CUSTOMER SERVICE * INTEGRITY ~ ACCOUNTABILITY
Operating efficiently and effectively
EPA's Fiscal Years 2021
and 2020 (Restated)
Consolidated Financial
Statements
Report No. 22-F-0007
November 15, 2021
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Abbreviations:
CFC
EPA
FFMIA
OCFO
OIG
OMB
U.S.C.
WIFIA
Cincinnati Finance Center
U.S. Environmental Protection Agency
Federal Financial Management Improvement Act
of 1996
Office of the Chief Financial Officer
Office of Inspector General
Office of Management and Budget
United States Code
Water Infrastructure Finance and Innovation Act
of 2014
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Office of Inspector General
U.S. Environmental Protection Agency
At a Glance
22-F-0007
November 15, 2021
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act of
1994, which requires the
U.S. Environmental Protection
Agency's Office of Inspector
General to audit the financial
statements prepared by the
Agency each year. Our primary
objectives were to determine
whether:
• The EPA's consolidated
financial statements were
fairly stated in all material
respects.
• The EPA's internal controls
over financial reporting were
in place.
• EPA management complied
with applicable laws,
regulations, contracts, and
grant agreements.
This 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 audit supports an EPA
mission-related effort:
• Operating efficiently and
effectively.
This audit addresses a top EPA
management challenge:
• Fulfilling mandated reporting
requirements.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.
List of OIG reports.
EPA's Fiscal Years 2021 and 2020 (Restated)
Consolidated Financial Statements
EPA Receives an Unmodified Opinion for Fiscal Years 2021 and
2020 (Restated)
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 2021 and 2020 (restated), meaning
they were fairly presented and free of material
misstatement.
Significant Deficiencies Noted
We noted the following significant deficiencies:
• The EPA did not reconcile cash differences with the U.S. Department
of the Treasury.
• The EPA did not recognize revenue for the Water Infrastructure
Finance and Innovation Act of 2014 fee fund expenses.
• Accounts receivable source documentation was not provided in a
timely manner by EPA regions.
• The Office of the Chief Financial Officer needs to conduct periodic
reviews of users' accounts within the EPA's Contract Payment
System.
Noncompliance with Laws, Regulations, Contracts, and Grant
Agreements Noted
We noted the following instance of noncompliance with laws and regulations:
the EPA did not comply with Office of Management and Budget Circular A-136
form and content requirements for the balance sheet.
Recommendations and Planned Agency Corrective Actions
The EPA generally agreed with our findings and recommendations but
disagreed with some findings. The EPA has already completed corrective
actions on several of our findings, and some corrective actions are ongoing.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 15, 2021
MEMORANDUM
SUBJECT: EPA's Fiscal Years 2021 and 2020 (Restated) Consolidated Financial Statements
Report No. 22-F-0007
This is our report on the subject audit conducted by the Office of Inspector General of the
U.S. Environmental Protection Agency. The project number for this audit was QA-FY21-0170. This
report contains findings that describe the problems the OIG has identified and the corrective actions the
OIG recommends. Final determination on matters in this report will be made by EPA managers in
accordance with established audit resolution procedures.
The Office of the Chief Financial Officer and the Office of Enforcement and Compliance Assurance have
primary responsibility for the issues discussed in the report.
In accordance with EPA Manual 2750, your offices provided acceptable planned corrective actions and
estimated milestone dates in response to the OIG's recommendations. All recommendations are resolved, and
no final response to this report is required. If you submit a response, however, it will be posted on the OIG's
website, along with our memorandum commenting on your response. Your response should be provided as an
Adobe PDF file that complies with 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 j ustification.
We will post this report to our website at www.epa.gov/oig.
Attachments:
