101.700
89,000
809
2.884
$ 1.499.201 $
1.664.874
35,
21-F-0014
54
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
B. Transfers In/Out Without Reimbursement, Budgetary:
For September 30, 2020 and 2019, Transfers In/Out under Budgetary Financing Sources on the Statement of Changes
in Net Position consist of transfers between EPA funds. These transfers affect Cumulative Results of Operations.
Details of the transfers-in and transfers-out expenditure and non-expenditure, follow for September 30, 2020 and
2019:
2020 2019
Funds From
]'"unds From
Dedicated
Dedicated
Type of Transfer/Funds:
Collections
Other Funds
Collections
Other Funds
Transfers-in (out) nonexpenditure, b um uk to
Science and Technology and Office ot I he
Inspector General funds
$ (42,748)
$
42,081
$ (2,776)
$ 24,048
Transfers-in (out) nonexpenditure. Oil Spill
19,581
-
18,209
-
Transfers-in (out) nonexpendituie. e-Mamfest
23
-
8
-
Transfers-in (out), TSCA
(5,528)
-
-
(2,718)
PRIA
389
-
-
-
National Resource Damage Assessment
1.647
-
167
.
Total Transfer in (out) without Reimbursement,
Budgetary
$ C26.636)
$
42.081
S 15.608
$ 21.330
Note 29, Imputed Financing
In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, Federal agencies must
recognize the portion of employees" pensions and other retirement benefits to be paid by the OPM trust funds. These
amounts are recorded as imputed costs and imputed financing for each Agency. Each year the OPM provides Federal
agencies with cost factors to calculate these imputed costs and financing that apply to the current year. These cost
factors are multiplied by the current year's salaries or number of employees, as applicable, to provide an estimate of
the imputed financing that the OPM trust funds will provide for each Agency. The estimates for FY 2020 were S28.1
million. For FY 2019, the estimates were S81.1 million.
SFFAS No. 4. Managerial Cost Accounting Standards and Concepts and SFFAS No. 30, Inter-Entity
Cost Implementation, requires Federal agencies to recognize the costs of goods and services received from other
Federal entities that are not fully reimbursed, if material. The EPA estimates imputed costs for inter-entity
transactions that are not at full cost and records imputed costs and financing for these unreimbursed costs subject to
materiality. The EPA applies its Headquarters General and Administrative indirect cost rate to expenses incurred for
inter-entity transactions for which other Federal agencies did not include indirect costs to estimate the amount of
unreimbursed (i.e., imputed) costs. For FY 2020 total imputed costs were S29.7 million.
In addition to the pension and retirement benefits described above, the EPA also records imputed costs and financing
for Treasury Judgment Fund payments made on behalf of the Agency. Entries are made in accordance with the
Interpretation of Federal Financial Accounting Standards No. 2, Accounting for Treasury Judgment Fund
Transactions. For FY 2020, entries for Judgment Fund payments totaled $4.1 million. For FY 2019, entries for
Judgment Fund payments totaled S3.9 million.
36.
21-F-0014
55
-------
United States Kmiroiimental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 30. Payroll and Benefits Payable
Payroll and benefits payable to the EPA employees for the fiscal years ending September 30, 2020 and 2019, consist
of the following:
Covered by
Budgetary
Resources
Not Covered
by Budgetary
Resources
Total
F\ 2020 Payroll and Benefits Pa\nble
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable - Thrift Savings Plan
Accrued Unfunded Annual Leave
$ 36,385
30.297
1.792
$ - $
184 780
36,385
30.297
1.792
184.780
l'otal - Current
$ 68.474
S 184.780 $
253.254
Covered by
Budgetary
Resources
Not Covered
b\ Budgetary
Resources
Total
FY 2019 Pa> roll and Benefits Payable
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable - Thrift Savings Plan
Accrued Unfunded Annual Leave
$ 50.890
10,582
810
$ - $
141.703
50.890
10,582
810
141.703
l'otal - Current
$ 62.282
$ 141.703 $
203.985
Note 31. Other Adjustments, Statement of Changes in Net Position
The Other Adjustment's under Budgetary Financing Sources on the Statement of Changes in Net Position consist of
rescissions to appropriated funds and cancellation of funds that expired 7 years earlier. These amounts affect
Unexpended Appropriations. Other Adjustments, Statement of Changes in Net Position for the years ended September
30, 2020 and 2019, consist of the following:
Other Other
Funds Funds
2020 2019
Cancelled General Authority
S 18.964 $
229.890
Total Other Adjustments
S 18,964 $
229,890
37.
