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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Operating efficiently and effectively
EPA's Fiscal Years 2019
and 2018 (Restated)
Consolidated Financial
Statements
Report No. 20-F-0033
November 19, 2019
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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
NIST
National Institute of Standards and Technology
OCFO
Office of the Chief Financial Officer
OIG
Office of Inspector General
OMB
Office of Management and Budget
OMS
Office of Mission Support
PII
Personally Identifiable Information
SFFAS
Statement of Federal Financial Accounting Standards
SPII
Sensitive Personally Identifiable Information
U.S.C.
United States Code
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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 (EPA's) Office of
Inspector General (OIG) 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.
EPA's Fiscal Years 2019 and 2018 (Restated)
Consolidated Financial Statements
EPA Receives an Unmodified Opinion for FY 2019 and 2018
We found the EPA's
financial statements to be
fairly presented and free
of material misstatement.
We rendered an unmodified opinion on the
EPA's consolidated financial statements for
fiscal years 2019 and 2018 (restated), meaning
they were fairly presented and free of material
misstatement.
Internal Control Material Weakness and
Significant Deficiencies Noted
We noted the following material weakness:
• The EPA needs to improve its financial statement preparation process.
We noted the following significant deficiencies:
• The EPA improperly recorded e-Manifest receivables and earned revenue.
• The EPA misclassified e-Manifest user fee revenue.
• The EPA understated its contract accrued liabilities.
• The EPA needs to improve the process to disable user accounts for
financial and mixed financial systems.
• The EPA's Office of the Chief Financial Officer needs to protect personally
identifiable information on its server used to transfer data with vendors.
Compliance with Laws and Regulations
We did not note any significant noncompliance with laws and regulations.
Recommendations and Planned Agency Corrective Actions
The EPA agreed with all 17 recommendations and has either completed
corrective actions or provided an estimated time frame for completion.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.
List of OIG reports.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 19, 2019
MEMORANDUM
SUBJECT: EPA's Fiscal Years 2019 and 2018 (Restated) Consolidated Financial Statements
Report No. 20-F-0033
Attached is our report on the U.S. Environmental Protection Agency's (EPA's) fiscal years 2019 and
2018 (restated) consolidated financial statements. The project number for this audit was OA&E-FY19-
0201. We are reporting one internal control material weakness and five significant deficiencies.
Attachment 1 contains details on the material weakness and significant deficiencies. We did not
note any instances of noncompliance.
This audit report represents the opinion of the Office of Inspector General (OIG), and the findings in this
report do not necessarily represent the final EPA position. EPA managers, in accordance with
established EPA audit resolution procedures, will make final determinations on the findings in this audit
report. Accordingly, the findings described in this audit report are not binding upon the EPA in any
enforcement proceeding brought by the EPA or the U.S. Department of Justice.
The agency agreed with the recommendations in this report and, therefore, no further response is
required. If you nonetheless choose to provide a response, your response 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.
This report will be available at www.epa.gov/oig.
FROM: Paul C. Curtis, Director
Financial Directorate
Office of Audit and Evaluation
TO:
David Bloom, Acting Chief Financial Officer
Donna Vizian, Principal Deputy Assistant Administrator
Office of Mission Support
Attachments
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EPA's Fiscal Years 2019 and 2018 (Restated) 20-F-0033
Consolidated Financial Statement
Table of Contents
Inspector General's Report on EPA's Fiscal Years 2019 and
2018 (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 6
Prior Audit Coverage 7
Attachments
1. Internal Control Material Weakness and Significant Deficiencies 8
Material Weakness
FINANCIAL STATEMENT PREPARATION
EPA Needs to Improve Its Financial Statement Preparation Process 9
Significant Deficiencies
E-MANIFEST ACCOUNTS RECEIVABLES AND REVENUE
EPA Improperly Recorded e-Manifest Receivables and Earned Revenue 11
EPA Misclassified e-Manifest User Fee Revenue 14
ACCRUED LIABILITIES
EPA Understated Its Contract Accrued Liabilities 16
INFORMATION TECHNOLOGY
EPA Needs to Improve Process to Disable User Accounts
for Financial and Mixed Financial Systems 18
OCFO Needs to Protect Personally Identifiable Information
on Its Server Used to Transfer Data with Vendors 21
2. Status of Prior Audit Report Recommendations 25
3. Status of Current Recommendations and Potential Monetary Benefits 28
- continued -
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EPA's Fiscal Years 2019 and 2018 (Restated) 20-F-0033
Consolidated Financial Statement
Appendices
I. EPA's FYs 2019 and 2018 Consolidated Financial Statements
II. Agency Response to Draft Report
III. Distribution
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Inspector General's Report on
EPA's Fiscal Years 2019 and 2018 (Restated)
Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
Report on the Financial Statements
We have audited the accompanying financial statements of the U.S. Environmental Protection
Agency (EPA), which comprise the consolidated balance sheet, as of September 30, 2019, and
September 30, 2018 (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 financial
statements in accordance with accounting principles generally accepted in the United
States of America; 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 financial statements based upon our
audit. We conducted our audit in accordance with generally accepted government
auditing standards; the standards applicable to financial statements contained in
Government Auditing Standards issued by the Comptroller General of the United States;
and Office of Management and Budget (OMB) Bulletin No. 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 financial statements are free from
material misstatements.
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 (OIG) 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, 2019 and
2018, in conformity with accounting principles generally accepted in the United States of
America.
Emphasis of Matter- Restatement FY 2018
As described in Note 37, the EPA made certain restatements in its FY 2018 financial
statements to correct misstatements for a capitalized lease and contract accruals. Our
opinion is not modified with respect to these corrections.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
information in the Required Supplementary Steward Information, 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 OMB and the Federal Accounting Standards
Advisory Board who consider it to be an essential part of the financial reporting for placing the
basic consolidated financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the Required Supplementary Stewardship
Information, Required Supplementary Information, Supplemental Information, and Management's
Discussion and Analysis, in accordance with auditing standards generally accepted in the United
States of America, 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 statements, and other knowledge we obtained during the audit of the
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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 auditing
procedures for the purpose of expressing an opinion on the financial statements and to comply
with OMB audit guidance, not to express an opinion on internal control. Accordingly, we do not
express an opinion on internal control over financial reporting nor on management's assertion on
internal 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
No. 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 (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 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,
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 in a timely manner. 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.
We consider one of these matters to be a material weakness. These issues are summarized below
and detailed in Attachment 1.
Material Weakness
FINANCIAL STATEMENT PREPARATION
EPA Needs to Improve Its Financial Statement Preparation Process
We found multiple instances whereby the agency had major misstatements of its financial
transactions and financial statements. The OMB requires that information in the financial
statements be presented in accordance with Generally Accepted Accounting Principles.
Agency personnel initially failed to make the appropriate adjustments to the financial
20-F-0033
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statements, believing their accounting was accurate. Failure to correct the errors resulted
in the agency's misstating its financial statements, requiring a restatement. Furthermore,
failure to properly record accounting transactions and exercise due diligence in the
preparation of the agency's financial statements compromises the accuracy of the
financial statements and the reliance on them to be free of material misstatement.
Significant Deficiencies
E-Manifest Accounts Receivables and Revenue
EPA Improperly Recorded e-Manifest Receivables and Earned Revenue
The EPA did not properly record $15,682,808 of e-Manifest receivables during FY 2019.
Federal accounting standards require federal entities to recognize accounts receivable
when a legal claim exists, as well as to recognize exchange revenue when goods or
services are provided to the public or another government entity at a price. 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.
EPA Misclassified e-Manifest User Fee Revenue
The EPA misclassified $10.7 million of user fees collected for services provided as
nonexchange revenue instead of exchange revenue. Federal accounting standards require
the recognition of exchange revenue when a government entity provides goods or
services to the public or another government entity and when each party sacrifices value
and receives value in return. However, the agency recognized $10.7 million as
nonex change revenue because it had not updated its accounting posting model. As a
result, there was a high risk that the EPA would continue to misclassify user fee revenues
and would potentially overstate its net cost of operations. Further, such overstatement
inaccurately presented the EPA's ability to sustain program operation costs through user
fee revenues.
ACCRUED LIABILITIES
EPA Understated Its Contract Accrued Liabilities
We found that the EPA understated its FY 2018 contract accrued liabilities by $59
million. EPA policy states that accrual estimates should closely reflect the actual
liabilities outstanding at the end of the reporting period. The misstatement occurred
because the EPA relied on 1 month of subsequent disbursements to proof its accrual
estimate, even though contract payments for FY 2018 liabilities continued throughout FY
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2019. Consequently, the EPA's FY 2018 understatement of accruals also resulted in an
overstatement of its FY 2019 contract expenses.
INFORMATION TECHNOLOGY
EPA Needs to Improve Process to Disable User Accounts for Financial and
Mixed Financial Systems
The Office of the Chief Financial Officer (OCFO) and the Office of Mission Support
(OMS) did not consistently remove user access to financial and mixed financial systems
when employees were separated or terminated from the EPA. Removing each departing
employee access to information technology infrastructure is critical to protecting systems
and data. Federal and EPA directives require that user access to systems be removed
when access is no longer needed. However, account managers for the systems were not
consistently notified to remove access when employees no longer worked for the agency.
As a result, former agency employees could inappropriately access critical financial and
mixed financial systems and had the ability to inappropriately use or disclose EPA's data.
OCFO Needs to Protect Personally Identifiable Information on Its Server
Used to Transfer Data with Vendors
The OCFO lacks controls to protect personally identifiable information (PII) and
sensitive PII (SPII) stored on a file transfer server that is used to exchange data with EPA
vendors. Federal and EPA directives require the EPA to secure this type of information.
However, the OCFO did not encrypt, restrict access rights or remove files containing PII
and SPII on the file transfer server. Without proper security and access controls, PII and
SPII collected by EPA are vulnerable to unauthorized access and a breach of privacy that
could lead to identity theft.
Attachment 2 contains the status of issues reported in prior years' reports. The issues included in
the attachment should be considered among the EPA's significant deficiencies for FY 2019.
We reported less significant internal control matters to the agency during the course of the audit.
We will not issue a separate management letter.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Control
OMB Bulletin No. 19-03, requires the OIGto 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 No. 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.
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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 its
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 No. 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 (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. Ongoing investigations involving EPA grantees and
contractors could disclose violations of laws and regulations, but a determination about
these cases has not been made
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
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 the
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.
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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. In its representations to us, the EPA
reported one incident of potential violations of the Antideficiency Act regarding a
U.S. Government Accountability Office opinion related to the potential violation. We did
not identify any other potential violations of this act during the course of our 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.
• The EPA materially overstated earned revenue.
• The EPA improperly increased accounts receivable and related revenue.
• Originating offices did not forward accounts receivable source documents in a timely
manner to the finance center.
• The EPA should improve its efforts to resolve its long-standing cash differences with the
U.S. Treasury.
• Financial management system user account management need improvement.
• The EPA's OCFO lack internal controls when assuming responsibility for account
management procedures of financial systems.
• The EPA need controls to monitor direct access to its accounting system.
• The EPA need to perform a documented evaluation on upgrading equipment used to
implement physical environmental controls at the National Computer Center.
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 and Evaluation
Office of Inspector General
U.S. Environmental Protection Agency
November 19, 2019
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Attachment 1
Internal Control Material Weakness and
Significant Deficiencies
Table of Contents
Material Weakness
FINANICAL STATEMENT PREPARATION
1 EPA Needs to Improve Its Financial Statement Preparation Process 9
Significant Deficiencies
E-MANIFEST RECEIVABLES AND REVENUE
2 EPA Improperly Recorded e-Manifest Receivables and Earned Revenue 11
3 EPA Misclassified e-Manifest User Fee Revenue 14
ACCRUED LIABILITIES
4 EPA Understated Its Contract Accrued Liabilities 16
INFORMATION TECHNOLOGY
5 EPA Needs to Improve Process to Disable User Accounts
for Financial and Mixed Financial Systems 18
6 OCFO Needs to Protect Personally Identifiable Information
on Its Server Used to Transfer Data with Vendors 21
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1—EPA Needs to Improve Its Financial Statement Preparation Process
We found multiple instances whereby the agency had major misstatements of its financial
transactions and financial statements. The OMB requires that information in the financial
statements be presented in accordance with Generally Accepted Accounting Principles. Agency
personnel initially failed to make the appropriate adjustments to the financial statements,
believing their accounting was accurate. Failure to correct the errors resulted in the agency's
misstating its financial statements, requiring a restatement. Furthermore, failure to properly
record accounting transactions and exercise due diligence in the preparation of the agency's
financial statements compromises the accuracy of the financial statements and the reliance on
them to be free of material misstatement.
OMB Circular A-13 6, Financial Reporting Requirements, Section II. 3, requires that information
in the financial statements be presented in accordance with Generally Accepted Accounting
Principles, which include the Federal Accounting Standards Advisory Board's Statement of
Federal Financial Accounting Standards (SFFAS). The U.S. Government Accountability Office's
Standards for Internal Control in the Federal Government defines the five components of
internal control in government. 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 multiple instances whereby the agency had major misstatements of its financial
transactions and financial statements. Specifically, we found that the agency misreported a
capitalized lease; contract accruals; expenses incurred for Superfund sites, including unbilled
costs and unearned revenue; and other revenue:
• Capitalized Lease. In fiscal year (FY) 2016, we reported that the agency erroneously
reclassified the real property capital lease as an operating lease without making a proper
determination. SFFAS 5, Accounting for Liabilities of The Federal Government, and
SFFAS 6, Accounting for Property, Plant, and Equipment, provide specific requirements
for classifying a lease as capital. In FY 2019, the agency performed a review of its capital
lease. Initially, the agency decided to record remaining future payments on its capitalized
lease as a lease expense, thereby reclassifying it as an operating lease, even though the
terms of the lease had not changed since its inception. The agency later corrected the
lease liability and affected accounts, and it posted an adjustment.
• Contract Accruals. In FY 2018, we informed the agency that it had understated its
contract accruals. The agency maintained that its amounts were correct. While the agency
did post an adjustment to correct some of the difference, the contract accrual was still
understated, as discussed in Significant Deficiency 4, which is titled "EPA Understated
Its Contract Accrued Liabilities."
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• Superfund Unbilled Oversight Costs. During our analysis of the agency's manual
adjustments to unearned revenue, we noticed a restated amount posted for FY 2018 and
material adjustments to FY 2019. When we inquired about these adjustments, agency
staff indicated that they were changing the financial statements to reflect a new
accounting model used for special accounts. However, our analysis indicated that the
agency was not properly matching revenue with expenses incurred, in accordance with
SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for
Reconciling Budgetary and Financial Accounting. The agency also failed to provide
sufficient documentation to determine the validity of actions taken, affecting our ability
to conclude that the entries made were accurately recorded.
• Other. We found other discrepancies in the agency's financial statements. Specifically, in
the November 14, 2019, version of the financial statements, the agency recorded negative
revenue of $371 million. This material change was the result of late journal entries. After
we inquired about this negative balance, agency staff indicated that they would make
corrections.