1. Significant Deficiencies.
2. Compliance with Laws and Regulations.
3. Status of Prior Audit Report Recommendations.
4. Status of Recommendations.
FROM: Paul C. Curtis, Director
Financial Directorate
Office of Audit
TO:
Faisal Amin, Chief Financial Officer
Lawrence Starfield, Acting Assistant Administrator
Office of Enforcement and Compliance Assurance
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EPA's Fiscal Years 2021 and 2020 (Restated)
Consolidated Financial Statements
22-F-0007
Table of C
Inspector General's Report on EPA's Fiscal Years
2021 and 2020 (Restated) Consolidated Financial
Statements
Report on the Financial Statements 1
Required Supplementary Information 2
Report on Internal Control over Financial Reporting 3
Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements 5
Other Governmental Reporting Requirements 6
Prior Audit Coverage 6
Attachments
1. Significant Deficiencies 7
EPA Did Not Reconcile Cash Differences with Treasury 8
EPA Did Not Recognize Revenue for Water Infrastructure Finance and Innovation Act
of 2014 Fee Fund Expenses 10
Accounts Receivable Source Documentation Not Provided Timely by Regions 11
Office of the Chief Financial Officer Needs to Conduct Periodic Reviews of Users'
Accounts Within EPA's Contract Payment System 14
2. Compliance with Laws and Regulations 16
EPA Did Not Comply with OMB Circular A-136 17
3. Status of Prior Audit Report Recommendations 20
4. Status of Recommendations 23
Appendixes
I. EPA's FYs 2021 and 2020 (Restated) Consolidated Financial Statements 24
II. Agency Response to Draft Report 80
III. Distribution 90
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Inspector General's Report on EPA's
Fiscal Years 2021 and 2020 (Restated)
Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of the U.S. Environmental
Protection Agency, which comprise the consolidated balance sheets, as of September 30, 2021, and
September 30, 2020 (restated), and the related consolidated statements of net cost, net cost by major
program, changes in net position, and custodial activity; the combined statement of budgetary
resources for the years then ended; and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States 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 consolidated financial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial statements contained in Government Auditing
Standards, issued by the comptroller general of the United States of America; and Office of
Management and Budget Bulletin 21-04, Audit Requirements for Federal Financial Statements. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
22-F-0007
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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. Treasury is also responsible for investing amounts not needed for current
disbursements and transferring funds to the EPA as authorized in legislation. Since Treasury, and not the
EPA, is responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General is not independent with respect to amounts pertaining to OIG
operations that are presented in the financial statements. The amounts included for 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, 2021 and 2020, in conformity with accounting principles
generally accepted in the United States of America.
Emphasis of Matter - Restatement of Fiscal Year 2020
As described in Note 36 to the financial statements, the fiscal year 2020 financial statements have been
restated to correct misstatements related to imputed costs for Pension, Health, and Life insurance and
to eliminate intragovernmental receivables and payables. Our opinion is not modified with respect to
this matter.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the information in
the Required Supplementary Information, Supplemental Information, and Management's Discussion and
Analysis sections be presented to supplement the EPA's financial statements. Such information,
although not a part of the basic consolidated financial statements, is required by the OMB and the
Federal Accounting Standards Advisory Board, which consider it to be an essential part of the financial
reporting that places the basic consolidated financial statements in an appropriate operational,
economic, or historical context.
We have applied certain limited procedures to the Required Supplementary Information, Supplemental
Information, and Management's Discussion and Analysis, in accordance with auditing standards
generally accepted in the United States 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 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.
22-F-0007
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Report on Internal Control over Financial Reporting
Opinion on Internal Control. In planning and performing our audit of the consolidated financial
statements as of and for the year ended September 30, 2021, in accordance with auditing standards
generally accepted in the United States of America, we considered the EPA's internal control over
financial reporting as a basis for designing our audit procedures that are appropriate in the
circumstances for the purpose of expressing an opinion on the financial statements and to comply with
the OMB's audit guidance, but not to express an opinion on the effectiveness of the EPA's internal
control. Accordingly, we do not express an opinion on the effectiveness of the EPA's internal control
over financial reporting.
Material Weakness and Significant Deficiencies. Our consideration of the internal control was for the
limited purpose of expressing an opinion on the EPA's financial statements and was not designed to
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies;
therefore, such deficiencies in internal control may exist that were not identified during the course of
our audit. A deficiency in internal control over financial reporting exists when the design or operation of
a control does not allow management or employees, in the normal course of performing their assigned
functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the entity's financial statements will not be
prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control over financial reporting that is less severe than a material
weakness yet important enough to merit attention by those charged with governance.
Because of inherent limitations in internal control, misstatements, losses, or noncompliance may
nevertheless occur and not be detected. We noted certain matters, which we discuss below, involving
the internal control and its operation that we consider to be significant deficiencies. These issues are
summarized below and detailed in Attachment 1.