21-F-0014
56
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 32. Non-Exchange Revenue, Statement of Changes in Net Position
Non-Exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net Position for the fiscal
years ended September 30, 2020 and 2019:
2020
2019
Interest on Trust Fund
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nnnexchangc Revenue
Funds Ironi
Funds from
Dedicated
All Other
Dedicated
AH Other
Collections
Funds
Collections
Funds
$ 90,116
$
S 134,699
$
219.210
-
237,963
-
3,239
-
6,195
-
17.346
-
26.095
KM
00
$ .329.911
$
$ 404.952
$ (58)
38,
21-F-0014
57
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 33. Reconciliation of Net Cost of Operations to Budget (Restated)
For the Fiscal Year 2020:
Intra-
With the
governmental
Public
Total 2020
NKI'COST
$ 1,331,109 a
> 7,490,055
$ 8,821,164
Components of Net Cost That \re Not Part of Net Outlays:
Property, Plant and Fquipment Depreciation
-
68.599
68,599
Property, Plant and Equipment Disposal & Revaluation
-
(1,373)
(1.373)
Year-end Credit Reform Subsidy Re-estimates
(23,459)
-
(23.459)
Other
-
57,917
57.917
Increase/(l)ccrease) in Vssets:
Accounts Receivable
17,070
2,840
19,910
Loans Receivable
-
196,206
196,206
Investments
(27.990)
-
(27,990)
Other Assets
(12,323)
495
(11,828)
(Increase)/Decrease in Liabilities:
Accounts Payable and Accrued Liabilities
(15,188)
15,062
(126)
Debt Due to Treasury
(221,385)
-
(221,385)
Pensions and Other Actuarial Liabilities
-
(8,408)
(8,408)
Environmental Cleanup Costs
-
(5,573)
(5,573)
Cashout Advances, Supcrlund
-
100,456
m456
Commitments and Contingencies
-
(38)
(38)
Payroll and Benefits Payable
-
(49.269)
(49.269)
Other Liabilities
19,100
(9,132)
9,968
Other Financing Sources:
Federal Employee Retirement Benefit Costs Paid by OPM and
28,090
-
28,090
Imputed to the Agency
Transfer Out (In) Without Reimbursement
15,509
-
15,509
Other Imputed Financing
33.859
-
33.859
Total Components of Net Cost That Are Not Part of Net
Outlays
1,144,392
7,857,837
9,002,229
Components ol' Net Outlays That Are Not Part of Net Cost:
Effect of Prior Year Agencies Credit Reform Subsidy Re-
estimates
-
-
-
Acquisitions of Capital Leases
-
-
-
Acquisition of Inventory
-
567
567
Acquisition of Other .Assets
-
15,915
15,915
Other
-
474,408
474,408
lilt nponents of Net Outlays That Are Not Part of Net
t i
-
490.890
490.890
Other temporary Timing Differences
-
(769,712)
(769,712)
NET OUTLAYS
S 1.144.392 3
J 7.579.015
$ 8.723.407
39,
21-F-0014
58
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
For the Fiscal Year 2019: (Restated)
Intra- With the
governmental Public Total 2019
NET COST (Note 37) S
i 1,209,171 5
> 7,336,002 J
> 8,545,173
Components of Net Cost That Are Not Tart of Net Outlays:
Property, Plant and Equipment Depreciation
-
(77,679)
(77,679)
Property. Plant and Equipment Disposal & Revaluation
-
(1.160)
(1.160)
Year-end Credit Reform Subsidy Re-estimates
4
-
4
Other
-
62,120
62,120
Increaso/(Decrease) in Assets:
Accounts Receivable
16,953
42,430
59.383
Loans Receivable
-
263
263
Investments
499,610
-
499.610
Other Assets
(1,918)
4,426
2.508
(Increase)/Deerease in Liabilities:
Accounts Payable and Accrued Liabilities
(6.364)
(17,245)
(23.609)
Debt Due to Treasury
(266)
-
(266)
Pensions and Other Actuarial Liabilities
-
1,635
1,635
Environmental Cleanup Costs
-
148
148
Cashout Advances. Superiund (Note 37)
-
(268,217)
(268,217)
Commitments and Contingencies
-
-
-
Payroll and Benefits Payable
-
(1,966)
(1.966)
Other Liabilities
(51,799)
(4,481)
(56,280)
Other Financing Sources:
Federal Employee Retirement Benefit Costs Paid by OPM and
81,061
-
81,061
Imputed to the Agency
Transfer Out (In) Without Reimbursement
2.256.131
-
2,256,131
Other Imputed Financing
20.779
-
20.779
Total Components of Net Cost That Are Not Part of Net
Outlays
4,023,362
7,076,276
11,099,638
Components of Net Outlays That Are Not Part of Net Cost:
Effect of Prior Year Agencies Credit Reform Subsidy Re-
estimates
-
-
-
Acquisitions of Capital Leases
-
-
-
Acquisition of Inventory
-
194
194
Acquisition of Other Assets
-
21,059
21,059
Other
-
(2,908.309)
(2,908,309)
Total Components of Net Outlays That Are Not Part of Net
Cost
-
(2.887.056)
(2.887.0561
Other Temporary Timing Differences
-
(149,019)
(149,019)
NET OUTLAYS S
; 4.023362 8
5 4.040.201 S
i 8.063.563
21-F-0014
59
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Budgetary and financial accounting information differ. Budgetary accounting is used for planning and control
purpose:- and relates to both the receipt and use of cash, as well as reporting the federal deficit. Financial accounting is
intended to provide a picture of the government's financial operations and financial position, so it presents
information on an accrual basis. The accrual basis includes information about costs arising from the consumption of
assets and the incurrence of liabilities. The reconciliation of net outlays, presented on a budgetary basis, and the net
cost presented on an accrual basis, provides an explanation of the relationship between budgetary and financial
accounting information.
The reconciliation serves not only to identify costs paid for in the past and those that will be paid in the future, but
also to assure integrity between budgetary and financial accounting. The reconciliation explains the relationship
between the net cost of operations and net outlays by presenting components of net cost that are not part of net outlays
(e.g. depreciation and amortization expenses of assets previously capitalized, change in asset/liabilities), components
of net outlays that are not part of net cost (e.g. acquisition of capital assets), other temporary timing difference (e.g.
prior period adjustments due to correction of errors). The analysis above illustrates this reconciliation by listing the
key differences between net cost and net outlays.
41.
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60
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Note 34. Amounts Held by Treasury (Unaudited)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by Treasury in the
Superfiind and LUST Trust Funds.
A. Superfund
Superfund is supported by general revenues, cost recoveries of funds spent to clean up hazardous waste sites, interest
income, and fines and penalties.
The following reflects the Superfund Trust Fund maintained by Treasury as of September 30, 2020 and 2019. The
amounts contained in these notes have been provided by Treasury. As indicated, a portion of the outlays represents
amounts received by the EPA's Superfund Trust Fund: such funds are eliminated on consolidation with the Superfund
Trust Fund maintained by Treasury.