Agency personnel initially failed to make the appropriate adjustments to the financial statements,
believing their accounting was accurate. In each case, the agency's initial accounting for the
transactions was in error, as was its intended corrections. It was only after we conducted an
account analysis of the activity and questioned the agency's actions that staff made adjustments
to correct the errors. Had it not been for the intensive inquiry by our auditors, major and material
errors would have impacted the financial statements. These issues highlight the need for the
agency to strengthen its processes so that data are accurate; comply with federal accounting
standards; and are readily available on a timely basis to prepare the financial statements.
Failure to correct the errors resulted in the agency misstating its FY 2018 financial statements,
requiring a restatement. Furthermore, failure to properly record accounting transactions and
exercise due diligence in the preparation of the agency's financial statements compromises the
accuracy of the financial statements and the reliance on them to be free of material misstatement.
Recommendations
We recommend that the Chief Financial Officer:
1. Evaluate and improve the EPA's process for preparing financial statements.
2. Provide accurate and reliable supporting documentation for adjustments and corrections
to the financial statements.
Agency Comments and OIG Evaluation
The EPA agreed with our findings and recommendations. The agency's estimated completion date
for corrective actions is July 31, 2020, for Recommendation 1 and February 29, 2020, for
Recommendation 2.
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2—EPA Improperly Recorded e-Manifest Receivables and
Earned Revenue
The EPA did not properly record $15,682,808 of e-Manifest receivables during FY 2019.1
Federal accounting standards require federal entities to recognize accounts receivable when a
legal claim exists, as well as to recognize exchange revenue when goods or services are provided
to the public or another government entity at a price. 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.
SFFAS 1, Accounting for Selected Assets and Liabilities, states:
A receivable should be recognized when a federal entity establishes a claim to cash
or other assets against other entities, either based on legal provisions, such as a
payment due date, ... or goods or services provided. ... [Further,] [Receivables
from federal entities are intragovernmental receivables, and should be reported
separately from receivables from nonfederal entities.
In addition:
Interest [receivable] should be recognized on outstanding accounts receivable and
other U.S. government claims against persons and entities in accordance with
provisions in 31 U.S.C. 3717, Interest and Penalty Claims. ... Interest receivable
from federal entities should be accounted for and reported separately from interest
receivable from the public.
SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling
Budgetary and Financial Accounting, states:
Exchange revenue and gains are inflows of resources to a Government entity that
the entity has earned. They arise from exchange transactions, which occur when
each party to the transaction sacrifices value and receives value in return.
The EPA did not create appropriate accounting models to record e-Manifest accounts receivable
or to recognize revenue when costs were incurred. We found three collection transactions during
our sample testing that reduced accounts receivable in General Ledger account 13100044,
"Billed Emanifest [sic] Receipts Public." However, no prior receivable had been recorded for
these transactions. Upon further review of activity during the fiscal year, we identified
$15,682,808 of receivables that were not properly recorded.
1 The e-Manifest system is the EPA's national system for electronically tracking hazardous waste shipments.
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The Office of Land Emergency Management compiles invoice data based on the electronic
manifest documents received from waste handlers and transmits invoices from the e-Manifest
system to individual facilities. However, the e-Manifest system is not integrated with Compass
Financials; therefore, no financial data for the invoiced amounts or earned revenue for services
provided are recorded in Compass at the transaction level. Facilities receive the invoices and
remit payments, which are recorded in Compass. The EPA records a standard voucher at the end
of each month to record receivables and recognize revenue, but this standard voucher is recorded
solely for financial reporting purposes, not to record individual receivable and earned revenue
transactions. Although the standard voucher, combined with the collection entries, offsets the
receivables and recognizes earned revenue, the receivables and earned revenue are still not
recorded at the transaction level. The EPA is therefore not compliant with federal accounting
standards during the year, and accounts are misstated until the monthly standard voucher is
posted.
We also found that penalties, interest and federal revenue are also not properly recorded in
Compass. According to the Office of Land Emergency Management, interest and penalties are
assessed automatically within the e-Manifest system and are combined with the amount of fees
due in invoices. Finally, the EPA does not differentiate its reporting of earned revenue from
federal versus nonfederal sources. According to information provided by Office of Land
Emergency Management, e-Manifest collections are from both federal and nonfederal vendors.
However, this activity was not accounted for separately in the agency's accounting system,
which misstates earned revenue due to the failure to differentiate between federal versus
nonfederal sources.
By not creating proper accounting models for e-Manifest transactions to record accounts
receivable and earned revenue at the transaction level, account receivables and earned revenue
are understated during the year, and interest, penalties and federal revenue are misstated in the
EPA's financial statements. Furthermore, the EPA is not in compliance with either SFFAS 1,
which requires the recognition of a receivable when a legal claim exists, or SFFAS 7, which
requires revenue recognition when the goods or services were provided.
Recommendations
We recommend that the Chief Financial Officer:
3. Update the accounting models to properly record collections and not reduce an account
receivable account.
4. Establish accounting models to properly record e-Manifest account receivables and
recognize earned revenue at the transaction level.
5. Establish accounting models to properly classify and record interest, fines, penalties and
fees.
6. Establish accounting models to properly record receivables, collections and earned revenue
from federal versus nonfederal vendors.
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Agency Comments and OIG Evaluation
The EPA agreed with our findings and recommendations. The agency's estimated completion date
for corrective actions is September 30, 2021.
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3—EPA Misclassified e-Manifest User Fee Revenue
The EPA misclassified $10.7 million of user fees collected for services provided as nonexchange
revenue instead of exchange revenue. Federal accounting standards require the recognition of
exchange revenue when a government entity provides goods or services to the public or another
government entity and when each party sacrifices value and receives value in return. However,
the agency recognized $10.7 million as nonexchange revenue because it had not updated its
accounting posting model. As a result, there was a high risk that the EPA would continue to
misclassify user fee revenues and would potentially overstate its net cost of operations. Further,
such overstatement inaccurately presented the EPA's ability to sustain program operation costs
through user fee revenues.
SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling
Budgetary and Financial Accounting, states:
Exchange revenue and gains are inflows of resources to a Government entity that
the entity has earned. They arise from exchange transactions, which occur when
each party to the transaction sacrifices value and receives value in return. That is,
exchange revenue arises when a Government entity provides something of value
to the public or another Government entity at a price.
This standard also states that "[ejxchange revenue includes most user charges other than taxes."
In addition, according to the Hazardous Waste Electronic Manifest Establishment Act
(e-Manifest Act), 42 U.S.C. § 6939g(c)(2), the EPA is required to recover the full cost of
providing system-related services through the established user fees.
In FY 2019, the OCFO misclassified four vouchers—with a total of $10.7 million of e-Manifest2
user fees collected for services provided—as nonexchange revenue instead of exchange revenue.
Table 1 sets forth the user fee summary totals recorded as nonexchange revenue in the EPA's
general ledger.
Table 1: User fee vouchers posted as nonexchange revenue
Voucher number
Date
Amount
RAS19081AJS
3/27/19
$5,981,552.10
RAS19125TWJ
4/10/19
1,008,967.00
RAS19146CYL
5/24/19
1,986,986.64
RAS19159TWJ
6/6/19
1,761,742.40
Total
$10,739,248.14
Source: Office of Inspector General analysis.
According to OCFO staff, they initially believed that the revenue received from e-Manifest user
fees was not equal in value to the services the agency provided to the public. After we discussed
our finding with OCFO staff, however, they agreed that the fees should have been recorded as
2 The e-Manifest is the EPA's national system for electronically tracking hazardous waste shipments.
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exchange revenue. In response to our finding, the staff said that they will change their accounting
posting model to correctly record the e-Manifest user fees as exchange revenue.
If the agency did not change the accounting posting model, the EPA could have continued to
misclassify user fee revenues and potentially overstated its net cost of operations. Further, such
overstatement would inaccurately present the EPA's ability to sustain the program's operations
and recover its full cost through user fee revenues, as required by the e-Manifest Act.
Based on our finding, the OCFO updated the voucher posting model to record e-Manifest user
fees as exchange revenue. In addition, the OCFO reclassified the $10.7 million as exchange
revenue. Since the agency has already acted on our finding, we make no recommendations.
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A—EPA Understated Its Contract Accrued Liabilities
We found that the EPA understated its FY 2018 contract accrued liabilities by $59 million. EPA
policy states that accrual estimates should closely reflect the actual liabilities outstanding at the
end of the reporting period. The misstatement occurred because the EPA relied on 1 month of
subsequent disbursements to proof its accrual estimate, even though contract payments for
FY 2018 liabilities continued throughout FY 2019. Consequently, the EPA's FY 2018
understatement of accruals also resulted in an overstatement of its FY 2019 contract expenses.
Statement of Federal Financial Accounting Standard No. 5, Accounting for Liabilities of the
Federal Government, requires that all liabilities be recognized when incurred, regardless of
whether they are covered by available budgetary resources. In addition, the EPA's Resource
Management Directive System No. 2540-04-P4, Recognizing Year-End Accrued Liabilities,
states that "[w]hile the amounts recorded as accruals are estimates of liabilities, reasonable
efforts should be made to develop a methodology that will closely reflect the actual amount
outstanding at the end of the reporting period."
The EPA recorded $67 million as its contract accrued liability as of September 30, 2018. At that
time, we estimated that the EPA's contract accrual should have been approximately
$116 million, a difference of $49 million. We discussed our finding with the EPA and reported
an audit difference of $49 million during our FY 2018 audit. The EPA decided not to record the
audit difference.
In FY 2018, the EPA changed its contract accrual methodology. To support the reasonableness
of its new methodology, the EPA calculated a proof of its contract accrual for FY 2018. The
EPA's initial proof was based on FY 2018 contract payments disbursed during the first month of
FY 2019. However, we found that EPA payments on contracts for work performed in FY 2018
continued throughout FY 2019. As a result, the contract accrual should have been approximately
$126 million, which means the EPA understated the accrual amount by $59 million.
After we discussed these findings with the EPA, the agency agreed that its new accrual
methodology did not closely reflect the actual expenses for the reporting period. The EPA
therefore decided to restate its FY 2018 financial statements by posting a $49 million adjustment.
Subsequently, the EPA updated its contract accrual methodology for FY 2019. However, based
on the actual disbursements, we estimate that the FY 2018 restated financial statements are still
understated by approximately $10 million.
By understating the FY 2018 accrued liabilities, the EPA overstated its FY 2019 contract expenses.
Recommendations
We recommend that the Chief Financial Officer:
7. Adjust the fiscal year 2018 contract accrued liabilities by $9,853,030.26.
8. Perform a proof of the contract accrual methodology using actual expenses to verify the
accuracy of the EPA's accruals.
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Agency Comments and OIG Evaluation
The EPA agreed with our findings and recommendations and has completed corrective actions.
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5—EPA Needs to Improve Process to Disable User Accounts for
Financial and Mixed Financial Systems
The OCFO and the OMS did not consistently remove user access to financial and mixed
financial systems when employees were separated or terminated from the EPA. Removing each
departing employee access to information technology infrastructure is critical to protecting
systems and data. Federal and EPA directives require that user access to systems be removed
when access is no longer needed. However, account managers for the systems were not
consistently notified to remove access when employees no longer worked for the agency. As a
result, former agency employees could inappropriately access critical financial and mixed
financial systems and had the ability to inappropriately use or disclose EPA's data.
Federal and EPA Requirements for Termination of Access Control
National Institute of Standards and Technology's (NIST's) Special Publication 800-53,
Security and Privacy Controls for Federal Information Systems and Organizations, Revision
4, dated April 2013, Access Control-2, states that each federal agency or organization:
• "Creates, enables, modifies, disables, and removes information system accounts in
accordance with" organization-defined procedures or conditions.
• "Notifies account managers ... When users are terminated or transferred."
Section AC-2 of the EPA's Information Security - Access Control Procedure (CIO-2150-
P-01.2, dated September 21, 2015) states:
When a user's official association with the EPA or authorization to access
EPA information systems is terminated, all accounts associated with that
user are disabled immediately. Such accounts include network access,
e-mail access, etc.
EPA Did Not Remove User Access for Separated Employees
The OCFO and the OMS did not always follow procedures to enforce access controls
procedures to notify account managers when users are separated from the agency. We
reviewed user access to four systems; some financial and some mixed financial systems:
• Three under the purview of the OCFO—the Automated Standard Application for
Payments, Compass Financials and the Grants Payment Allocation System.
• One under the purview of the OMS—the Integrated Grants Management System.
For these four systems, we interviewed the three account managers and found they had
differing prompts for disabling user accounts:
• One removes or disables user accounts via direct notification, while the other
removes or disables user accounts via indirect notification.
• One relies upon annual reviews to certify that users still need system access, even
though EPA policy requires system access to be removed immediately.
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As a result, eight former EPA employees who separated from the agency from May 1,
2018, through May 31, 2019, retained access to one financial and two mixed financial
systems we reviewed (Table 2).
Table 2: Active accounts for former employees who separated from the EPA from May 1,
2018, through May 31, 2019
System name
System purpose
Separated employees
with active accounts
Automated Standard
Application for
Payments
This Department of the Treasury system is used by federal
agencies to enroll recipient organizations, authorize payments
and manage accounts.
23
Compass Financials
This web application provides the tools needed to manage,
budget and track expenditures.
1
Integrated Grants
Management System
This system exchanges data with Grants.gov, the central portal
for applicants to apply for federal grants. The system receives
electronic applications and makes them available to EPA
employees for review, approval, and funding and post-award
management.
4
Total separated employees with access
7
Source: OIG analysis.
If the EPA does not take immediate action to remove system access when employees
separate or are terminated from the agency, these active accounts could be used to gain
unauthorized access to the agency's financial and mixed financial systems, leaving data
vulnerable to unauthorized use and disclosure.
Recommendations
We recommend that the Chief Financial Officer:
9. Implement a process to timely notify the Compass Financials and Automated Standard
Application for Payment user account administrators of individuals who are separated or
terminated from the EPA and remove their access to these systems.
10. Remove user access of the separated Compass Financial user identified with an active
account.
We recommend that the Assistant Administrator for Mission Support:
11. Implement a process to timely notify the Integrated Grants Management System user
account administrator of individuals who separate from the EPA and remove their access
to this system.
12. Remove user access of the separated Integrated Grants Management System users
identified with active accounts.
3 Two former employees separated effective March 30, 2019. These former employees were included in the analysis
because user access was not disabled until April 22, 2019.
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Agency Comments and OIG Evaluation
The EPA agreed with our recommendations and provided acceptable corrective actions and
milestone dates. Specifically:
• For Recommendation 9, the agency stated that it had an internal control process that
provided automated notifications to terminate access when users separated from the
agency, but this process failed in the spring of 2019. Management indicated that it is
currently using a manually executed report and will update the internal controls so that
access to the EPA network is revoked when employees are separated.
• For Recommendation 10, the agency indicated that it removed the Compass access for
the employees identified in the finding.
• For Recommendation 11, the agency indicated that it will identify specific areas where
improvement is necessary in the deprovisioning process of user accounts and licenses.
The agency said that it will then implement, where appropriate, a technical solution for
these improvements.
• For Recommendation 12, the agency indicated that it has removed the IGEMS access for
the employees identified in the finding.
Recommendations 9 and 11 are resolved with corrective actions pending. The agency provided
documentation supporting that corrective actions to address Recommendations 10 and 12 have
been completed. Therefore, Recommendations 10 and 12 are completed. The EPA's full
response to our draft report is in Appendix II.