Significant Deficiencies
II II II "i j IINIt > II oncile Cash Differences with Treasury
We found that the EPA did not reconcile $2,109,083.84 in cash differences between the EPA's and
Treasury's cash balances. These differences remained unreconciled for nine months—from
December 2020 through August 2021. Treasury requires agencies to perform timely reconciliations of
their Fund Balance with Treasury's accounts. The EPA adjusted these recurring cash differences to
comply with Treasury's monthly reporting requirements and agree with Treasury's balances. The EPA
reversed the adjustments the following month, restoring the unreconciled cash differences in the EPA's
balances. Not adequately reconciling all cash differences increases the risk of unrecorded transactions;
fraud, waste, and mismanagement of funds; and misstatement of EPA financial statements.
II II II "i j Ni ¦ II ognize Revenue for Water Infrastructure Finance and Innovation Act of
2 d Expenses
We found that the EPA did not recognize $4,513,689 and $2,057,300 in revenue for the WIFIA fee fund
for fiscal years 2021 and 2020, respectively. Federal accounting standards require agencies to recognize
revenue as expenses are incurred. This error occurred because the EPA did not establish the correct
22-F-0007
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accounting model for WIFIA fee fund expenses to reduce unearned revenue and recognize earned
revenue. When the EPA does not properly recognize revenue, the financial statements could be
materially misstated.
Account sivable Source Documentation Not Provided Timely by Regions
EPA regions did not timely submit supporting source documents to the Cincinnati Finance Center for
over $50.7 million in accounts receivable, which then delayed recording and processing those
receivables. In one case, Region 2 submitted receivable documentation over six months after the
consent decree for that case was effective. In another case, Region 9 did not timely submit
documentation for three receivables totaling approximately $8.1 million. As a result, the CFC did not
record these four receivables in the proper fiscal year. EPA policies state that responsible offices must
forward to the CFC source documents supporting an accounts receivable for settlements or orders
demonstrating a debt owed to the Agency within five business days as specified in the applicable EPA
Resource Management directives. The regional program office, the office of regional counsel, and the
regional legal enforcement office staff are responsible for providing these documents to the CFC. When
the CFC is unable to create receivables timely, the debtor may not be billed appropriately, interest may
not accrue, and the EPA may not collect all that it is owed. Furthermore, the EPA's delayed recording of
accounts receivable could result in a material misstatement of the financial statements.
Office of the Chief Financial Officer Needs to Conduct IPeriot views of Users'
Accounts Within II II ¦ - -ntrai > I ment System
The OCFO has not conducted periodic reviews of user accounts within the EPA's Contract Payment
System. The system reports and tracks contract payments and uploads the accounting data associated
with the payments into the EPA's core financial system. EPA users, such as contract officers, project
officers, and alternate project officers, have access rights in the Contract Payment System to enter,
approve, and disapprove contract invoices.
Attachment 3 contains the status of issues reported in prior years' reports on the EPA's consolidated
financial statements. The issues included in Attachment 3 should be considered among the EPA's
significant deficiencies for fiscal year 2021. 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 «¦ 1 " il Manage 1 mncial Integrity Act Report with Our
Evaluation of Internal Control
OMB Bulletin 21-04 requires the OIG to compare material weaknesses disclosed during the audit with
those material weaknesses reported in the Agency's Federal Managers' Financial Integrity Act 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 Federal Managers' Financial Integrity Act
report.
For financial statement audit and financial reporting purposes, OMB Bulletin 21-04 defines material
weaknesses in internal control as a deficiency or combination of deficiencies in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of the
entity's financial statements will not be prevented or detected and corrected on a timely basis.
Details concerning our findings on significant deficiencies can be found in Attachment 1.
22-F-0007
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Report on Compliance with Laws, Regulations, Contracts, and Grant
Agreements
EPA management is responsible for complying with laws, regulations, contracts, and grant agreements
applicable to the Agency. As part of obtaining reasonable assurance about whether the Agency's
financial statements are free of material misstatement, we performed tests of the Agency's compliance
with certain provisions of laws, including those governing the use of budgetary authority, regulations,
contracts, and grant agreements that have a direct effect on the determination of material amounts and
disclosures in the financial statements. We also performed certain other limited procedures as described
in Codification of Statements on Auditing Standards, AU-C 250.14-16, "Consideration of Laws and
Regulations in an Audit of Financial Statements." OMB Bulletin 21-04 requires that we evaluate
compliance with federal financial statement system requirements, including the requirements referred
to in the Federal Financial Management Improvement Act of 1996, or FFMIA. We limited our tests of
compliance to these provisions and did not test compliance with all laws and regulations applicable to
the EPA.