SI l'FKFl M> FY 2020 EPA Treasury Combined
I ndist r ibilled Ualances
Uninvested Fund Balance
S - $
5.759 S
5.759
Total Undistributed Balance
-
5,759
5,759
Interest Receivable
-
6,298
6,298
Investments, Net
4.863.644
204.708
5.068.352
Total - Visels
$ 4.863.644 $
216. "'65 S
5.080.409
Liabilities and Equity
Equitv
4.863.644
216.765
5.080.409
Total Liabilities and Equity
4.863.644
216.765
5.080.409
Receipts
Cost Recoveries
-
237,778
237.778
Fines and Penalties
-
4.278
4.278
Total Revenue
-
242,056
242.056
Appropriations Received
-
1,076.535
1.076,535
Interest Income
-
83.302
83.302
Total Receipts
-
1.401.893
1.401.893
Outlays
Transfers to/from EPA, Net
1.548.747
(1.548.747)
-
Total Outlays
1.548.747
(1.548.747)
-
Net Income
$ 1.548.747 S
(146.854) S
1.401.893
21-F-0014
61
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United States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
In FY 2020, the EPA received an appropriation of S 1.1 billion for Superfund, Treasury's Bureau of the Fiscal Service
(BFS), the manager of the Superfund Trust Fund assets, records a liability to the EPA for the amount of the
appropriation. BFS does this to indicate those trust fund assets that have been assigned for use and therefore are not
available for appropriation. As of September 30, 2020 and 2019, the Treasury Trust Fund has a liability to the EPA for
previously appropriated funds and special accounts of $5.1 billion and $5.2 billion, respectively.
SIPFRIVM) FY 201'J
EPA
Treasury
Combined
I 'ndistrihulcd Balances
Uninvested Fund Balance
$
S 3.003
$ 3.003
Total Undistributed Balance
-
3,003
3,003
Interest Receivable
-
5.413
5,413
Investments. Net
4.962.820
277.526
5.240.346
Total - Assets
$ 4.962.820
$ 285,942
$ 5,248,762
Liabilities and Equity
Equitv
4.962.820
285.942
5.248.762
Total liabilities and Equity
4.962.820
285.942
5.248.762
Receipts
Cost Recoveries
-
444,806
444.806
Fines and Penalties
-
2.504
2.504
Total Revenue
-
447,310
447.310
Appropriations Received
-
1,083.758
1,083,758
Interest Income
-
117.318
117.318
Total Receipts
-
1.648.386
1.648.386
Outlays
Transfers to/from EPA, Net
1.592.858
(1.592.858)
-
Total Outlays
1.592.858
(1.592.858)
-
Net Income
$ 1.592.858
S 55.528
$ 1.648.386
43.
21-F-0014
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
B. LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FY 2020 and 2019, there
were no fund receipts from cost recoveries. Hie amounts contained in these notes are provided by Treasury. Outlays
represent appropriations received by the EPA's LLTST Trust Fund; such funds are eliminated on consolidation with
the LUST Trust Fund maintained by Treasury.
I 1ST FY 2(120
EPA
T reasuiv
Combined
I lulislrihutcd Balances
Uninvested Fund Balance
$
S 14.081
$ 14.081
Total Undistributed Balance
-
14,081
14,081
Investments, Net
Si 270
812.746
895.016
Total - Assets
$ 8 0
$ 826.827
$ 909.097
liabilities and Equity
Equity
82.270
826.827
909.097
Total Liabilities and Equity
82.270
826.827
909.097
Receipts
Highway TF Tax
-
207,604
207,604
Airport TF Tax
-
11,575
11.575
Inland TF Tax
-
31
31
Total Revenue
-
219,210
219.210
Interest Income
-
6.282
6.282
Total Receipts
-
225.492
225.492
Outlays
Transfers to/from EPA, Net
101.700
flO 1.700)
-
Total Oiitlavs
101.700
(101,700)
Net Income
$ 101,700
S 123.792
$ "» 4
21-F-0014
63
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United States Kmironmental Protection Agency
Notes to the Financial Statements
For the l is.
nil Years Ended September 3(1, 2(120 and 2019
(Dollars in Thousands)
1,1 S I FY 2019
EPA
Treasury
Combined
I ndistiibuk'd Balances
Uninvested Fund Balance
$
£ 11.909
$ 11.909
Total Undistributed Balance
-
11,909
11,909
Investments, Net
92.029
681.367
773.396
l'olal - \ssets
$ 92.029
$ 693.276
$ 785.305
I iabiliiies and Equity
Equity
92.029
693.276
785.305
Total Liabilities and Equity
92.029
693.276
785.305
Receipts
Highway TF Tax
-
213,944
213,944
Aiiport TF Tax
-
11,971
11,971
Inland TF Tax
-
15
15
Total Revenue
-
225,930
225,930
Interest Income
-
16.183
16.183
Total Receipts
-
242.113
242.113
Outlavs
Transfers to'from I-'PA. Net
93.441
(93.441)
-
"l'otal Oulla\s
93.441
(93.441)
-
Net Income
$ 93.441
S 148.672
$ 242.113
Note 35. COVII) 19 Activity
On March 27. 2020. President Donald Trump signed into law The Coronavirus Aid, Relief, and Economic Security
Act (CAKES Act) in response to the economic fallout of the COVID-19 pandemic in the United States. The EPA
received a supplemental appropriation of $7,230 thousand to support Environmental Program Management Science
and Technology. Building and Facilities, and Superfund program efforts related to the virus. Additional OOYID-19
activities are discussed in Section I, Management's Discussion and Analysis, Financial Analysis and Stewardship
Information; and Section III. Other Accompanying Information. Agency Response to Office of Inspector General-
Identified Management Challenges.