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6—OCFO Needs to Protect Personally Identifiable Information on Its
Server Used to Transfer Data with Vendors
The OCFO lacks controls to protect PII and SPII stored on a file transfer server that is used to
exchange data with EPA vendors. Federal and EPA directives require the EPA to secure this type
of information. However, the OCFO did not encrypt,
restrict access rights or remove files containing PII and
SPII on the file transfer server. Without proper security
and access controls, PII and SPII collected by EPA are
vulnerable to unauthorized access and a breach of privacy
that could lead to identity theft.
Federal and EPA Standards Require Protection of Information
NIST Special Publication 800-53 specifies the following controls for protecting PII:
• System and Communications Protection-28, Protection of Information at Rest.
This control addresses the confidentiality and/or integrity of information at rest,
which refers to the state of information when it is located on storage devices as
specific components of information systems. Pursuant to this control,
"Organizations have the flexibility to either encrypt all information on storage
devices (i.e., full disk encryption) or encrypt specific data structures (e.g., files,
records, or fields)"
• Access Control-6, Least Privilege. This control provides, "The organization
employs the principle of least privilege, allowing only authorized accesses for
users (or processes acting on behalf of users)
which are necessary to accomplish assigned tasks
in accordance with organizational missions and
business functions." This control is also defined in
the EPA's Information Security - Access Control
Procedure.
The EPA's Protecting Sensitive Personally Identifiable Information (SPII), Chief
Information Officer Directive No. 2151-P-10.0, dated December 19, 2016, provides that
security and controls are required to protect SPII due to the harm it could cause if an
information system is breached. This procedure states system owners are responsible for
properly destroying copies and files containing SPII after 90 days. In addition, pursuant
to this directive, all employees, must:
• "Ensure all such SPII has been erased, returned, or destroyed within 90 days, or
request approval ... for continued use."
• "Encrypt documents containing SPII properly ... and document the encryption."
PII: Information used to distinguish, trace or
identify an individual's identity, such as name,
date of birth and home address.
SPII: A subset of PII, this information includes
Social Security numbers or comparable
identification numbers, as well as passport,
biometric, medical or financial data.
The principle of least privilege is
the principle where users have the
minimum system access necessary
to perform their work.
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EPA File Transfer Server Does Not Protect Sensitive Information
The OCFO uses a file transfer server to exchange financial and other information with its
external service providers. This server and the exchanged data are controlled by the EPA
(Figure 1). When PII and SPII are exchanged, they should be protected from
unauthorized access. However, the
OCFO lacked internal controls to
verify that employees
(1) implemented information
system security controls required by
NIST and (2) followed the EPA's
Information Security - Access
Control Procedure and the EPA's
Protecting Sensitive Personally
Identifiable Information (SPII).
The OCFO did not limit access to
PII and SPII or encrypt SPII.
Specifically, OCFO employees
did not:
• Prevent people with access to the file transfer server from viewing SPII. For
example, we learned during an interview with the technician who maintains the
server for the OCFO that this person could view SPII on the server. However, the
technician does not need access to the SPII for work purposes.
• Follow the EPA's Information Security - Access Control Procedure, which
requires each user to have only the minimum
system access needed to accomplish assigned
organizational missions and business functions. The
OCFO thought access to SPII was restricted by
information technology based on assigned user
groups; however, we found that access to view SPII
was granted to all users of the server. As such, the OCFO process does not limit
access to PII and SPII.
• Erase SPII when it was no longer needed for current operations. Consequently, the
server contained bank files from calendar year 2013 and calendar year 2019 that
contain the EPA's travel, purchase and fleet credit card information, including
names, expiration dates and credit card numbers. The server also stored tax
information, including the names and social security numbers of EPA contractors,
from calendar years 2012 through 2017.
All 139 user accounts of the file transfer server could view the server's SPII because of
this lack of control. The OCFO could have protected the SPII by encrypting the data,
Figure 1: File Transfer Server
The EPA's Network
hi r"
EPA Systems
Compass Financials
Hosting Vendor
Source: EPA OIG.
User groups help simplify
access to a computer system,
whereby users assigned to the
same "group" have the same
system access and ability to
perform the same tasks.
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restricting which users could access the data and erasing the data from the file transfer
server after the data had been transferred to the system of record.
The OCFO indicated that it would work with its service provider, the Office of Mission
Support, to either remove or restrict user access by September 20, 2019. However, as of
September 24, 2019, the system access rules were not changed to restrict user access to
the server. The Office of Mission Support representative who is responsible for
maintaining the file transfer server told us that the OCFO had not submitted a request for
any rule changes. OMS also added that there are information technology staff in the
OCFO who can update access rights. The OCFO also said that it would work with its
support team to implement the agency's file retention policy and transfer the files
containing PII and SPII to a secure location by December 13, 2019.
Recommendations
We recommend that the Chief Financial Officer:
13. Implement internal controls to comply with mandatory information system security
controls to protect Personally Identifiable Information (PII) and Sensitive Personally
Identifiable Information (SPII) stored on the file transfer server as specified by the
National Institute of Standards and Technology Special Publication 800-53, Security and
Privacy Controls for Federal Information Systems and Organizations, Revision 4,
April 2013.
14. Implement internal controls to comply with CIO's Directive No.: 2151-P-10.0,
Protecting Sensitive Personally Identifiable Information (SPII), dated December 19,
2016, for the PII and SPII stored on the server used to exchange information with EPA
vendors.
15. Take immediate action to verify that the user accounts on the file transfer server, with
access to the PII and SPII, need the access to the file transfer server and remove the user
accounts of personnel who do not need access to the server.
16. Take immediate action to update the user account access group rules to restrict what PII
and SPII users can view on the file transfer server used to exchange information with
EPA vendors.
17. Take immediate action to verify that employees are complying with the EPA record
retention procedures for the PII and SPII that is currently stored on the file transfer server
used to exchange information with EPA vendors.
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Agency Comments and OIG Evaluation
The EPA agreed with our recommendations and provided acceptable corrective actions and
milestone dates. Specifically:
• For Recommendation 13, the agency indicated that it will remove the files from the
server within 5 days. Further the agency will use a tool to alert staff that the files have
been removed.
• For Recommendation 14, the agency indicated that it will develop a process to annually
recertify user access to the file transfer server. Further, the agency will generate a report
to validate and verify group access to the file transfer server.
• For Recommendation 15, the agency indicated that it has implemented steps to recertify
all users. Further, the agency will remove user accounts of personnel who do not need
access to the file transfer server.
• For Recommendation 16, the agency indicated that it would review all access from the
file transfer server and take the necessary actions to either remove or restrict access.
• For Recommendation 17, the agency indicated that it will not retain files with PII and
SPII on the file transfer server. The file transfer server is intended as a mechanism to
transfer files between agency systems and external destinations. The agency will transfer
files from the file transfer server to a secure location.
We consider Recommendations 13, 14, 15, 16 and 17 resolved with corrective actions pending.
The EPA's full response to our draft report is in Appendix II.
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Attachment 2
Status of Prior Audit Report Recommendations
The EPA is working to strengthen its audit management procedures to address audit findings in a
timely manner and to complete corrective actions expeditiously and effectively. Strengthened
procedures will also help improve environmental results. In FY 2019, 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 management procedures:
• The OCFO worked closely with Agency Audit Follow-Up Coordinators during
FY 2019 to ensure that corrective action dates were being met and required
certification memorandums were being submitted. The EPA said that OCFO efforts
significantly helped with the EPA's responses to the OIG's two Semiannual Reports
to Congress in FY 2018, which were issued in the spring and fall of 2018.
• The agency provided a session on Financial Audits and Audit Outcomes at the
FY 2019 OCFO Technical Conference held in the spring. Participants attended from
all EPA offices.
• The agency continued to hold quarterly meetings with Agency Audit Follow-Up
Coordinators to discuss issues and concerns, as well as to emphasize adherence to
corrective action due dates and the need to keep the Management Audit Tracking
System current. The EPA asked the OIG to participate in the agency's spring quarterly
meeting, and the EPA said that our participation, provided it with a better understanding
of OIG and EPA roles and responsibilities.
In addition, the EPA maintained its commitment to engage early with the OIG on audit
findings and to develop effective corrective actions that address OIG recommendations.
However, the following table outlines the status of past significant deficiency findings that
have not been resolved to date.
Table 3: Significant deficiency issues not fully resolved
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 not due until September 2017; however,
the agency revised the expected completion 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
examinations was not feasible.
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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 are 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.
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. Therefore, the EPA's corrective action was not totally effective.
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to the
Finance Center
In FY 2014, we found that the EPA and the Department of Justice did not forward accounts receivable
source documents to the 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 Cincinnati Finance Center's timely receipt of legal documents,
we still identified instances of untimely receipt during FYs 2015 through 2019. Therefore, the agency's
corrective actions are not completely effective, and we will continue to evaluate whether the agency
timely receives legal source documents in FY 2020.
EPA Improperly Increased Accounts Receivable and Related Revenue
During FY 2018, we found that the EPA improperly increased accounts receivable based on the cash
received rather than the amount stipulated in the legal claim. Based on our findings, we recommended
the agency adjust accounts receivable only for amounts stipulated in settlement agreements. The EPA
considers this recommendation completed; however, we found during the FY 2019 audit that the EPA
recorded an accounts receivable based on the cash received rather than the amount stipulated in the
legal document. Therefore, the agency's corrective actions are not completely effective, and we will
continue to evaluate the agency's recording of accounts receivable.
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. As of November 2019, we were awaiting additional supporting documentation
from the agency, and we had not assessed the effectiveness of the agency's corrective action.
Financial Management System User Account Management Needs Improvement
During our FY 2009 audit, we found that the EPA had not established policies that clearly define
incompatible functions and associated processes to facilitate the proper separation of duties within the
financial system application. Based on our findings, we recommended in our FY 2009 report that the
OCFO verify that all new and updated financial management systems include an automated control to
enforce separation of duties. The agency agreed with our finding and recommendation. The EPA had
considered this recommendation closed; however, the OCFO agreed in FY 2016 to develop alternative
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corrective actions for this recommendation, with a planned completion date of December 31, 2017.
In FY 2017, the OCFO extended the completion date to December 31, 2018. In FY 2019, the agency
provided us with a separation of duties waiver and a list of individuals requesting access in accordance
with EPA procedures, but the agency did not provide us the required list of mitigating controls. We
asked the EPA for additional documents to support the completion of the corrective action. The EPA did
not provide further information. Therefore, this recommendation is unresolved.
OCFO Lacks Internal Controls When Assuming Responsibility for Account Management
Procedures of Financial Systems
During our FY 2015 audit, we found that the OCFO's Application Management staff assumed
responsibility for managing oversight of users' access to the Payment Tracking System without ensuring
that the system had documentation covering key account management procedures. Based on our
findings, we recommended that the Chief Financial Officer implement an internal control process for
transferring the management of an application's user access to Application Management staff. We also
recommended that the Chief Financial Officer conduct an inventory of OCFO systems managed by
Application Management staff and create or update supporting access management documentation for
each application. The agency agreed with our finding and recommendations. In FY 2019, the OCFO
extended the completion date for the first recommendation to December 16, 2019, and the second
recommendation to the second quarter of FY 2020.
EPA Needs Controls to Monitor Direct Access to the Compass Financials Database
During our FY 2016 audit, we found that the EPA did not establish controls to monitor direct access to
data within the Compass Financials database. Based on our findings, we recommended in our FY 2017
report that the Chief Financial Officer work with the Compass Financials service provider to establish
controls for creating and locking administrative accounts. We also recommended that the Chief
Financial Officer work with the Compass Financials service provider to develop and implement a
methodology to monitor accounts with administrative capabilities. Further, we recommended that the
Chief Financial Officer enter the Continuous Monitoring Assessment recommendations into the
agency's system used for monitoring the remediation of information security corrective actions. The
agency concurred with our recommendations. According to the agency's May 1, 2019, corrective action
status report, the agency was adhering to the planned completion date of September 30, 2021, for the
first and second recommendations. Corrective actions for the third recommendation have been
completed.
EPA Needs to Perform a Documented Evaluation on Upgrading Equipment Used to Implement
Physical Environmental Controls at the National Computer Center
During FY 2018, we found that the EPA did not implement controls to enforce the required verification of
each person's identity every time anyone enters the agency's computer rooms. Additionally, we found
that equipment supporting the physical and environmental controls for the computer room at the
National Computer Center has not been maintained or reviewed to see if it still meets the needs of the
computer center. Based on our findings, we recommended that the Office of Mission Support:
• Implement controls to enforce the required verification of each person's identity prior to allowing
individuals to access the agency's computer rooms.
• Perform a review of system requirements and evaluate the suitability of existing technology to
replace or implement updates to the National Computer Center computer room's surveillance
system and generators. Update or replace, if warranted, the equipment based on the results of
the evaluation.
The Office of Mission Support provided a corrective action date of March 31, 2020, for the first
recommendation. We considered the first recommendation resolved with corrective actions pending.
For the second recommendation, the agency provided documentation to support that it evaluated the
video surveillance coverage of the National Computer Center computer room and established a process
to refill the fuel tanks for the generators. Additionally, the agency provided confirmation that its
generators' fuel tanks have a run time that exceeds the requirement for continuous uptime. Therefore,
the second recommendation is resolved.
Source: OIG analysis.
20-F-0033
27
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Attachment 3
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Potential
Monetary
Benefits
(in $000s)
1
10
Evaluate and improve the EPA's process for preparing financial
statements.
R
Chief Financial Officer
7/31/20
2
10
Provide accurate and reliable supporting documentation for
adjustments and corrections to the financial statements.
R
Chief Financial Officer
2/29/20
3
12
Update the accounting models to properly record collections and
not reduce an account receivable account.
R
Chief Financial Officer
9/30/21
4
12
Establish accounting models to properly record e-Manifest
account receivables and recognize earned revenue at the
transaction level.
R
Chief Financial Officer
9/30/21
5
12
Establish accounting models to properly classify and record
interest, fines, penalties and fees.
R
Chief Financial Officer
9/30/21
6
12
Establish accounting models to properly record receivables,
collections and earned revenue from federal versus nonfederal
vendors.
R
Chief Financial Officer
9/30/21
7
16
Adjust the fiscal year 2018 contract accrued liabilities by
$9,853,030.26.
C
Chief Financial Officer
11/8/19
$9,853
8
16
Perform a proof of the contract accrual methodology using actual
expenses to verify the accuracy of the EPA's accruals.
C
Chief Financial Officer
11/7/19
9
19
Implement a process to timely notify the Compass Financials
and Automated Standard Application for Payment user account
administrators of individuals who are separated or terminated
from the EPA and remove their access to these systems.
R
Chief Financial Officer
1/31/20
10
19
Remove user access of the separated Compass Financial user
identified with an active account.
C
Chief Financial Officer
10/31/19
11
19
Implement a process to timely notify the Integrated Grants
Management System user account administrator of individuals
who separate from the EPA and remove their access to this
system.
R
Assistant Administrator for
Mission Support
6/30/20
12
19
Remove user access of the separated Integrated Grants
Management System users identified with active accounts.
C
Assistant Administrator for
Mission Support
11/4/19
13
23
Implement internal controls to comply with mandatory
information system security controls to protect Personally
Identifiable Information (Pll) and Sensitive Personally Identifiable
Information (SPII) stored on the file transfer server as specified
by the National Institute of Standards and Technology Special
Publication 800-53, Security and Privacy Controls for Federal
Information Systems and Organizations, Revision 4, April 2013.