Note 36. Reclassification of Balance Sheet, Statement of Net Cost and Statement of Changes in Net
Position for the FR Compilation Process
To prepare the Financial Report of the U.S. Government (FR), the Department of the Treasury requires agencies to
submit an adjusted trial balance, which is a listing of amounts by U.S. Standard General Ledger account that appear in
the financial statements. Treasury uses the trial balance information reported in the Governmentwide Treasury
Account Symbol Adjusted Trial Balance System (GTAS) to develop a Reclassified Balance Sheet, Reclassified
Statement of Net Cost, and Reclassified Statement of Changes in Net Position for each agency, which are accessed
using GTAS. Treasury eliminates all intragovernmenta 1 balances from the reclassified statements and aggregates lines
with the same title to develop the FR statements. This note shows EPA's financial statements and the EPA's
reclassified statements prior to the elimination of intragovernmental balances and prior to aggregation of repeated FR
line items. A copy of the 2019 FR can be found here: https://www.fiscal.treasurv.gov/reports-statements/ and a copy
of the 2020 FR will be posted to this site as soon as it is released.
45.
21-F-0014
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2020 and 2019
(Dollars in Thousands)
The term "intragovernmental" is used in this note to refer to amounts that result from other components of the Federal
Government.
The term "non-Federal" is used in this note to refer to Federal Government amounts that result from transaction with
non-Federal entities. These include transactions with individuals, businesses, non-profit entities, and State, local, and
foreign governments.
46.
21-F-0014
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knried September 3(1, 2020 and 2019
(Dollars in Thousands)
Reclassification of Balance Sheet to Line Items used for the Government-wide Balance Sheet as of September 30, 2020
FY 2020 EPA Balance Sheet
Line Items Used to Prepare the FY 2020 Government-wide Balance Sheet
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Financial
Statement line
ASSETS
ASSETS
Intra-Governmental Assets
Intra-Governmental Assets
FBWT
10,823,112
11,065.168
242,056
-
-
10,823.112
FBWT
5.963,368
-
-
5,963.368
Federal Investments
Investments, Net
5,969.666
6,298
6.298
Interest Receivable -
Investments
TotalImestments JW
5,%9 666
5,969.666
5.969.666
Total Reclassified
Investments. Net
Accounts Receivable
51,872
1,979 90 i
4,945,914
27.929
-
6.061
Accounts Receivable
Total ic counts Recenabl?
5] S"2
4 979,904
4,945.914
2"\929
6,061
Total Reclassified - i 'R
Uther
198,268
213 241
44,974
198 26"
Advances to others and
Prepayments
Total Other
198,268
243 241
44,974
-
198 26"
Total Reclassified Other
Total liitra-Goveramentai
Assets
17,042,918
22,257,979
5,187,970
72,903
16,997,106
.total Intra-Governmental
Assets
Cash and Other Monetary
Assets
10
10
10
Cavh and Other Monetary
Assets
Accounts Receivable, Net
503,725
503,725
503,725
Accounts and Taxes
Receivable, Net
Direct Loans. Net
196,470
196,470
-
196,470
Loans Receivable. Net
Inventory and Related
Property. Net
288
288
288
Inventory and Related
Property. Net
General PPM5
659,668
681,334
-
681,334
General PPitE. Net
Oth er
7,921
7,921
-
7,921
Other
Total Assets
18,411,000
23,647,727
5,187,970
72,903
-
18,386,854
Total Assets
LIABILITIES
LIABILITIES
Intra-Governmental
Liabilities
Intra-Governmental
Liabilities
iccounts Payable
152,014
5.159,503
4,967,412
45,745
146,346
Accounts Payable
Debt
221,652
221,652
.
221,652
Debt
Other - Custodial Liabilitv
72,018
71,610
-
-
71,610
Other - Custodial Liability
Other - Miscellaneous
Liabilities
158,195
56,654
27,158
29,496
Benefit Program
Conti ibuti ons Pa's able
104,490
104,490
\ilvanccstiom ofhets &
Deterredi edits
5,381
-
-
5,381
Other Liabilities
Total. Other - Miscellaneous
liabilities
158,195
166,525
27,158
139,367
Total Reclassified Other -
Miscellaneous Liabilities
Tota! Intra-Govemm ental
Liabilities
603,879
5,619,290
4,967,412
72,903
578,975
Total Intra-Governmental
Liabilities
Accounts Payable
525,173
49,723
-
49,723
Accounts Payable
Federal Ernplo\ ee and
Veteran Benefits
50,451
235,230
235,230
Federal Employee and
Veteran Benefits
Environmental andDisposal
Liabilities
38,383
38,383
38,383
Environmental andDisposal
Liabilities
Contineent Liabilities
38
-
-
Contingent Liabilities
Advances and Deferred
Revenue
3,472,784
4,157,749
4.157,749
Miscellaneous Liabilities
402,935
-
-
Other Liabilities
Total Miscellaneous
Liabilities
402,935
4,481,085
4,481,085
Total Reclassified
Miscellaneous Dabilities48
Total Liabilities
5,093,643
10,100,375
4,967,412
72,903
-
5,060,060
Total Liabilities
47.
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
NEI POSII ION
NET POSITION
Unexpended Appropriations
- Funds from Dedicated
Collections
(189)
(870)
(870)
Net PoMtK i - Funds from
Dedicated Collections
Unexpended Appropriations
- Other Funds
9.600,037
9,596,928
9,596,928
Net Position - Funds Other
Than Tho«e From Dedicated
Collections
Cumulative Results of
Operati ons - Funds from
Dedicated Collections
3,307,079
2,521,500
220,558
2,300,942
Cumulative Results of
Operations - All Other
410,430
1 42c ""94
1.420, "'94
Total Net Position
13.31 \35~
13 sp 352
220,558
-
13.326."'94
Total Liabilities & Net
Position
18,411,000
23,64^2"
5(18%97fl
72,903
18,386,854
Total Liabilities & Net
Position
Reclassification of Statement of Net Cost to Line Items Used for tlie Government-wide Statement of Net Cost for the Year Ended September 30,2020
FY 2020 EPA SNC
Line Items Used to Prepare the FY 2020 Government-wide SNC
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Statement
Line
Gross Costs
9,335,328
Non-Federal Costs
7,886,866
7,886.866
Non-Federal Gross Costs
7.886,866
-
-
7,886,866
Total Non-Federal Costs
Intragovemmental Costs
403 son
-
403.800
Benefits Program Costs
5,666
.
5.666
Imputed Costs
919 646
-
-
.
919.646
Bu\ Seil Costs
15,469
-
15,469
Purchase of Assets
6,471
6,471
Borrowing and Other
Intel est Expense
317,266
274,191
43,075
Othei Expenses >wo
Reciprocals)
1,668,318
274,191
1,394,127
Total Intragovemmental
Costs
Total Gross Costs
9,335,328
9,555,184
274.191
9,280,993
'Total Reclassified Gross
Costs
Earned Revenue
514.164
936,860
237,778
274,191
424,891
Non-fed eial Famed
Revenue
Intragovemmental
Revenue
73,450
-
-
-
73,450
Buy/Sell Revenue
15,469
15f469
Pin chase of Assets Offset
(26)
{26!
Borrowing and Other
Interest Revenue
88,893
88,89?
Total Intragovemmental
Earned Revenue
Total Earned Revenue
514,164
1,025,753
237,778
274,191
513,784
Total Reclassified Lamed
Revenue
NET COST
8,821,164
8,529,431
(237,778)
-
-
8,767,209
NFI COS!
48.
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67
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Reclassification of Statement on Changes in Net Position to Line Items Used for Government-wide Statement of Operations and Changes in Net
Position foi the \eai I'nded Septembei 30,2020
FY 2020 EPA SCNP
Line Items Used to Prepare the FY 2020 Government-wide SCNP
financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Statement
Line
UNEXPENDED
APPROPRIATIONS
UNEXPENDED
APPROPRIATIONS
Unexpended appropriations,
Beginning Balance
8,928,321
8.925.580
8.925 580
Net Position Beginning of
Period
Appropriations Received
9.148,119
9.129,155
9.129,155
Appropriations Received as
Adjusted
Other Adjustments
(17,892)
1
.
-
1
Other Adjustments
Appropriations Used
(8,458,700)
i8.45S,67"7)
-
-
(8.4^8 6""')
Appropriations Used
Total Unexpended
Appropriations
9,599,848
CUMUL. RESULTS OF
OPERATIONS
Cumulative Results.
Beginning Balance
3,667,993
3,639,072
(21,498)
3,660,570
Net Position. Beginning of
Period
Other Adjustments
(1,072)
Other Budgetary Financing
Sources
Appropriations Used
8,458,700
8,458,677
-
-
8.458,677
Appropriations Used
Non-Federal Non-
Exchange Revenues
Nonexchange Revalue -
Securities Investment
90,116
90,116
90,116
Nonexchange Revenue -
Securities Investment
Nonexchange
202,243
4,278
197,965
Borrowings and othei
interest, revenue
2,511
2,511
Borrowings and other
interest revenue
Nonexchange Revenue -
Other
239,795
219,210
219,210
Other Taxes and Receipts
329,911
514,080
4,278
509,802
Total Non-Federal Non-
Exchange Revenues
Borrowings and Other
Interest Revenue
-
-
Other Taxes and Receipts
Transfers In/Out w/o
Reimbursement-Budgetary
15,445
20,371
20,371
Non-Expendituie Tiansfeiv-
In of Unexpended
Appropriations and
Financing Sources
857
857
Expenditure transfers-m of
financing sources
219
219
219
Transfers-in without
reimbursement
Transfers-out without
reimbursement
Total Transfers In/Out w/o
Reimbursements udgetary
219
219
219
Total Reclassified Transfers
In Out m o Rembursement-
Budzetaiv
Imputed Financing Sources
61,949
(152,907)
(152,907)
Imputed Financing Souices
(Federal)
Trust. Fund Appropriations
5,528
5,666
5,666
Non-entity collections
transfeired to the General
Fund of the U.S.
Government
(14,64S)
(14,648)
Accrual of collections yet to
be trans, to the Gen. Fund
9,337
9.337
Other non-budgetarv
fim icing souices
Total Financing Sources
€7,696
(152,333)
-
-
-
(152,333)
Net Cost of Operations
(8,821,164)
(8,529,431)
237,778
-
(8-6-.209)
Net Cost of Operations
49,
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I nited States Kmironmeiital Protection Agency
Notes to the Financial Statements
For the Fiscal Years Knded September 3(1, 2020 and 2019
(Dollars in Thousands)
Ending Balance -
Cumulative Results of
Operations
3,717,509
3,951,293
220,558
3,730,735
Total Net Position
13,317,357
13,547,352
220,558
-
-
13,326,794
Total Net Position
Note 37. Restatements
During FY 2020, EPA determined that $120 million of Superfund Cashout Advances had been incorrectly classified
as earned revenue when it should have been unearned. To address this finding, EPA has restated its FY 2019 financial
statements.
This change impacts the FY 2019 Cashout Advances, Superfund on the Balance Sheet, Earned Revenue and Net Cost
of Operations on the Statement of Net Cost and Statement of Net Cost by Major Program, and Net Cost of Operations
and Cumulative Results of Operations for Funds From Dedicated Collections on the Statement of Changes in Net
Position.