R
Chief Financial Officer
1/31/20
20-F-0033
28
-------
RECOMMENDATIONS
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Potential
Monetary
Benefits
(in $000s)
14
23
Implement internal controls to comply with ClO's Directive No.:
2151-P-10.0, Protecting Sensitive Personally Identifiable
Information (SPIIj, dated December 19, 2016, forthe Pll and
SPII stored on the server used to exchange information with EPA
vendors.
R
Chief Financial Officer
12/30/19
15
23
Take immediate action to verify that the user accounts on the file
transfer server, with access to the Pll and SPII, need the access
to the file transfer server and remove the user accounts of
personnel who do not need access to the server.
R
Chief Financial Officer
11/22/19
16
23
Take immediate action to update the user account access group
rules to restrict what Pll and SPII users can view on the file
transfer server used to exchange information with EPA vendors.
R
Chief Financial Officer
11/22/19
17
23
Take immediate action to verify that employees are complying
with the EPA record retention procedures forthe Pll and SPII
that is currently stored on the file transfer server used to
exchange information with EPA vendors.
R
Chief Financial Officer
12/13/19
1 C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
20-F-0033
29
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Appendix I
EPA's FYs 2019 and 2018
Consolidated Financial Statements
20-F-0033
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EPA's Fiscal Year 2019 and 2018
Consolidated Financial Statements (With Restatements)
Financial Section
20-F-0033
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Table of Contents
Principal Financial Statements ,1
Notes to Financial Statements ,8
Note 1. Summary of Significant Accounting Policies 8 - 17
Note 2. Fund Balance with Treasury (FBWT) 18
Note 3. Cash and Other Monetary Assets 18
Note 4. Investments 19
Note 5. Accounts Receivable, Net 20
Note 6. Other Assets 20
Note 7. Loans Receivable, Net 20 - 22
Note 8. Accounts Payable and Accrued Liabilities (Restated) 22 - 23
Note 9. General Property Plant and Equipment 23
Note 10. Debt Due to Treasury 23
Note 11. Stewardship Property, Plant and Equipment 23-24
Note 12. Custodial Liability 24
Note 13. Other Liabilities (Restated) 24 - 25
Note 14. Leases (Restated) 25 - 26
Note 15. FECA Actuarial Liabilities 26 - 27
Note 16. Cashout Advances, Superfund 27
Note 17. Commitments and Contingencies 27 - 28
Note 18. Funds from Dedicated Collections (Unaudited) 29 - 31
Note 19. Cost of Stewardship Land 32
Note 20. Environmental Cleanup Costs 32 - 33
Note 21. State Credits 33
Note 22. Preauthorized Mixed Funding Agreements 33
Note 23. Custodial Revenues and Accounts Receivable 34
Note 24. Reconciliation of President's Budget to the Statement of Budgetary Resources 34
Note 25. Recoveries and Resources Not Available, Statement of Budgetary Resources 34
Note 26. Unobligated Balances Available 35
Note 27. Undelivered Orders at the End of the Period 35
Note 28. Offsetting Receipts 35
Note 29. Transfers-In and Out, Statement of Changes in Net Position 36
Note 30. Imputed Financing 37
Note 31. Payroll and Benefits Payable 37
Note 32. Other Adjustments, Statement of Changes in Net Position 38
Note 33. Non-Exchange Revenue, Statement of Changes in Net Position 38
Note 34. Reconciliation of Net Cost of Operations to Budget 39
Note 35. Amounts Held by Treasury (Unaudited) 40 - 43
Note 36. Reclassified Financial Statements for Government-wide Reporting 43 - 47
Note 37. Restatements 47
Required Supplementary Information (Unaudited) .48 - 51
Deferred Maintenance 48
Supplemental Statement of Budgetary Resources 51
Required Supplemental Stewardship Information (Unaudited) 52 - 54
Investment in The Nation's Research and Development: 52
Investment in The Nation's Infrastructure: 53
Human Capital 54
20-F-0033
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Principal Financial Statements
United States Environmental Protection Agency
Consolidated Balance Sheet
As of September 30, 2019 and 2018 (Restated)
(Dollars in Thousands)
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments (Note 4)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intragovernmental
2019
$ 10,056,926
5,997,657
34,802
210.591
Restated
2018
16,299,976
9,184,092
5,498,047
17,849
212.509
14,912,497
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net (Note 7)
Property, Plant and Equipment, Net (Note 9)
Other (Note 6)
Total Assets
10
500,886
263
671,207
7,714
10
458,456
687,393
3,288
S 17.480.056 S 16.061.644
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilites (Note 8)
Debt Due to Treasury (Note 10)
Custodial Liability (Note 12)
Other (Notes 13 and 37)
Total Intragovernmental (Note 37)
136,825
266
36,494
177.294
350,879
130,462
26,544
125.495
282,501
Accounts Payable and Accrued Liabilities (Notes 8 and 37)
Pensions and Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 20)
Cashout Advances, Superfund (Notes 16 and 37)
Commitments and Contingencies (Note 17)
Payroll and Benefits Payable (Note 31)
Other (Notes 13 and 37)
Total Liabilites
NET POSITION
Unexpended Appropriations - Funds from Dedicated Collections (Note 18)
Unexpended Appropriations - Other Funds (Note 37)
Cumulative Results of Operations - Funds from Dedicated Collections (Note 18)
Cumulative Results of Operations - Other Funds (Note 37)
Total Net Position
Total Liabilities and Net Position
540,235
42,044
32,810
3,453,124
203,985
140.549
4.763.626
(1,264)
8,929,585
3,290,710
497.399
12.716.430
522,989
43,679
32,958
3,305,023
202,019
136.069
4.525.238
2,790
8,058,744
2,966,236
508.636
11.536.406
S 17.480.056 S 16.061.644
The accompanying notes are an integral part of these financial statements.
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United States Environmental Protection Agency
Consolidated Statement of Net Cost
For the Fiscal Years Ending September 30, 2019 and 2018 (Restated)
(Dollars in Thousands)
Restated
2019 2018
COSTS
Gross Costs (Note 37) $ 8,883,930 $ 8,694,112
Earned Revenue 458.873 660.708
NET COST OF OPERATIONS (Notes 34 and 37) S 8.425.057 S 8.033.404
The accompanying notes are an integral part of these financial statements.
20-F-0033
2.
-------
United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Year Ending September 30, 2019
(Dollars in Thousands)
Environmental
Programs &
Leaking
Underground
Science &
State Tribal
Assistance
Management Storage Tanks Technology Superfund Agreements Other
Totals
Costs:
Gross Costs !
WCF Elimination
$ 2,650,992 $
89,019 !
S 709,019
$ 1,392,940
$3,876,041
$ 398,223
(232.3041
$9,116,234
(232.3041
Total Costs
2.650.992
89.019
709.019
1.392.940
3.876.041
165.919
8.883.930
Less:
Earned Revenue
79,874
-
5,963
299,231
-
305,887
690,955
WCF Elimination
-
-
-
-
-
(232.0821
(232.0821
Total Earned Revenue
79.874
-
5.963
299.231
-
73.805
458.873
NET COST OF
OPERATIONS
2.571.118
89.019
703.056 $ 1.093.709 $3.876.041
92.114 $ 8.425.057
United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Year Ending September 30, 2018 (Restated)
(Dollars in Thousands)
Costs:
Gross Costs
WCF Elimination
Total Costs
Environmental Leaking
Programs & Underground Science &
Management Storage Tanks Technology Superfund
State Tribal
Assistance
Agreements
Other
$ 2,859,581 $
2.859.581
Totals
93,896 $ 711,350 $ 1,328,447 $3,553,001 $ 359,779
- - - C211.9421
93.896 711.350 1.328.447 3.553.001 147.837
8,906,054
C211.9421
8.694.112
Less:
Earned Revenue
WCF Elimination
Total Earned Revenue
173,244
173.244
5,177
5.177
422,277
422.277
272,396
(212.3861
60.010
873,094
(712.3861
660.708
NET COST OF
OPERATIONS (Note
37)
2.686.337
93.896
706.173
906.170 $3.553.001
87.827 $ 8.033.404
The accompanying notes are an integral part of these financial statements.
20-F-0033
3.
-------
United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position
For the Fiscal Year Ending September 30, 2019
(Dollars in Thousands)
Funds from
Dedicated
All Other
Consolidated
Collections
Funds
Total
Cumulative Results of Operations:
Net Position - Beginning of Period
$ 2,966,236
$ 508,636
$ 3,474,872
Budgetary Financing Sources:
Appropriations Used (Note 37)
4,054
8,190,426
8,194,480
Nonexchange Revenue - Securities Investment (Note 33)
134,699
-
134,699
Nonexchange Revenue - Other (Note 33)
270,253
(58)
270,195
Transfers In/Out
15,608
21,330
36,938
Transfers In/Out - Nonmonetary
-
142
142
Trust Fund Appropriations
1.083.758
(1.083.758)
-
Total Budgetary Financing Sources
1,508,372
7,128,082
8,636,454
Other Financing Sources (Non-Exchange)
Imputed Financing Sources (Note 30)
16.635
85.205
101.840
Total Other Financing Sources
16,635
85,205
101,840
Net Cost of Operations
$ (1,200,533)
$ (7,224,524)
$ (8,425,057)
Net Change
324.474
(11.237)
313.237
Cumulative Results of Operations
$ 3.290.710
$ 497.399
$ 3.788.109
Funds from
Dedicated
All Other
Consolidated
Collections
Funds
Total
Unexpended Appropriations:
Net Postition - Beginning of Period
$ 2,790
$ 8,058,744
$ 8,061,534
Budgetary Financing Sources:
Appropriations Received
-
9,288,440
9,288,440
Appropriation Transfers-In/Out
-
2,717
2,717
Other Adjustments (Note 32)
-
(229,890)
(229,890)
Appropriations Used (Note 37)
(4.054')
(8.190.426)
(8.194.480)
Total Budgetary Financing Sources
(4,054)
870,841
866,787
Total Unexpended Appropriations
(1.264)
8.929.585
8.928.321
TOTAL NET POSITION
$ 3.289.446 $ 9.426.984 $ 12.716.430
The accompanying notes are an integral part of these financial statements.
20-F-0033
4.
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United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position
For the Fiscal Year Ending September 30, 2018 (Restated)
(Dollars in Thousands)
Funds from
Dedicated
Collections
All Other
Funds
Consolidated
Total
Cumulative Results of Operations:
Net Position - Beginning of Period
Adjustment:
(a) Changes in Accounting Principles
(b) Corrections of Errors (Note 37)
$ 2,638,364
$
572,065
12.994
$
3,210,429
12.994
Beginning Balances, as Adjusted
2,638,364
585,059
3,223,423
Budgetary Financing Sources:
Appropriations Used (Note 37)
Nonexchange Revenue - Securities Investment (Note 33)
Nonexchange Revenue - Other (Note 33)
Transfers In/Out
Trust Fund Appropriations
Total Budgetary Financing Sources (Note 37)
4,144
80,893
244,969
(4,763)
1.000.646
1,325,889
7,931,651
23,976
(1.094.046)
6,861,581
7,935,795
80,893
244,969
19,213
(93.400)
8,187,470
Other Financing Sources (Non-Exchange)
Imputed Financing Sources (Note 30)
Total Other Financing Sources
14.598
14,598
82.785
82,785
97.383
97,383
Net Cost of Operations (Note 37)
$ (1,012,615)
$
(7,020,789)
$
(8,033,404)
Net Change (Note 37)
327.872
(76.423)
251.449
Cumulative Results of Operations (Note 37)
$ 2.966.236
$
508.636
$
3.474.872
Funds from
Dedicated
Collections
All Other
Funds
Consolidated
Total
Unexpended Appropriations:
Net Postition - Beginning of Period
$ 3,697
$
7,302,077
$
7,305,774
Budgetary Financing Sources:
Appropriations Received
Other Adjustments (Note 32)
Appropriations Used (Note 37)
Total Budgetary Financing Sources (Note 37)
3,237
(4.144^
(907)
8,862,285
(173,967)
(7.931.651)
756,667
8,865,522
(173,967)
(7.935.795)
755,760
Total Unexpended Appropriations (Note 37)
2.790
8.058.744
8.061.534
TOTAL NET POSITION (Note 37)
$ 2.969.026
$
8.567.380
$
11.536.406
The accompanying notes are an integral part of these financial statements.
5.
20-F-0033
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United States Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Fiscal Years Ending September 30, 2019 and 2018
(Dollars in Thousands)
2019
2018
BUDGETARY RESOURCES
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
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward adjustments (total)
Unobligated Balance, End of Year:
Apportioned, Unexpired Accounts
Unapportioned, Unexpired accounts
Expired Unobligated Balance, End of Year
Unobligated Balance, End of Year (total):
Total Status of Budgetary Resources
OUTLAYS, NET
Outlays, Net (total) (discretionary and mandatory)
Distributed Offsetting Receipts (-) (Note 28)
Agency Outlays, Net (discretionary and mandatory)
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
$
4,714,826
$
1,461,572
$
4,479,928
$
10,801,690
-
10,225,913
-
-
1,083,500
-
2,500,000
557.467
5
610.290
-
$
16.073.983
$
2.545.077
$
15.316.131
$
2.500.000
$
10,613,226
$
2,524,163
$
10,823,821
$
1,038,428
5,273,498
20,914
4,210,746
1,461,572
917
-
194,768
-
186.342
-
86.796
-
5.460.757
20.914
4.492.310
1.461.572
$
16.073.983
$
2.545.077
$
15.316.131
$
2.500.000
$
9,648,346
$
264
$
9,484,562
$
(1.584.783')
-
(1.399.483')
-
$
8.063.563
$
264
$
8.085.079
$
-
The accompanying notes are an integral part of these financial statements.
20-F-0033
6.
-------
United States Environmental Protection Agency
Statement of Custodial Activity
For the Fiscal Years Ending September 30, 2019 and 2018
(Dollars in Thousands)
2019
2018
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
$
352,092 $
78,596
Other
(4.3591
23.087
Total Cash Collections
347,733
101,683
Accrual Adjustment
8.912
2.467
Total Custodial Revenue (Note 23)
$
356.645 $
104.150
Disposition of Collections:
Transferred to Others (General Fund)
$
347,711 $
101,615
Increases/Decreases in Amounts to be Transferred
8.934
2.535
Total Disposition of Collections
$
356.645 $
104.150
Net Custodial Revenue Activity
$
$
-
The accompanying notes are an integral part of these financial statements.
20-F-0033
7.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Reporting Entities
The EPA 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 2019 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 Presentation
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-13 6, Financial Reporting Requirements, 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 Assistance 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 carry out the Frank R. Lautenberg Chemical Safety for the
21st Century Act. Under the Act, the Agency is authorized collect users fees (up to $25 million annually)
from chemical manufacturers and processors. Fees collected will defray costs for new chemical reviews and a
range of TSCA implementation activities for existing chemicals.
The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) established a Federal credit program
administered by the EPA 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
8.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
loans are disbursed. The Agency received two-year appropriations in fiscal years 2019 and 2018 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.