50,
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Required Supplementary Information (Unaudited)
United States Knvirunmental Protection Agency
September 30, 2020 and 2019
(Dollars in Thousands)
Deferred Maintenance
Deferred maintenance is maintenance that was not performed when it should have been, that was scheduled and not
performed, or that was delayed for a future period. Maintenance is the act of keeping property, plant and equipment
(PP&E) in acceptable operating condition and includes preventive maintenance, normal repairs, replacement of parts
and structural components, and other activities needed to preserve the asset so that it can deliver acceptable
performance and achieve its expected life. Maintenance excludes activities aimed at expanding the capacity of an
asset or otherwise upgrading it to serve needs different from or significantly greater than those originally intended.
Deferred Maintenance is described as the act of keeping fixed assets in acceptable condition.
Such activities include: Preven tive maintenance, replacement of parts, systems, or components, and other activities
needed to preserve or maintain the asset.
The deferred maintenance as of Fiscal Year 2020:
2020
2019
Asset Category
Buildings
Total Deferred Maintenance
S 128.924 S 131.059
S 128.924 S 131.059
51.
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70
-------
In Fiscal Year 2020, in accordance with SFFAS No. 42. Deferred Maintenance and Repairs: Amending Statements of
Federal Financial Accounting Standards 6, 14, 29 and _ the EPA presents Deferred Maintenance and Repairs
(DM&R) information by asset category as follows:
Buildings:
I'olicv
Explanation
Maintenance and repairs policies and how they are
applied.
The maintenance and repair policy is to maintain facilities and
real property installed equipment to fully meet mission needs
at each site. Systems are maintained to function efficiently at
full capacity and to meet or exceed life expectancy of buildings
and building systems.
How we rank and prioritize maintenance and repair
activities among other activities.
Building and facility program projects are scored and ranked
individually based on seven weighted factors to determine
priority needs. High scoring projects are prioritized above
lower scoring projects. The seven factors considered are:
health and safety, energy conservation, environmental
compliance, program requirements, repair and upkeep, space
alteration, and operational urgency. Repair and Improvement
(R&I) projects are identified and prioritized on a local basis.
Factors considered in determining acceptable
condition standards.
The nine building systems must function at a level that fully
meet mission needs. The nine building systems are: structure,
roof, exterior components and finish, interior finish, HVAC,
electrical, plumbing, conveyance, and specialized program
support equipment. Each system is rated from 0 to 5 during
facility assessments. Ratings are used to determine facility
condition index and estimated deferred maintenance.
State whether DM&R relate solely to capitalized
general PP&F. and stewardship PP&E or also to
non-capitalized or fully depreciated general PP&E.
Facilities assessments and the resulting DM&R estimates are
applied to capitalize PP&F. onh. Full facility assessments
using the NASA parametric model are used to determine
facilities and systems indices and deferred maintenance
estimates.
PP&E for which management does not measure
and' or report DX l&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
Buildings are not excluded from DM&R estimates.
Explain significant changes from the prior year.
No significant changes.
EPA Held Equipment:
Policy
Explanation
Maintenance and repairs policies and how they are
applied.
Managers of the equipment consider manufacturers
recommendations in determining maintenance requirements.
How we rank and prioritize maintenance and repair
activities among other activities.
Equipment is maintained based on manufacture's
recommendations.
Factors considered in determining acceptable
condition standards.
Manufacturer recommendations.
State whether DM&R relate solely to capitalized
general PP&E and stewardship PP&E or also to
non-capitalized or fullv depreciated general PP&E.
DM&R relates to all EPA Held Equipment as determined by
individual site managers.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
Individual site managers determine the need to measure and/or
report DM&R based on mission needs.
Explain significant changes from the prior year.
Individual site equipment managers decide on a case-by-case
basis the need to maintain equipment.
52,
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Vehicles:
Policv
Explanation
Maintenance and repairs policies and how they are
applied.
Vehicle managers maintain vehicles owned by the EPA in
accordance with the recommendations of the manufacturer.
How we rank and prioritize maintenance and repair
activities among other activities.
The goal is to maintain the vehicle as built and as
recommended by the manufacturer. Repairs and maintenance
are also described as system critical or minor. System critical
repairs and maintenance are high priority and are immediately
taken care of. Minor repairs are lower priority and may be
taken care of at a later date (time/scheduling permitting).
These are not critical to in-field functionality, but the repairs
are needed to maintain the vehicle as built.
Factors considered in determining acceptable
condition standards.
The vehicle is inspected to ensure that it (the vehicle) and
related specialized equipment are in good working order. The
criteria being that the vehicle is being maintained as built and
as recommended bv the manufacturer.
State whether D.YI&R relate solely to capitalized
general PP&E and stewardship PP&E or also to
non-capitalized or fully depreciated general PP&E.
All vehicles are capitalized.
PP&E for which management does not measure
and/ or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
None.
Explain significant changes from the prior year.
No significant changes.
Beginning in FY 2015, requirements for recognizing and reporting significant and expected to be permanent
impairment of general PP&F. (except Internal 1 Tse Software) remaining in use are in SFFAS No. 44, Accounting for
Impairment of General Property, Plant, andEqi ipment (G-PP&E) Remaining in Use,
This statement establishes accounting and financial reporting standards for impairment of general property, plant, and
equipment remaining in use, except for internal use software. G-PP&E is considered impaired when there is a
significant and permanent decline in the service utility of G-PP&E or expected service utility for construction work in
progress. A decline is permanent when management has no reasonable expectation that the lost service utility will be
replaced or restored.
This statement does not anticipate that entities will have to establish additional or separate procedures beyond those
that may already exist, such as those related to deferred maintenance and repairs, to search for impairments.
Impairments can be identified and brought to management's attention in a variety of ways. Although a presumption
exists that there are existing processes and internal controls in place to reasonably assure identification and
communication of potential material impairments, this statement does not require entities to conduct an annual or
other periodic survey solely for the purpose of applying these standards.
Management may determine that existing processes and internal controls are not sufficient to reasonably assure
identification of potential material impairments and impairments and implement appropriate additional processes and
internal controls.
53.
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Supplemental Combined Statement of Budgetary Resources (Unaudited)
United Suites km ironmenUil Protection Agency
For the Fiscal Year Kndin<: September 30, 2020
(Dollars in Thousands)
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget Authority, Net
Appropriations (discretionary and mandatory)
Bon owing Authoiitj kli&ct etionary and mandatory)
Spending Authority From Offsetting Collection
Total Budgetary Resources
S1A11TS OF Bt'DGKI 4RV RESOURCES
New Obligation1; and Upwaid adjustments (total)
Unobligated Balance. End of Year:
Apportioned, Unexpired Accounts
Unapportioned. Unexpired accounts
Expired Unobligated Balance. End of Y ear
Unobligated Balance, End of Year (total):
Total Status of Budgetary Resources
OUTLAYS, NET
Outlaws Net (total > (di^aetionai) and mandatory)
Distributed Offsetting Receipts (-)
Agenc} Outlays, "Net (di«£ietionai\'md mandatory)
Disbursements. Net (total) (mandatory)
Leaking
Environmental Underground State Tribal
Programs & Storage Science & Assistance
Management Tanks Technology Superfund Agreements .
Ot
$ 579,104 $ 9,283 $ 168,700 $ ITm % 944,436 $ 410 087 S *82^104
2.676.794 91,941 718,699 1 4^2 4,546,232 1 2M 912 10 Ti"9
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Appendix II
Agency Response to Draft Report
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
November 13, 2020
OFFICE OF THE
CHIEF FINANCIAL OFFICER
MEMORANDUM
SUBJECT: Response to the Office of Inspector General Draft Audit Report, Project No. OA&E-
FY20-0206, "EPA's Fiscal Years 2020 and 2019 (Restated) Consolidated Financial
Statements, " dated November 10, 2020
FROM: David A. Bloom, Deputy Chief Financial Officer DAVID
Office of the Chief Financial Officer BLOOM
gned by DAVID
BLOOM
Date _¦>_ 1.11.13 15:03:47
~0S'00'
TO: Paul C. Curtis, Director
Financial Directorate
Office of Audit
Thank you for the opportunity to respond to the issues and recommendations in the subject draft audit
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. We have provided high-level intended
corrective actions and estimated completion dates to the extent possible.
AGENCY'S OVERALL POSITION
The EPA concurs with the Office of Inspector General's recommendations but disagrees with some of
the OIG statements made.
AGENCY RESPONSE TO PIG STATEMENTS
OIG STATEMENT
During its financial statement preparation process, however, the EPA did not detect and correct multiple
misstatements and adjustment errors before they were entered into the EPA's accounting system or
statements. Not properly recording financial adjustments and not exercising due diligence in the
preparation of the financial statements compromise the accuracy of the financial statements and the
reliance on them to be free of material misstatement.
AGENCY RESPONSE
The agency disagrees that it was unable to detect errors and did not exercise due diligence in the
preparation of the financial statements. Considering the hundreds of adjustments that are
required for the financial statements eveiy fiscal year, occasional errors are an expected risk, and
that is why the agency has internal controls in place to mitigate that risk. Due diligence and
1
21-F-0014
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application of existing internal controls led to the discovery and correction of errors and
prevented any misrepresentation of the agency's financial position.
OIG STATEMENT
The EPA incorrectly recorded an adjustment totaling approximately $4 billion in its accounting system.
The error occurred because the EPA's preparation, analysis, and review of the material adjustment
before it was entered into the EPA's accounting system did not detect or prevent the material adjustment
from being entered incorrectly. After being informed of the error, the Agency subsequently recorded a
financial statement adjustment to mitigate the impact of the error.
AGENCY RESPONSE
As the agency stated in its response to a previous finding on this adjustment, agency staff
independently detected and quickly corrected this error, which was due to a transposition of
debits and credits. While we did make the error, staff followed procedures in checking work and
that allowed the error to be properly detected and corrected prior to the issuance of the first draft
of the financi al statements. Therefore, there was 110 impact to the financial statements.
OIG STATEMENT
During audits of the EPA's component financial statements, we found the following misstatements and
errors:
• Toxic Substances Control Act Service Fee Fund financial statements for the period from
inception (June 22, 2016) through September 30, 2018. We found that the EPA overstated its
expenses from other appropriations by $8.4 million. The EPA made errors in multiple iterations of its
calculation for expenses from other appropriations. Management did not have an adequate review
process in place to ensure proper reporting of costs incurred against other appropriations to support
Toxic Substances Control Act Service Fee Fund activities.
• FY 2019 Pesticide Registration Improvement Act Fund financial statements. We found multiple
instances where the EPA misstated its adjustments and financial statements. We found that the Agency
misreported contract expenses by approximately $156,000, and statement of budgetary resources by
approximately $48,000. We also found that the EPA incorrectly calculated its payroll accrual.
• FY 2019 Hazardous Waste Electronic Manifest System Fund financial statements. We found that
the EPA misreported accounts receivable and earned revenue by approximately $151,000, and accrued
liabilities by approximately $183,000. We also found various errors totaling at least $110,000.
AGENCY RESPONSE
The agency concurs with the misstatements identified in the component financial statements and
is working on implementing stronger internal control over the component financial statement
preparation process. Having said that, the overall impact of the identified misstatements total
$9,048 million which is not material to the consolidated financial statements of the EPA.
2
21-F-0014
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Component
Dollar Amount of
Misstatement
Material, to EPA Financial.