Funds transferred from other 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. Revolving Funds
Funding of the Reregi strati on and Expedited Processing Fund (FIFRA) is provided by fees collected from
industry to offset costs incurred by the Agency in carrying out these programs. Each year, the Agency
submits an apportionment request to OMB 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.
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.
20-F-0033
9.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
V. Trust Funds
Congress enacts an annual appropriation for the Hazardous Substance Superfund, Leaking Underground
Storage Tank (LUST) and the 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 at 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.
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. In addition to these funds, 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 Principles (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.
10.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
EPA uses a modified matching principle since federal 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.
E. Revenues and Other Financing Sources
The following EPA policies and procedures to account for inflow of revenue and other financing sources are
in accordance with SFFAS 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. WIFIA 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.
The FIFRA and PRIA funds receive funding through fees collected for services provided and interest on
invested funds. The Hazardous Waste Electronic Manifest System Fund receives funding through fees
collected for use of the Hazardous Waste Electronic Manifest System. 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 without regard to payment of cash. Other revenues are recognized when earned (i.e., when services
have been rendered).
F. Funds with the Treasury
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.
20-F-0033
11.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
G. Investments in U.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).
H. Marketable Securities
The Agency records marketable securities at cost as of the date 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 Receivable and Interest Receivable
Superfund accounts receivable represent recovery of costs from PRPs as provided under CERCLA as
amended by the Superfund Amendments 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 Superfund 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 states for a percentage of Superfund site remedial
action costs incurred by the Agency within those states. As 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.
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.
20-F-0033
12.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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 allowance 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 terms 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, 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 15 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 fair 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 $150 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 term 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 EPA'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 WCF.
13.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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.
Real property consists of land, 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 assets,
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/enhancements 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 full 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 working capital fund is capitalized at $250 thousand and
is amortized using the straight-line method over its useful life, not exceeding 5 years.
N. 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.
O. 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 based on the collection of loan
receivables at the end of the fiscal year.
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.
14.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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.
With the issuance of SFFAS No. 5, Accounting for Liabilities of the Federal Government, accounting and
reporting standards were established for liabilities relating to the federal employee benefit programs
(Retirement, Health Benefits, and Life Insurance). SFFAS No. 5 requires that the employing agencies
recognize the cost of pensions and other retirement benefits during their employees' active years of service.
SFFAS No. 5 requires that the Office of Personnel Management (OPM), as administrator of the CSRS and
FERS, the Federal Employees Health Benefits Program, and the Federal Employees Group Life Insurance
Program, provide federal agencies with the actuarial cost factors to compute the liability for each program.
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. For detailed information on the restatements of the FY 2018 Consolidated Financial Statements,
refer to Note 37, Restatements.
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 EPA 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.
20-F-0033
15.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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.
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 $571 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.
U. Use of Estimates
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.
20-F-0033
16.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
V. Reclassifications and Comparative 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 (OMB)
Circular No. A-136, Financial Reporting Requirements revised June 28, 2019. As a result, Net Adjustments
to Unobligated Balance Brought Forward, Oct. 1 has been omitted in the Statement of Budgetary Resources.
20-F-0033
17.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 2. Fund Balance With Treasury (FBWT)
Fund Balance with Treasury as of September 30, consists of the following:
2019 2018
Entity
Assets
Non-Entity
Assets
Total
Entity
Assets
Non-Entity
Assets
Total
Trust Funds:
Superfund
$ 77,906
$
$ 77,906
$ 140,013
$
-
$ 140,013
LUST
21,902
-
21,902
10,425
-
10,425
Oil Spill & Misc.
12,109
-
12,109
8,822
-
8,822
Revolving Funds:
FIFRA/Tolerance
58,133
-
58,133
47,864
-
47,864
Working Capital
129,185
-
129,185
128,909
-
128,909
Credit Reform Financing
-
-
-
-
-
-
E-Manifest
8,029
-
8,029
4,294
-
4,294
WIFIA
-
-
-
-
NRDA
1,551
-
1,551
2,057
-
2,057
Appropriated
9,236,309
-
9,236,309
8,348,172
-
8,348,172
Other Fund Types
507.871
3.929
511.800
489.727
3.809
493.536
Total
$10,052,997
$ 3.929
$10,056,926
$ 9.180.283
$
3.809
$ 9.184.092
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 Other 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-Entity 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:
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund (Note 35)
Obligated Balance not yet Disbursed
Non-Budgetary FBWT
Total
2019
2018
5,294,411
187,260
(5,096,874)
14,912
9,160,730
496.487
4,405,970
86,796
(4,758,627)
1,807
8,974,558
473.588
S 10.056.926 S 9.184.092
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 FY 2019 and FY 2018, 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, 2019 and September 30, 2018, the balance in the imprest fund was $10 thousand.
20-F-0033
18.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 4. Investments
As of September 30, 2019 and 2018, 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 2019 $ 6,024,413 32,170 5,414 5,997,657 $ 5,997,657
Non-Marketable FY 2018 $ 5,537,630 44,298 4,715 5,498,047 $ 5,498,047
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 from dedicated collections. The 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.
20-F-0033
19.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 5. Accounts Receivable, Net
Accounts Receivable as of September 30, 2019 and 2018, consist of the following:
2019 2018
Intragovernmental:
Accounts & Interest Receivable
$
34,802
$
17,849
Less: Allowance for Uncollectible
-
-
Total
$
34.802
$
17.849
Non-Federal:
Unbilled Accounts Receivable
$
109,545
$
234,731
Accounts & Interest Receivable
2,573,004
2,385,341
Less: Allowance for Uncollectible
("2.181.663')
(2.161.616')
Total
$
500.886
$
458.456
The Allowance for Uncollectible Accounts is determined both on a specific identification basis, as a result of
a case-by-case review of receivables, and on a percentage basis for receivables not specifically identified.
Note 6. Other Assets
Other Assets as of September 30, 2019 and 2018, consist of the following:
2019 2018
Intragovernmental:
Advances to Federal Agencies
$
210,498
$
212,334
Advances for Postage
93
175
Total
$
210.591
$
212.509
Non-Federal:
Travel Advances
$
90
$
119
Other Advances
7,607
2,954
Inventory Purchased for Resale
17
215
Total
$
7.714
$
3.288
Note 7. Loans Receivable, Net
Loans Receivable disbursed from obligations made prior to FY 1992 are presented net of allowances for
estimated uncollectible loans, if an allowance was considered necessary. Loans 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 2019 and 2018, the Agency received
borrowing authority of $920 million and $2.5 billion for the non-subsidy portion of loan proceeds disbursed,
20.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
respectively, for a total of $3.42 billion in borrowing authority. The cumulative loan limit for the WIFIA
Loan Program through fiscal year 2019 is $17.1 billion. For the fiscal year ended September 30, 2019 and
2018, the Agency closed $2.5 billion and $1 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, 2019 and 2018, the WIFIA program has incurred $7.3 and $4.0 million in administrative
expenses, respectively.
Obligated after FY 1991
Direct Loan Program
WIFIA
2019 Loans
Receivable,
Gross
261
Interest
Receivable
Foreclosed
Property/
Allowance
for
Loan Losses
Allowance for
Subsidy
Cost
Value of Assets
Related to
Direct
Loans, Net
2 $
263
Total Amount of Direct Loans Disbursed (Post-1991)
Direct Loan Program 2019 2018
WIFIA $ 261 _
Subsidy Expense for Direct Loans by Program and Component
Subsidy Expense for New Direct Loans Disbursed
Direct Loan Program
2019 Interest
Differential
WIFIA $
Modifications and Reestimates
Direct Loan Program
WIFIA
Defaults
$
Fees and Other Other Subsidy
2019
Total
Modifications
Collections
Interest
Rate
Reestimates
Costs
Total
2 $
Technical
Reestimates
Total
Reestimates
Budget Subsidy Rates for Direct Loans for the Current Year Cohort
2019 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA 0% 0% 0% ~69% .69%
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-
21.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
estimates.
Schedule for Reconciling Subsidy Cost Allowance Balances
Beginning Balance, Changes and Ending Balance 2019 2018
Beginning Balance of the Subsidy Allowance $ - $ -
Add: Subsidy Expense for Direct Loans Disbursed During the Reporting Years
by Component
Default Costs (Net of Recoveries)
Fees and Other Collecitons
Other Subsidy Costs 2 2
Total of the Above Subsidy Expense Components 2 2
Adjustments
Loan 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 ; ;
Total of the Above Reestimate Components : :
Ending Balance of the Subsidy Cost Allowance $ 2 $ 2
The economic assumptions of the WIFIA 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 2019 loan
disbursements were lower than the interest rate assumptions used during the budget formulation process at
loan origination.
Note 8. Accounts Payable and Accrued Liabilities (Restated)
The Accounts Payable and Accrued Liabilities are current liabilities and consist of the following amounts as
of September 30, 2019 and 2018 (Restated):
Restated
2019 2018
Intragovernmental:
Accounts Payable $ 5,719 $ 3,902
Liability for Allocation 226
Accrued Liabilities 130.880 126.560
Total S 136.825 S 130.462
20-F-0033
22.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Restated
2019 2018
Non-Federal:
Accounts Payable $ 68,012 $ 67,003
Advances Payable (2,454) (1,355)
Interest Payable 5 5
Grant Liabilities 325,335 288,526
Other Accrued Liabilities 149.337 168.810
Total $ 540.235 $ 522.989
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, 2019 and 2018, General PP&E consisted of the following:
2019
2018
Net
Net
Acquisition
Accumulated
Book
Acquisition
Accumulated
Book
Value
Depreciation
Value
Value
Depreciation
Value
EPA-Held Equipment
$ 304,453
$ (212,886) $
91,567
$ 299,732
$ (203,434) $
96,298
Software (production)
439,787
(398,613)
41,174
441,571
(365,206)
76,365
Software (development)
27,046
-
27,046
7,908
-
7,908
Contractor Held Equip.
44,707
(28,593)
16,114
40,437
(26,706)
13,731
Land and Buildings
794,192
(303,239)
490,953
774,146
(286,224)
487,922
Capital Leases
24.485
(20.132')
4.353
24.485
(19.316)
5.169
Total
$ 1.634.670
$ (963.463) $
671.207
$ 1.588.279
$ (900.886) $
687.393
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.
EPA borrows funds from The Bureau of Public Debt right before funds are disbursed to the borrower for the
non-subsidy portion of WIFIA loans. As of September 30, 2019, the EPA had debt due to Treasury of $266
thousand consisting entirely of funds borrowed to finance the non-subsidy portion of the WIFIA Direct Loan
Program. In FY 2018, the EPA did not borrow funds to finance the WIFIA Direct Loan Program as there
were no disbursements of loan proceeds.
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
23.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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, 2019 and 2018, the Agency possessed the following land and land rights:
2019 2018
Superfund Sites with Easements:
Beginning Balance
Additions
Withdrawals
Ending Balance
Superfund Sites with Land Acquired:
Beginning Balance
Additions
Withdrawals
Ending Balance
; 39
$
39
l
-
; 40
$
39
; 32
$
34
(i)
(2)
; 31
$
32
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, 2019,
and 2018, custodial liability is approximately $36,494 thousand and $26,544 thousand, respectively.
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2019:
Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Advances HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgement Fund
Total Intragovernmental
Covered by Not Covered
Budgetary by
Resources Resources Total
$ 19,161 $ - $ 19,161
3,504 - 3,504
6,062 - 6,062
82 - 82
117,256 - 117,256
9,229 9,229
- 22.000 22.000
$ 146.065 $ 31.229 $ 177.294
20-F-0033
24.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal
Liability for Deposit Funds, Non-Federal
Capital Lease Liability
Non-Current
Capital Lease Liability
Total Non-Federal
134,076
3,769
343
2,361
$ 137.845 $_
2.704 $_
134,076
3,769
343
2.361
140.549
Other Liabilities consist of the following as of September 30, 2018 (Restated):
Covered by
Budgetary
Resources
Current
Employer Contributions & Payroll Taxes $ 17,574
WCF Advances
Other Advances
Advances HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgement Fund
Total Intragovernmental
1,651
6,161
60,048
9,069
(1)
Not Covered
by
Resources
8,906
87
22.000
Total
17,574
1,651
6,161
60,048
9,069
(1)
8,906
87
22.000
94.502 $_
30.993 $_
125.495
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal
Liability for Deposit Funds, Non-Federal
Capital Lease Liability (Restated)
Non-Current
Capital Lease Liability (Restated)
Total Non-Federal
127,132 $
5,942
$ 133.074 $_
291
2.704
2.995 $_
127,132
5,942
291
2,704
136.069
Note 14. Leases
The value of assets held under Capital Leases as of September 30, 2019 and 2018 (restated), are as follows:
A. Capital Leases:
Restated
2019 2018
Summary of Assets Under Capital Lease:
Real Property
$
24,485 $
24,485
Personal Property
-
-
Total
24.485
24.485
Accumulated Amortization
$
20.132 $
19.316
20-F-0033
25.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
The EPA has one capital lease 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
2020 $ 769
2021 769
2022 769
2023 769
2024 769
After five years 256
Total Future Minimum Lease Payments 4,101
Less: Imputed Interest (1.397)
Net Capital Lease Liability 2.704
Liabilities not Covered by Budgetary Resources $ 2.704
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-year renewal, the yearly lease payment will be $769 thousand from 2015 until 2025. Note
37 provides additional information about the restatement of lease data.
B. Operating Leases:
The GSA provides leased real property (land and buildings) as office space for the EPA employees. GSA
charges a Standard Level User Charge that approximates the commercial rental rates for similar properties.
The EPA has two direct operating leases for land and buildings housing scientific laboratories and computer
facilities. The leases include 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.
The total minimum future operating lease costs are listed below:
Operating Leases,
Land and
Fiscal Year Buildings
2020 $ 36
Total Future Minimum Lease Payments $ 36
Note 15. FECA Actuarial Liabilities
The Federal Employees' Compensation Act (FECA) provides income and medical cost protection to covered
Federal civilian 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.
26.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
The FECA Actuarial Liability as of September 30, 2019 and 2018, was $42,044 thousand and $43,679
thousand, respectively. The estimated future costs are recorded as an unfunded liability. The FY 2019 present
value of these estimated outflows is calculated using a discount rate of 2.610 percent in the first year, and
2.610 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 received 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, 2019 and 2018 (restated),
cash-out advances total $3,453,124 thousand and $3,305,023 thousand, respectively.
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, 2019 and 2018, there were 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. The 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 Utah's Lake Powell.
As of September 30, 2019, 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 $2 billion but they are only reasonably possible, and the
27.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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 $20
million, but they are only reasonably possible, and the final outcomes are not probable.
D. Environmental Liabilities
As of September 30, 2019, 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.
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, 2019, there is no other case pending in the court.
F. Other Commitments
EPA has a commitment to fund the United States 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, 2019 and $2.5
million in the period ending September 2018.
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 2018 and $8.3 million in the period ending September 2019.