Statements
Toxic Substances Control Act
Service Fee Fund
$8.4 M
No
FY 2019 Pesticide Registration
Improvement Act Fund
$0,156 M
$0,048 M
No
FY 2019 Hazardous Waste
Electronic Manifest System
Fund
$0,151 M
$0,183 M
S0.110M
No
Total
$9,048 M
OIG STATEMENT
The EPA did not detect and correct, during its financial statement preparation processes, the errors and
misstatements stated above. After w e conducted account analyses of the activity and questioned the
Agency, staff stated that the EPA will prepare additional adjustments and revise the current adjustments
to correct the errors and misstatements we found. Had it not been for the intensh e inquiry by our
auditors, material errors would have impacted the financial statements.
AGENCY RESPONSE
There was one material error cited by the OIG, a Si 20 million misstated Superfund special
account unearned revenue balance. To prevent this t\ pe of error, in addition to the improvements
and updates to "Standard Procedures for the Processing of Vouchers in Compass" described
below, the review process for adjustments will now include analysis of the complete general
ledger impact of adjustments to ensure the proper genera! ledger impact in the financial
statements is achieved.
AGENCY'S RESPONSE TO DRAFT AUDIT RECOMMENDATIONS
No.
Recommendation
High-Level Intended Corrective
Aetion(s)
Estimated
Completion Date
1
Develop a plan to strengthen
and improve the preparation
and management review of the
financial statements and
adjustments entered into the
accounting system so that errors
and misstatements are detected
and corrected in a timely
manner.
Concur. The agency agrees that it will
strengthen and improve the preparation
and management review of the financial
statements and adjustments and has
already developed and implemented a
plan to do so. The following corrective
actions have been completed or are in
progress:
• Updated the "Standard Procedures for
the Processing of Vouchers in
Compass" to improve the process for
My 31, 2021
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21-F-0014
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
preparing adjustments, Adjustments
over $10 million will now require an
additional level of management
rev iew. On top adjustments to the
financial statements will require
review and approval by management
before being processed. (Completed
November 2020)
• Review ed w ith staff the need to
include more of the supporting
analysis and rationale behind the
adjustments made and the accounting
basis for them, (CompletedFebruary
2020)
• Regular review s of journal \ ouchers to
ensure they are clearh and sufficiently
supported, / On-gut rig)
• Regular financial statements team
meetings to cross train and resolve
potential issues. {On-going)
• Full implementation of Case Ware
financial statement preparation
software which increases efficiency
and provides additional format
controls and footnote cross checks that
were not available previously.
(Completed A larch 2020)
• Annual staff training on CaseWare.
{Completed July 2020)
• Annual project plan for financial
statement preparation process.
{Completed July 2<>20)
• Developed Standard Operating
Procedures for financial statement
preparation and review er checklist.
{Completed July 2020)
• Established a senior level call bi-
weekly between the DCFO, Controller
and OICt senior management to
address concents early in the audit
process. {On-going)
• Lessons learned to be discussed at
conclusion of audit and process
improvement plans developed.
(Janttarv February 2021)
4
21-F-0014
77
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
• Off cycle A-123 review of SOPs.
(January/February 2021)
2
Develop a plan to evaluate and
improve the EPA's process for
preparing adjustments,
including an analysis of the
impact of adjustments on
general ledger accounts, and
improve the management
review process to ensure
general ledger impact is proper
in the financial statements.
Concur. The agency has already
developed and implemented a plan to
improve the process as stated above. In
addition, the agency updated the
"Standard Procedures for the Processing
of Vouchers in Compass" as a process
improvement for preparing adjustments.
Adjustments over $10 million will now
require an additional level of management
review. Additionally, on top adjustments
to the financial statements will require
review and approval by management
before being processed. Any adjustment
materially affecting accounts and/or
balances of the finance centers will be
coordinated for review. The review
process for adjustments will now include
analysis of the complete general ledger
impact of adjustments.
November 9,
2020
CONTACT INFORMATION
If you have any questions regarding this response, please contact the OCFO's Audit Follow-up
Coordinator, Andrew LeBlanc, at (202) 564-1761.
cc: Donna J. Vizian
Carol Terris
C. Paige Hanson
Charlie Dankert
Lek Kadeli
Katherine Trimble
Charles Sheehan
Edward Shields
James Hatfield
Jeanne Conklin
Christine El-Zoghbi
Meshell Jones-Peeler
Richard Gray
OCFO-OC-MANAGERS
Paul Curtis
Rudy Brevard
Richard Eyermann
Wanda Arrington
21-F-0014
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Demetrios Papakonstantinou
Mairim Lopez
Oabrielle Hanson
Andrew Sheeran
Andrew LeBlanc
Jose Kercado
6
21-F-0014
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Appendix III
Distribution
The Administrator
Assistant Deputy Administrator
Associate Deputy Administrator
Chief of Staff
Deputy Chief of Staff/Operations
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
Associate Chief Financial Officer for Policy
Controller
Deputy Controller
Associate Deputy Controller
Director, Office of Budget, Office of the Chief Financial Officer
Director, Office of Planning, Analysis and Accountability, Office of the Chief Financial Officer
Director, Office of Resource and Information Management, Office of the Chief Financial Officer
Director, Office of Technology Solutions, Office of the Chief Financial Officer
Director, Accounting and Cost Analysis Division, Office of the Controller
Director, Policy, Training, and Accountability Division, Office of the Controller
Branch Chief, Management, Integrity, and Accountability Branch, Policy, Training, and
Accountability Division, Office of the Controller
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Budget, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of the Controller, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Technology Solutions, Office of the Chief Financial Officer
Backup Audit Follow-Up Coordinator, Office of the Chief Financial Officer
21-F-0014
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