20-F-0033
28.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 18. Funds from Dedicated Collections (Unaudited)
Other Funds
Total Funds
Environmental
from Dedicated
from Dedicated
Services
LUST
Suoerfund
Collections
Collections
Balance sheet as of September 30, 2019
Assets
Fund Balance with Treasury
$ 491,972 $
21,902 <
I 77,906
$ 95,702
$ 687,482
Investments
-
773,397
5,224,260
-
5,997,657
Accounts Receivable, Net
-
92,029
357,602
1,198
450,829
Other Assets
-
176
56.705
7.255
64.136
Total Assets
491.972
887.504
5.716.473
104.155
7.200.104
Other Liabilities
99.012
3.733.012
78.635
3.910.659
Total Liabilities
_
99.012
3.733.012
78.635
3.910.659
Unexpended Appropriations
(2)
(1,262)
(1,264)
Cumulative Results of Operations
491.972
788.492
1.983.465
26.781
3.290.710
Total Liabilities and Net Position
491.972
887.504
5.716.475
104.154
7.200.105
Statement of Net Cost for the Fiscal
Year Ended September 30, 2019
Gross Program Costs
-
89,019
1,392,940
82,167
1,564,126
Less: Earned Revenues
-
-
299.231
64.362
363.593
Net Costs of Operations
$ - $
89.019 <
I 1.093.709
$ 17.805
$ 1.200.533
Statement of Changes in Net Position
for the Fiscal Year Ended September
30,2019
Net Position, Beginning of Period
$ 469,191 $
623,356 5
I 1,856,334
$ 20,145
$ 2,969,026
Nonexchange Revenue - Securities
Investments
-
16,183
117,318
1,198
134,699
Nonexchange Revenue
22,781
237,962
6,197
3,314
270,254
Other Budgetary Finance Sources
-
-
1,080,982
18,384
1,099,366
Other Financing Sources
-
10
16,341
283
16,634
Net Cost of Operations
-
(89.019)
(1.093.709)
(17.805)
(1.200.533)
Change in Net Position
22.781
165.136
127.129
5.374
320.420
Net Position
$ 491.972 $
788.492 5
I 1.983.463
$ 25.519
$ 3.289.446
20-F-0033
29.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in
Thousands)
Other Funds
Total Funds
Environmental
from Dedicated
from Dedicated
Services
LUST
Superfund
Collections
Collections
Balance sheet as of September 30, 2018
Assets
Fund Balance with Treasury
$ 469,194 $
: 10,425
$ 140,013
$ 83,571
$ 703,203
Investments
-
620,160
4,877,887
-
5,498,047
Accounts Receivable, Net
-
87,588
306,338
1,784
395,710
Other Assets
-
209
54,723
7,614
62,546
Total Assets
469,194
718,382
5,378,961
92,969
6,659,506
Other Liabilities
3
95,026
3,522,627
72,824
3,690,480
Total Liabilities
3
95,026
3,522,627
72,824
3,690,480
Unexpended Appropriations
(2)
2,792
2,790
Cumulative Results of Operations
469,191
623,356
1,856,336
17,353
2,966,236
Total Liabilities and Net Position
469,194
718,382
5,378,961
92,969
6,659,506
Statement of Net Cost for the Fiscal
Year Ended September 30, 2018
Gross Program Costs
-
93,897
1,328,447
66,224
1,488,568
Less: Earned Revenues
-
-
422,277
53,676
475,953
Net Costs of Operations
$ - $
: 93,897
$ 906,170
$ 12,548
$ 1,012,615
Statement of Changes in Net Position
for the Fiscal Year Ended September
30,2018
Net Position, Beginning of Period
$ 444,636 $
; 591,252
$ 1,599,954
$ 6,218
$ 2,642,060
Nonexchange Revenue - Securities
Investments
-
8,657
71,516
720
80,893
Nonexchange Revenue
24,555
210,731
6,598
3,085
244,969
Other Budgetary Finance Sources
-
(93,400)
1,070,070
22,450
999,120
Other Financing Sources
-
13
14,366
220
14,599
Net Cost of Operations
-
(93,897)
(906,170)
(12,548)
(1,012,615)
Change in Net Position
24,555
32,104
256,380
13,927
326,966
Net Position
$ 469,191 $
: 623,356
$ 1,856,334
$ 20,145
$ 2,969,026
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. Leaking Underground Storage Tank (LUST) 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 allocated to the states through cooperative agreements and prevention
30.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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.
hi. Superfund Trust Fund:
In 1980, the Superfund Trust Fund, was established by CERCLA to 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
i. Inland Oil Spill Programs Account:
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 OPA 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, 2019, 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.
ill. 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
31.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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.
Note 19. Cost of Stewardship Land
EPA had two Stewardship-Superfund Real Estate Actions in FY19.
The first action was for site: Santaquin City, Utah. It was for release of lien and an affidavit asserting a new
lien. This allowed the City to proceed with the construction of a road, with EPA maintaining its security
interest on a portion of the property. Because Santaquin City Corporation will continue to own the land, and
EPA would be owed all proceeds of a sale only when Santaquin eventually disposes the portion of the
property that EPA would have a 100% interest, no cash transaction took place (apart from the sum of $1 that
Santaquin is providing as consideration for EPA's release of its lien). This action was effectuated via the
signing of the Quit Claim Deed, signed on May 21, 2019.
The second action was for site: Crossley Farm Superfund Site; Hereford Township, Berks County,
Pennsylvania. EPA authorized the Army Corps of Engineers to acquire a 30-year easement for the
continuation of remedial actions and maintenance on the Crossley Farm Superfund site. Pennsylvania state
recently revised their Hazardous Site Cleanup Act (HSCA) order that applies to the location to confine
restrictions. The revision left out the access road to the site which is now private property. The easement
will allow unfettered access to the site as necessary. The Authorization was signed on May 8, 2019.
Note 20. 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 versus an environmental liability is to determine
whether the event (accident, damage, etc.) has already occurred and whether we can reasonably estimate the
cost to remediate the 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.
20-F-0033
32.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
As of September 30, 2019, 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.
A. Accrued Clean-up Cost
The EPA has 30 sites for which it is required to fund the environmental cleanup. As of September 30, 2019,
the estimated costs for site clean-up were $32.8 million unfunded, and $551 thousand funded, respectively. In
2018 the estimated costs for site clean-up were $33.0 million unfunded, and $1.1 million 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 2019, the estimate for unfunded clean-up cost decreased by $0.2 million from the FY 2018 estimate.
This decrease is primarily due to current lab cleanup and closeout actions, and ongoing clean-up actions at
similar facilities resulted in more refined and significantly lower estimates of future clean-up costs in various
regions.
Note 21. State Credits
Authorizing statutory language for Superfund 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.
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 excess/remaining credit to another site when approved by
the EPA. As of September 30, 2019 and 2018, the total remaining state credits have been estimated at $21.3
million, and $21.4 million, respectively.
Note 22. Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response actions at their
sites with the understanding that the 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, 2019, the EPA had 3
outstanding preauthorized mixed funding agreements with obligations totaling $6.3 million. As of September
30, 2018, the EPA had 4 outstanding preauthorized mixed funding agreements with obligations totaling $6.7
33.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
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 23. Custodial Revenues and Accounts Receivable
The EPA uses the accrual basis of accounting for the collection of fines, penalties and miscellaneous receipts.
Collectability by the EPA of the fines and penalties is based on the respondents' willingness and ability to
pay.
2019 2018
Fines, Penalties and Other Miscellaneous Receipts
Accounts Receivable for Fines, Penalties and Other Miscellaneous
Receipts:
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Total $ 36.409 $ 27.496
$ 356.645 $
104.150
$ 166,089 $
158,990
(129.680)
(131.494}
Note 24. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited FY 2019 Statement of
Budgetary Resources, will be reconciled to the amounts included in the FY 2019 Budget of the United States
Government when they become available. The Budget of the United States Government with actual numbers
for FY 2019 has not yet been published. We expect it will be published by early 2020, and it will be available
on the Office of Management and Budget website at https://www.whitehouse.gov/
The actual amounts published for the year ended September 30, 2018 are listed immediately below (dollars in
millions):
FY 2018 Budgetary Offsetting
Resources Obligations Receipts Net Outlays
Statement of Budgetary Resources
$
17.816
$ 11.862
$
1.399
$
9.485
Reported in the Budget of the U.S. Government
$
17.720
$ 11.853
$
1.399
$
9.477
Note 25. 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 for September 30, 2019, and 2018:
2019 2018
Net Adjustments to Unobligated Balance Brought Forward, Oct 1.
$ 226.028 $
232.751
Temporarily Not Available - Rescinded Authority
(4.592)
(11.217)
Permanently Not Available:
Rescinded Authority
(210,529)
(148,848)
Cancelled Authority
(19.588)
(24.200)
Total Permanently Not Available
$ (230.117) $
(173.048)
20-F-0033
34.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 26. 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, 2019 and 2018:
2019 2018
Unexpired Unobligated Balance $ 5,295,329 $ 5,867,574
Expired Unobligated Balance 186.342 86.796
Total $ 5.481.671 $ 5.954.370
Note 27. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at September 30, 2019 and 2018, were $12.7 billion
and $10.0 billion, respectively.
Note 28. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt accounts offset
gross outlays. For September 30, 2019 and 2018, the following receipts were generated from these activities:
Trust Fund Recoveries
Special Fund Environmental Services
Trust Fund Appropriation
Miscellaneous Receipt and Clearing Accounts
Total
2019
73,266
22,778
1,455,299
33.440
2018
40,664
24,558
1,292,678
41.583
$ 1.584.783 $ 1.399.483
20-F-0033
35.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 29. Transfers-In and Out, Statement of Changes in Net Position
A. Appropriations Transfers, In/Out:
For September 30, 2019 and 2018, 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, 2019, and 2018:
2019 2018
Net Transfers from Invested Funds
$ 1,572,990 $
1,306,784
Transfer to the Department of Transportation
89,000
142,400
Transfers to Another Agency
2,884
1,004
Allocations Rescinded
-
6.600
Total of Nets Transfers on The Statement of Budgetary Resources
$ 1.664.874 $
1.456.788
B. Transfers In/Out Without Reimbursement, Budgetary:
For September 30, 2019 and 2018, 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, 2019, and 2018:
2019 2018
Type of Transfer/Funds:
Funds From
Dedicated
Collections
Funds From
Dedicated
Other Funds Collections
Other Funds
Transfers-in (out) nonexpenditure, Earmark to
Science and Technology and Office of The
Inspector General funds
$
(2,776)
$
24,048 $
(23,976)
$
23,976
Transfers-in (out) nonexpenditure, Oil Spill
18,209
-
18,209
-
Transfers-in (out) nonexpenditure, e-Manifest
8
-
-
-
Transfers-in (out), TSCA
-
(2,718)
-
-
National Resource Damage Assessment
167
-
1.004
-
Total Transfer in (out) without Reimbursement,
Budgetary $
15.608
$
21.330 $
(4.763)
$
23.976
20-F-0033
36.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 30. 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 2019 were $81.1 million. For FY 2018, the estimates were $73.0 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 2019 total imputed costs were
$16.8 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 2019, entries for Judgment Fund payments totaled $3.9
million. For FY 2018, entries for Judgment Fund payments totaled $2.3 million.
Note 31. Payroll and Benefits Payable
Payroll and benefits payable to the EPA employees for the years September 30, 2019, and 2018, consist of
the following:
Covered by Not Covered
Budgetary by Budgetary
Resources Resources Total
FY 2019 Payroll 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
$ 50,890
10,582
810
141.703 141.703
141.703 S 203.985
Total - Current
S 62.282 $.
37.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
FY 2018 Payroll and Benefits Payable
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable - Thrift Savings Plan
Accrued Unfunded Annual Leave
Total - Current
Covered by
Budgetary
Resources
B 40,487
20,553
2,795
Not Covered
by Budgetary
Resources
138.184
Total
40,487
20,553
2,795
138.184
63.835 $ 138.184 $ 202.019
Note 32. Other Adjustments, Statement of Changes in Net Position
The Other Adjustments 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 Other
Funds Funds
2019 2018
Cancelled General Authority $ 229.890 $ 173.967
Total Other Adjustments $ 229.890 $ 173.967
Note 33. Non-Exchange Revenue, Statement of Changes in Net Position
Non-Exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net Position as of
September 30, 2019 and 2018 consists of the following items:
Interest on Trust Fund
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue
2019
Funds from
Dedicated
Collections
$ 134,699i
237,963
6,195
2018
26.095
$
404.952!
Funds from
All Other Dedicated All Other
Funds Collections Funds
$ 80,893 $
210,731
6,598
(58) 27.640 -
(58) S 325.862 S
20-F-0033
38.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 34. Reconciliation of Net Cost of Operations to Budget
Intra-
With the
governmental
Public
Total 2019
NET COST
$ 1,209,171
$ 7,215,886
$ 8,425,057
Components of Net Cost That Are Not Part 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
Increase/(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)/Decrease in Liabilites:
Accounts Payable and Accrued Liabilites
(6,364)
(17,245)
(23,609)
Debt Due to Treasury
(266)
-
(266)
Pensions and Other Actuarial Liabilites
-
1,635
1,635
Environmental Cleanup Costs
-
148
148
Cashout Advances, Superfund
-
(148,101)
(148,101)
Commitments and Contingiencies
-
-
-
Payroll and Benefits Payable
-
(1,966)
(1,966)
Other Liabilites
(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
-
-
-
Acquistions 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)
(2.887.056)
Other Temporary Timing Differences
-
(148,755)
(148,755)
39.
20-F-0033
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
NET OUTLAYS $ 4.023.362 $ 4.040.465 $ 8.063.827
Note 35. Amounts Held by Treasury (Unaudited)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by Treasury in the
Superfund 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, 2019 and 2018.
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.
SUPERFUND FY 2019
Undistributed Balances
Uninvested Fund Balance
Total Undistributed Balance
Interest Receivable
Investments, Net
Total - Assets
Liabilities and Equity
Equity
Total Liabilities and Equity
Receipts
Corporate Environmental
Cost Recoveries
Fines and Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury
Combined
3.003 $_
3.003
-
3,003
3,003
-
5,413
5,413
4.962.820
277.526
5.240.346
: 4.962.820 $
285.942 $
5.248.762
4.962.820
285.942
5.248.762
4.962.820
285.942
5.248.762
-
444,806
444,806
-
2.504
2.504
-
447,310
447,310
-
1,083,758
1,083,758
-
117.318
117.318
-
1.648.386
1.648.386
1.592.858
(1.592.858)
1.592.858
(1.592.858)
-
$ 1.592.858 $_
55.528 $ 1.648.386
20-F-0033
40.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
In FY 2019, the EPA received an appropriation of $1.1 billion for Superfund. Treasury's Bureau of 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, 2019 and 2018, the Treasury Trust Fund
has a liability to the EPA for previously appropriated funds and special accounts of $52 billion and $5.0
billion, respectively.
SUPERFUND FY 2018
Undistributed Balances
Uninvested Fund Balance
Total Undistributed Balance
Interest Receivable
Investments, Net
Total - Assets
Liabilities and Equity
Equity
Total Liabilities and Equity
Receipts
Corporate Environmental
Cost Recoveries
Fines and Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury Combined
1.807 $
1.807
-
1,807
1,807
4.671.302
201.942
4.873.244
: 4.671.302 $
203.749 $
4.875.051
4.671.302
208.391
4.879.693
4.671.302
208.391
4.879.693
-
239,297
239,297
-
1.294
1.294
-
240,591
240,591
-
1,094,046
1,094,046
-
71.516
71.516
-
1.406.153
1.406.153
1.324.412
1.324.412
$ 1.324.412 $.
(1.324.412)
(1.324.412)
81.741
$ 1.406.153
20-F-0033
41.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
B. LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FY 2019 and
2018, there were no fund receipts from cost recoveries. The amounts contained in these notes are provided by
Treasury. Outlays represent appropriations received by the EPA's LUST Trust Fund; such funds are
eliminated on consolidation with the LUST Trust Fund maintained by Treasury.
LUST FY 2019
EPA
Treasury
Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$
11.909
$
11.909
Total Undistributed Balance
-
11,909
11,909
Interest Receivable
-
-
-
Investments, Net
92.029
681.367
773.396
Total - Assets
$
92.029
$
693.276
$
785.305
Liabilities 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
Airport 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
Outlays
Transfers to/from EPA, Net
93.441
(93.441)
-
Total Outlays
93.441
(93.441)
-
Net Income
$
93.441
$
148.672
$
242.113
20-F-0033
42.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
LUST FY 2018
EPA
Treasury
Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$
-
$
-
Total Undistributed Balance
-
-
-
Interest Receivable
-
72
72
Investments, Net
87.588
532.500
620.088
Total - Assets
$
87.588
$
532.572
$
620.160
Liabilities and Equity
Equity
87.588
532.572
620.160
Total Liabilities and Equity
87.588
532.572
620.160
Receipts
Highway TF Tax
-
200,338
200,338
Airport TF Tax
-
10,348
10,348
Inland TF Tax
-
45
45
Total Revenue
-
210,731
210,731
Interest Income
-
8.657
8.657
Total Receipts
-
219.388
219.388
Outlays
Transfers to/from EPA, Net
142.400
(142.400)
-
Total Outlays
142.400
(142.400')
-
Net Income
$
142.400
$
76.988
$
219.388
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 intragovernmental
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
2018 FR can be found here: https://www.fiscal.treasury.gov/reports-statements/ and a copy of the 2019 FR
will be posted to this site as soon as it is released.
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.
20-F-0033
43.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Reclassification of Balance Sheet to Line Items used for the Government-wide Balance Sheet as of September
30,2019
FY 2019 EPA Balance Sheet
Line Items Used to Prepare the FY 2019
Government-wide Balance Sheet
Financial Statement Line
Amounts
Amounts
Reclassified Statement Line
ASSETS
ASSETS
Intra-Governmental Assets
Intra-Governmental Assets
FBWT
10,056,926
10,056,926
FBWT
5,992,244
Federal Invesments
Investments, Net
5,997,657
5,413
Interest Receivable - Investments
Total Invesments, Net
5,997,657
5,997,657
Total Reclassified Investments, Net
Accounts Receivable
34,802
13,501
Accounts Receivable
Total Accounts Receivable
34,802
13,501
Total Reclassified -A/R
Other
210,591
210,591
Advances to Others and Prepayments
Total Other
210,591
210,591
Total Reclassified Other
Total Intra-Governmental Assets
16,299,976
16,278,675
Total Intra-Governmental Assets
Cash and Other Monetary Assets
10
10
Cash and Other Monetary Assets
Accounts Receivable, Net
500,886
500,716
Accounts and Taxes Receivable, Net
Direct Loans, Net
263
263
Loans Receivable, Net
Inventory and Related Property, Net
17
17
Inventory and Related Property, Net
General PP&E
671,207
645,437
PP&E, Net
Other
7,697
19,887
Other
Total Assets
17,480,056
17,445,005
Total Assets
LIABILITIES
LIABILITIES
Intra-Governmental Liabilities
Intra-Governmental Liabilities
Accounts Payable
136,825
161,026
Accounts Payable
Debt
266
266
Debt
Other - Custodial Liability
36,494
45,248
Other - Custodial Liability
Other - Miscellaneous Liabilities
177,294
24,793
Benefit Program Contributions Payable
126,433
Advances from Others & Deferred
Credits
-
2,981
Other Liabilities
Total Other - Miscellaneous Liabilites
177,294
154,207
Total Reclassified Other - Miscellaneous
Liablities
Total Intra-Governmental Liabilites
350,879
360,747
Total Intra-Governmental Liabilites
Accounts Payable
540,235
66,757
Accounts Payable
Federal Employee and Veteran Benefits
42,044
43,872
Federal Employee and Veteran Benefits
Environmental and Disposal Liabilities
32,810
32,810
Environmental and Disposal Liabilities
Contingent Liabilites
-
-
Contingent Liabilites
Advances and Deferred Revenue
3,453,124
-
Miscellaneous Liabilities
344,534
4,391,803
Other Liabilities
Total Miscellaneous Liabilites
344,534
4,535,242
Total Reclassified Miscellaneous
Liablities
Total Liabilites
4,763,626
4,895,989
Total Liabilites
44.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
NET POSITION
NET POSITION
Unexpended Appropriations - Funds
from Dedicated Collections
(1,264)
2,120,704
Net Position - Funds from Dedicated
Collections
Unexpended Appropriations - Other
Funds
8,929,585
10,428,312
Net Position - Funds Other Than Those
From Dedicated Collections
Cumulative Results of Operations -
Funds from Dedicated Collections
3,171,087
-
Cumulative Results of Operations - All
Other
496,905
-
Total Net Position
12,596,313
12,549,016
Total Liabilites & Net Position
17,359,939
17,445,005
Total Liabilites & Net Position
Reclassification of Statement of Net Cost to Line Items Used for the Government-wide Statement of Net Cost
for the Year Ended September 30, 2019
FY 2019 EPA SNC
Line Items Used to Prepare the FY 2019
Government-wide SNC
Financial Statement Line
Amounts
Amounts
Reclassified Statement Line
Gross Costs
8,883,930
Non-Federal Costs
-
7,635,954
Non-Federal Gross Costs
-
7,635,954
Total Non-Federal Costs
Intragovernmental Costs
-
357,395
Benefits Program Costs
-
101,839
Imputed Costs
-
834,250
Buy/Sell Costs
-
21,154
Purchase of Assets
-
8
Borrowing and Other Interest Expense
-
(1,007)
Other Expenses (w/o Reciprocals)
-
1,313,639
Total Intragovernmental Costs
Total Gross Costs
8,883,930
8,949,593
Total Reclassified Gross Costs
Earned Revenue
349,935
338,073
Non-Federal Earned Revenue
Intragovernmental Revenue
108,938
108,829
Buy/Sell Revenue
-
21,154
Purchase of Assets Offset
134,698
Federal Securities Interest Revenue
Including Associated Gain/Losses
Exchange
-
1
Borrowing and Other Interest Revenue
19
Accrual of Custodial Collections Yet to
be Transferred to a TAS Other Than The
General Fund
-
264,701
Total Intragovernmental Earned
Revenue
Total Earned Revenue
458,873
602,774
Total Reclassified Earned Revenue
NET COST
8,425,057
8,346,819
NET COST
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45.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(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 for the Year Ended September 30, 2019
FY 2019 EPA SCNP
Line Items Used to Prepare the FY 2019
Government-wide SCNP
Financial Statement Line
Amounts
Amounts
Reclassified Statement Line
UNEXPENDED APPROPRIATIONS
UNEXPENDED APPROPRIATIONS
Unexpended appropriations, Beginning
Balance
8,061,534
8,120,376
Net Position Beginning of Period
Corrections of Errors
-
(82,569)
Corrections of Errors
(37,547)
Corrections of Errors - Years Preceeding
the Prior Year
Total Correction of Errors
-
(120,116)
Total Correction of Errors
Appropriations Received
9,288,440
9,058,323
Appropriations Received as Adjusted
Other Adjustments
(227,173)
-
Other Adjustments
Appropriations Used
(8,194,480)
(8,253,323)
Appropriations Used
Total Unexpended Appropriations
8,928,321
CUMULATIVE RESULTS OF
OPERATIONS
Cumulative Results, Beginning Balance
3,474,872
3,434,403
Cumulative Results, Beginning Balance
Appropriations Used
8,194,480
8,253,323
Appropriations Used
Non-Federal Non-Exchange Revenues
Nonexchange Revenue - Securities
Investment
134,699
-
Nonexchange
-
-
Nonexchange Revenue - Other
270,195
57,531
Other Taxes and Receipts
404,894
57,531
Total Non-Federal Non-Exchange
Revenues
-
2
Borrowings and Other Interest Revenue
-
225,930
Other Taxes and Receipts
Transfers In/Out w/o Reimbursement-
Budgetary
36,938
18,209
Non-Expenditure Transfers-In of
Unexpended Appropriations and
Financing Sources
142
142
Transfers-in wthout reimbursement
-
-
Transfers-out wthout reimbursement
Total Transfers In/Out w/o
Reimbursement-Budgetary
142
142
Total Reclassified Transfers In/Out w/o
Reimbursement-Budgetary
Imputed Financing Sources
101,840
101,840
Imputed Financing Sources (Federal)
-
(1,226)
Non-entity collections transferred to the
General Fund of the U.S. Government
421
Accrual or non-entity amounts to be
collected and transferred to the General
Fund of the U.S. Government
Total Financing Sources
101,982
101,177
Net Cost of Operations
(8,425,057)
(8,346,819)
Net Cost of Operations
Ending Balance - Cumulative Results
of Operations
3,788,109
3,743,756
Total Net Position
12,716,430
12,549,016
Total Net Position
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46.
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United States Environmental Protection Agency
Notes to the Financial Statements
Fiscal Years ended September 30, 2019 and September 30, 2018
(Dollars in Thousands)
Note 37. Restatements
Capital Lease
EPA performed a review of its capital lease in FY 2019. The review revealed that the lease liability schedule
did not align with the lease agreement because of the following:
1. The lease agreement required a change in payment upon exercise of a 10-year renewal option
2. In 2015, the agency exercised the 10-year renewal option, but the lease schedule did not reflect
the new payment
To address these findings, the EPA revised the capital lease schedule to agree with the terms of the lease
agreement. The agency corrected the lease liability payment schedule and made corrections to the
accumulated amortization schedule for the leasehold asset.
As a result of these corrections, the agency restated FY 2018 financial statements. The changes impacted the
FY 2018 Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.
Contract Accrual
During a review in FY 2019, EPA determined that the amount accrued for contracts in FY 2018 was
understated by approximately $59 million. To address this finding, EPA restated its FY 2018 financial
statements. The changes impacted the FY 2018 Balance Sheet, Statement of Net Cost, and Statement of
Changes in Net Position.
20-F-0033
47.
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Required Supplementary Information (Unaudited)
United States Environmental Protection Agency
September 30, 2019 and September 30, 2018
(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: Preventive maintenance, replacement of parts, systems, or components, and other
activities needed to preserve or maintain the asset.
The deferred maintenance as of Fiscal Year 2019:
2019 2018
Asset Category
Buildings
$ 131,059 $
136,407
EPA Held Equipment
-
120
Vehicles
-
-
Total Deferred Maintenance
$ 131.059 $
136.527
In Fiscal Year 2019, in accordance with SFFAS No. 42, Deferred Maintenance and Repairs: Amending
Statements of Federal Financial Accounting Standards 6, 14, 29 and 32, the EPA presents Deferred
Maintenance and Repairs (DM&R) information by asset category as follows:
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48.
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Buildings:
Policy
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&E 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&E only. 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 DM&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.
20-F-0033
49.
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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 fully
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.
Vehicles:
Policy
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 by the
manufacturer.
State whether DM&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..
20-F-0033
50.
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Beginning in FY 2015, requirements for recognizing and reporting significant and expected to be permanent
impairment of general PP&E (except Internal Use Software) remaining in use are in SFFAS No. 44,
Accounting for Impairment of General Property, Plant, and Equipment (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.
Supplemental Combined Statement of Budgetary Resources (Unaudited)
United States Environmental Protection Agency
For the Fiscal Year Ending September 30, 2019
(Dollars in Thousands)
Leaking
Environmental Underground State Tribal
Programs & Storage Science & Assistance
Management Tanks Technology Superfund Agreements Other Totals
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget Authority, Net
$
454,823 $
11,233
$
137,615
$
3,411,496
$ 402,241
$1,758,990
$ 6,176,398
Appropriations (discretionary and mandatory)
2,602,978
93,441
707,073
1,592,437
4,542,863
1,262,898
10,801,690
Borrowing Authority (discretionary and mandatory)
-
-
-
-
-
1,083,500
1,083,500
Spending Authority From Offsetting Collection
123.718
-
23.200
96.591
-
313.963
557.472
Total Budgetary Resources
$
3.181.519 $
104.674
$
867.888
$
5.100.524
$4,945,104
$4,419,351
$ 18.619.060
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward adjustments (total)
$
2,702,112 $
98,173
$
720,888
$
1,495,522
$4,068,669
$4,052,025
$ 13,137,389
Unobligated Balance, End of Year:
Apportioned, Unexpired Accounts
314,672
6,501
128,540
3,605,002
876,435
363,262
5,294,412
Unapportioned, Unexpired accounts
-
-
-
-
-
917
917
Expired Unobligated Balance, End of Year
164.735
-
18.460
-
-
3.147
186.342
Unobligated Balance, End of Year (total):
479.407
6.501
147.000
3.605.002
876.435
367.326
5.481.671
Total Status of Budgetary Resources
$
3.181.519 $
104.674
$
867.888
$
5.100.524
$4,945,104
$4,419,351
$ 18.619.060
OUTLAYS, NET
Outlays, Net (total) (discretionary and mandatory)
$
2,503,735 $
89,432
$
674,801
$
1,363,556
$3,826,088
$1,190,998
$ 9,648,610
Distributed Offsetting Receipts (-)
-
-
-
ri.528.5641
-
("56.219")
("1.584.783")
Agency Outlays, Net (discretionary and mandatory)
$
2.503.735 $
89.432
$
674.801
$
(165.008) $3,826,088
$1,134,779
$ 8.063.827
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51.
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Required Supplemental Stewardship Information (Unaudited)
United States Environmental Protection Agency
Required Supplemental Stewardship Information (Unaudited)
For the Fiscal Year Ended September 30, 2019
(Dollars in Thousands)
Investment in The Nation's Research and Development:
The EPA's Office of Research and Development provides the crucial underpinnings for EPA decision-
making. Through conducting cutting-edge science and technical analysis, ORD develops sustainable
solutions to our environmental problems and employs more innovative and effective approaches to reducing
environmental risks. Public and private sector institutions have long been significant contributors to our
nation's environment and human health research agenda. The EPA, however, is unique among scientific
institutions in this country in combining research, analysis, and the integration of scientific information
across the full spectrum of health and ecological issues and across the risk assessment and risk management
paradigm. Research enables us to identify the most important sources of risk to human health and the
environment, and by so doing, informs our priority-setting, ensures credibility for our policies, and guides
our deployment of resources. It gives us the understanding, the framework, and technologies we need to
detect, abate, and avoid environmental problems.
Among the Agency's highest priorities are research programs that address: the development and application
of alternative techniques for prioritizing chemicals for further testing through computational toxicology; the
environmental effects of pollutants on children's health; the potential risks and effects of manufactured
nanomaterials on human health and the environment; the impacts of global change and providing information
to policy makers to help them adapt to a changing climate; the potential risks of unregulated contaminants in
drinking water; the health effects of air pollutants such as particulate matter; the protection of the nation's
ecosystems; and the provision of near-term, appropriate, affordable, reliable, tested, and effective
technologies and guidance for potential threats to homeland security. The EPA also supports regulatory
decision-making with chemical risk assessments.
For FY 2019, the full cost of the Agency's Research and Development activities totaled over $525M. Below
is a breakout of the expenses (dollars in thousands):1
2015 2016 2017 2018 2019
Programmatic Expenses $ 535,352 $ 541,190 $ 532,153 $ 492,648 $ 469,769
Allocated Expenses $ 78,028 $ 82,646 $ 103,451 $ 54,684 $ 55,339
See Section II of the PAR for more detailed information on the results of the Agency's investment in research
and development.
'Allocated Expenses calculated specifically for the Required Supplemental Stewardship Information report and do not represent the
overall Agency indirect cost rates. Allocated expenses include general and administrative expenses of headquarter organizations
that provide support services to the entire agency, general and administrative expenses of the regional and headquarter offices that
provide support services to national programs within their organization, and inter-entity costs provided by Office of Personal
Management.
52.
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Investment in The Nation's Infrastructure:
The Agency makes significant investments in the nation's drinking water and clean water infrastructure,
primarily through the two SRF programs and the WIFIA program.
WIFIA: The EPA provides through the WIFIA program long-term, low cost supplemental credit assistance
under customized terms for creditworthy water and wastewater projects. The WIFIA program directly
supports the Agency's goal to ensure waters are clean through improved water infrastructure. The program
requires a small appropriation compared to its potential loan volume. For example, the FY19 WIFIA
appropriation of $68 million could potentially spur up to $11 billion in total infrastructure investment when
combined with other sources of funding. The WIFIA program is designed to attract private participation,
encourage new revenue streams for infrastructure investment, and allow public agencies to get more projects
done.
State Revolving Funds: The EPA provides capital, in the form of capitalization grants, to state revolving
funds which state governments use to make loans to eligible entities for the construction of wastewater and
drinking water treatment infrastructure. When the loans are repaid to the state revolving fund, the collections
are used to finance new loans for new construction projects. The capital is reused by the states and is not
returned to the Federal Government.
Construction Grants Program: During the 1970s and 1980s, the Construction Grants Program provided more
than $60 billion of direct grants for the construction of public wastewater treatment projects. These projects,
which constituted a significant contribution to the nation's water infrastructure, included sewage treatment
plants, pumping stations, and collection and intercept sewers, rehabilitation of sewer systems, and the control
of combined sewer overflows. The construction grants led to the improvement of water quality in thousands
of municipalities nationwide. Congress set 1990 as the last year that funds would be appropriated for
Construction Grants. Projects funded in 1990 and prior will continue until completion. After 1990, the EPA
shifted the focus of municipal financial assistance from grants to loans that are provided by State Revolving
Funds.
The Agency also is appropriated funds to finance the construction of infrastructure outside the Revolving
Funds programs. These are reported below as Other Infrastructure Grants.
The Agency's appropriated investments in the nation's Water Infrastructure are outlined below (dollars in
thousands):
2015 2016 2017 2018 2019
Construction Grants $ 17,462 $ 11,344 $ 8,686 $ - $ 843
Clean Water SRF $ 1,715,630 $ 1,459,820 $ 1,247,919 $ 1,422,613 $ 1,708,175
Drinking Water SRF $ 1,268,360 $ 1,213,201 $ 994,297 $ 890,460 $ 1,016,071
Other Infrastructure Grants $ 96,439 $ 62,011 $ 44,916 $ 48,198 $ 24,243
Allocated Expenses $ 590,595 $ 529,815 $ 480,415 $ 438,823 $ 499,466
WIFIA2 $ - $ - $ 30,000 $ 63,000 $ 68,000
See the Goal 2 - Clean and Safe Water portion in Section II of the AFR for more detailed information on the
results of the Agency's investment in infrastructure.
2 Amounts for WIFIA include administratve expenses.
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53.
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Human Capital
Agencies are required to report expenses incurred to train the public with the intent of increasing or
maintaining the nation's economic productive capacity. Training, public awareness, and research fellowships
are components of many of the Agency's programs and are effective in achieving the Agency's mission of
protecting public health and the environment, but the focus is on enhancing the nation's environmental, not
economic, capacity.
The Agency's expenses related to investments in the Human Capital are outlined below (dollars in
thousands):
2015
2016
2017
2018
2019
Training and Awareness Grants
Fellowships
Allocated Expenses
Total
$
27,047 $ 29,116 $ 22,090 $
6,579 4,630 2,077
5,146 5,336 4,073
19,351 $
1,460
2,525
23,336 $
21,072
442
$
38,772 $ 39,082 $ 28,240 $
2,831
24,345
54.
20-F-0033
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Appendix II
Agency Response to Draft Report
i A ; UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| ? WASHINGTON, D C. 20460
November 19 2019
iNuvciiiuti Ly, z.
-------
No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
The agency will continue to review its
processes for preparing financial
statements and identify process
improvements to further strengthen the
preparation process.
2
Provide accurate and reliable
supporting documentation for
adjustments and corrections to
the financial statements.
The agency makes every effort to provide
supporting documentation for adjustments
and corrections; however, we will review
with staff the need to include more of the
supporting analysis and rationale behind
the adjustments made and the accounting
basis for them. The OIG has verbally told
the agency that supporting documentation
has improved over the last year, but we
will continue to work with the OIG on any
specific instances for which they feel
additional documentation is needed.
February 29,
2020
3
Update the accounting models
to properly record collections
and not reduce an account
receivable account.
The OCFO will work with the Office of
Land and Emergency Management to
review the business process for e-Manifest
financial activities and develop a plan for
recording the related activities at the
transactional level.
September 30,
2021
4
Establish accounting models to
properly record e-Manifest
account receivables and
recognize earned revenue at the
transaction level.
The OCFO will work with the Office of
Land and Emergency Management to
review the business process for e-Manifest
financial activities and develop a plan for
recording the related activities at the
transactional level.
September 30,
2021
5
Establish accounting models to
properly classify and record
interest, fines, penalties and
fees.
The OCFO will work with the Office of
Land and Emergency Management to
review the business process for e-Manifest
financial activities and develop a plan for
recording the related activities at the
transactional level.
September 30,
2021
6
Establish accounting models to
properly record receivables,
collections and earned revenue
from federal versus nonfederal
vendors.
The OCFO will work with the Office of
Land and Emergency Management to
review the business process for e-Manifest
financial activities and develop a plan for
recording the related activities at the
transactional level.
September 30,
2021
20-F-0033
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
7
Adjust the fiscal year 2018
contract accrued liabilities by
$9,853,030.26.
The agency has made an additional
adjustment to contract accrued liabilities
by $9,853,030.26 in the final FY 2019
financial statement.
Completed
November 8,
2019
8
Perform a proof of the contract
accrual methodology using
actual expenses to verify the
accuracy of the EPA's accruals.
The agency performed the proof as
requested.
Completed
November 7,
2019
9
Implement a process to timely
notify the Compass Financials
and Automated Standard
Application for Payment user
account administrators of
individuals who are separated
or terminated from the EPA and
remove their access to these
systems.
OCFO/OTS has an internal control
process for an automated notification to
terminate access, which failed in the
spring of 2019. We are currently using a
manually executed report and will update
the internal controls to ensure system
access is revoked when employees are
separated. As a compensating
control, during the off-boarding of
employees, EPA network access is
revoked, and a valid network user account
ID and password are required for access to
Compass.
The two ASAP users were an unusual
situation, and access removal was
completed on April 18, 2019. The
Director of the Finance Center that
manages ASAP will continue to notify the
ASAP account manager of terminations or
separations.
January 31, 2020
10
Remove user access of the
separated Compass Financial
user identified with an active
account.
OCFO/OTS has removed Compass access
of the identified user.
Completed
October 31, 2019
11
Implement a process to timely
notify the Integrated Grants
Management System user
account administrator of
individuals who separate from
the EPA and remove their
access to this system.
OMS/OGD will work directly with
OMS/EI, OMS/ARM/OHR and
OMS/ORBO to determine specific areas
where improvement is necessary in the
deprovisioning process of user accounts
and licenses. OMS/ARM/OGD, along
with its partners, will then identify and
implement, where appropriate, a technical
June 30, 2020
20-F-0033
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
solution for these improvements. The
target date for developing and fully
implementing all improvements is June
30, 2020.
12
Remove user access of the
separated Integrated Grants
Management System users
identified with active accounts.
As of November 4, 2019,
OMS/ARM/OGD has removed IGMS
access for the identified users.
Completed
November 4,
2019
13
Implement internal controls to
comply with mandatory
information system security
controls to protect Personally
Identifiable Information (PII)
and Sensitive Personally
Identifiable Information (SPII)
stored on the file transfer server
as specified by the National
Institute of Standards and
Technology (NIST), Special
Publication 800-53, Security
and Privacy Controls for
Federal Information Systems
and Organizations, Revision 4,
April 2013.
In coordination with OMS/EI,
OCFO/OTS disabled the non-secure
connection (ftp) port access on
Wednesday, September 11, 2019,
preventing any future transfer of
information. OCFO/OTS will only allow a
secure transfer method (SSH File Transfer
Protocol, also known as Secure FTP) to
transfer the files to and from the file
transfer server.
In accordance with security controls
identified in the National Institute of
Standards and Technology, Special
Publication 800-53, Security and Privacy
Controls for Federal Information Systems
and Organizations, Revision 4, April
2013, OTS will monitor the file transfer
server on a bi-weekly basis to ensure that
the PII and SPII files are transferred to a
secure location within 5 days or less. In
addition, OTS will work with OMS to
create an automatic monitoring script by
January 31, 2020, to generate a report that
OTS/AMD staff will use to validate and
confirm that no files older than 5 days
remain on the file transfer server.
January 31, 2020
14
Implement internal controls to
comply with CIO's Directive
No.: 2151-P-10.0, Protecting
Sensitive Personally
Identifiable Information (SPII),
dated December 19, 2016, for
the PII and SPII stored on the
Access to the file transfer server is
controlled by file-level roles and
privileges. All EPA users of the
referenced server are required to be inside
the EPA network, therefore additional
encryption on the file transfer server is not
required due to the controlled access
December 30,
2019
20-F-0033
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
server used to exchange
information with EPA vendors.
previously mentioned. Additionally,
external connections are made over a
point-to-point connection, and all traffic
flows through either an IP Sec tunnel or
VPN, which terminates within the NCC.
OCFO/OTS will continue to verify their
compliance to protect the PII and the SPII
stored on the server used to exchange
information with EPA vendors.
OCFO/OTS has also implemented steps to
recertify all users. By November 22, 2019,
OCFO/OTS will remove user accounts
who do not need access to the file transfer
server.
In compliance with CIO Directive No.:
2151-P-10.0, Protecting Sensitive
Personally Identifiable Information (SPII),
12/19/2016, OTS implemented a process
to recertify all users on an annual
basis. The recertification process involves
users submitting a form identifying their
roles associated with accessing files on
the file transfer server. In addition, OTS
will work with OMS to generate a
monthly report by December 30, 2019 that
OTS/AMD staff will use to validate and
verify group access on the file transfer
server. OTS expects to complete the initial
recertification by November 22, 2019.
15
Take immediate action to verify
that the user accounts on the file
transfer server, with access to
the PII and SPII, need the
access to the file transfer server
and remove the user accounts of
personnel who do not need
access to the server.
OCFO/OTS has implemented steps to
recertify all users. OCFO/OTS will
remove user accounts of personnel who
do not need access to the file transfer
server by November 22, 2019.
November 22,
2019
20-F-0033
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No.
Recommendation
High-Level Intended Corrective
Action(s)
Estimated
Completion Date
16
Take immediate action to
update the user account access
group rules to restrict what PII
and SPII users can view on the
file transfer server used to
exchange information with EPA
vendors.
OCFO/OTS will work with OMS/EI to
review all access from the file transfer
server and take necessary actions to either
remove or restrict access by November
22, 2019 as appropriate.
November 22,
2019
17
Take immediate action to verify
that employees are complying
with the EPA record retention
procedures for the PII and SPII
that is currently stored on the
file transfer server used to
exchange information with EPA
vendors.
OCFO/OTS will not retain files with PII
and SPII on the file transfer server. The
file transfer server is intended as a
mechanism for file transfers between
OCFO/OTS systems and external
destinations. OCFO/OTS will work with
OMS/EI to transfer files from the file
transfer server to a secure location by
December 13, 2019.
December 13,
2019
CONTACT INFORMATION
If you have any questions regarding this response, please contact OCFO's Audit Follow-up
Coordinator, Andrew LeBlanc, at 202-564-1761.
cc: Kevin Christensen
Richard Eyermann
Paul Curtis
Rudy Brevard
Wanda Arlington
Margaret Hiatt
Donna Vizian
Carol Terris
Jeanne Conklin
Meshell Jones-Peeler
Denise Polk
Richard Gray
Dany Lavergne
Greg Luebbering
Aileen Atcherson
Lorna Washington
Andrew LeBlanc
20-F-0033
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Appendix III
Distribution
The Administrator
Assistant Deputy Administrator
Associate Deputy Administrator
Chief of Staff
Deputy Chief of Staff
Chief Financial Officer
Assistant Administrator for Mission Support
Assistant Administrator for Land and Emergency Management
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Associate Administrator for Policy, Office of the Administrator
Director, Office of Continuous Improvement, Office of the Administrator
Associate Chief Financial Officer
Associate Chief Financial Officer for Policy
Principal Deputy Assistant Administrator for Mission Support
Associate Deputy Assistant Administrator for Mission Support
Deputy Assistant Administrator for Administration and Resources Management, Office of
Mission Support
Deputy Assistant Administrator for Environmental Information and Chief Information Officer,
Office of Mission Support
Principal Deputy General Counsel
Principal Deputy Assistant Administrator for Land and Emergency Management
Deputy Assistant Administrator for Land and Emergency Management
Director, Office of Budget, Office of the Chief Financial Officer
Controller, Office of the Controller, Office of the Chief Financial Officer
Deputy Controller, Office of the Controller, 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, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Director, Office of Resources and Business Operations, Office of Mission Support
Director, Administrative IT Staff, Office of Mission Support
Director, Information Security and Management Staff, Office of Mission Support
Director, Office of Acquisition Solutions, Office of Mission Support
Director, Office of Grants and Debarment, Office of Mission Support
Director, Office of Administration, Office of Mission Support
Director, Office of Human Resources, Office of Mission Support
Director, Office Information Technology Operations, Office of Mission Support
Director, Office Information Security and Privacy, Office of Mission Support
20-F-0033
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Deputy Director, Office of Grants and Debarment, Office of Mission Support
Senior Debarring Official, Office of Grants and Debarment, Office of Mission Support
Senior Associate Director for Grants Competition, Office of Grants and Debarment, Office of
Mission Support
Director, Office of Superfund Remediation and Technology Innovation, Office of Land and
Emergency Management
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
Audit Follow-Up Coordinator, Office of Mission Support
Audit Follow-Up Coordinator, Office of Acquisition Solutions, Office of Mission Support
Audit Follow-Up Coordinator, Office of Grants and Debarment, Office of Mission Support
Audit Follow-Up Coordinator, Office of Land and Emergency Management
20-F-0033
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