Opinion on Compliance with Laws, Regulations, Contracts, and Grant Agreements
Providing an opinion on compliance with certain provisions of laws, regulations, contracts, and grant
agreements was not an objective of our audit and, accordingly, we do not express such an opinion.
We did not identify any instances of noncompliance that would result in a material misstatement to the
audited financial statements.
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 OMB Memorandum M-09-06, Implementation Guidance for the Federal
Financial Management Improvement Act, dated January 9, 2009, to determine whether there was any
substantial noncompliance with FFMIA.
The results of our tests did not disclose any instances of noncompliance with FFMIA requirements,
including where the Agency's financial management systems did not substantially comply with the
applicable federal accounting standard.
We identified one significant matter involving compliance with laws and regulations that came to our
attention during the course of the audit. We found that the EPA did not comply with OMB Circular A-136.
Attachment 2 provides additional details, as well as our recommendations on actions that should be
taken on this matter. We will not issue a separate management letter.
I I I "i j Not Comply with Office of Management ai i > I 1 dget Circular i
We found that the EPA did not comply with the required form and content on its fiscal year 2021
balance sheet. The OMB requires agencies to use line titles and the format detailed in its Circular A-136,
Financial Reporting Requirements, dated August 10, 2021. The EPA did not revise the line titles and
22-F-0007
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format of its balance sheet to meet the requirements. As a result, the EPA did not comply with federal
financial reporting requirements.
Other Governmental Reporting Requirements
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. § 9611(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.
During previous financial statement audits, we reported weaknesses, as detailed in Attachment 3, that
impacted our audit objectives. Those weaknesses include that:
• The EPA did not capitalize lab renovation costs.
• 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 Treasury.
• The EPA improperly recorded e-Manifest receivables and earned revenue.
• The EPA needs to improve its financial statement preparation process.
This report is intended solely for the information and use of the management of the EPA, the OMB, and
Congress, and it is not intended to be and should not be used by anyone other than these specified
parties.
Paul C. Curtis
Certified Public Accountant
Director, Financial Directorate
Office of Audit
Office of Inspector General
U.S. Environmental Protection Agency
November 9, 2021
22-F-0007 6
Prior Audit Coverage
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Significant Deficiencies
Table of Contents
Attachment 1
1 EPA Did Not Reconcile Cash Differences with Treasury 8
2 EPA Did Not Recognize Revenue for Water Infrastructure Finance and Innovation
Act of 2014 Fee Fund Expenses 10
3 Accounts Receivable Source Documentation Not Provided Timely by Regions 11
4 Office of the Chief Financial Officer Needs to Conduct Periodic Reviews of Users'
Accounts Within EPA's Contract Payment System 14
22-F-0007 7
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1 - EPA Did Not Reconcile Cash Differences
with Treasury
We found that the EPA did not reconcile $2,109,083.84 in cash differences between the EPA's and
Treasury's cash balances. These differences remained unreconciled for nine months—from
December 2020 through August 2021. Treasury requires agencies to perform timely reconciliations of
their Fund Balance with Treasury's accounts. The EPA adjusted these recurring cash differences to
comply with Treasury's monthly reporting requirements and agree with Treasury's balances. The EPA
reversed the adjustments the following month, restoring the unreconciled cash difference in the EPA's
balances. Not adequately reconciling all cash differences increases the risk of unrecorded transactions,
fraud, waste, mismanagement of funds, and misstatement of EPA financial statements.
The Treasury Financial Manual, Volume 1, Part 2, Chapter 5100, "Fund Balance with Treasury,"
Section 5125, states that:
Agency reconciliation of [Fund Balance with Treasury] accounts is a key internal
control process and it ensures the accuracy of the government's receipt and
disbursement data. Therefore, agencies must perform timely reconciliations of their
agency's United States Standard General Ledger (USSGL) account 101000 to Fiscal
Service [Central Accounting Reporting System Account] Statement and implement
effective and efficient reconciliation processes.
Section 5130.10 states that:
Agencies must post account transactions to the [United States Standard General
Ledger] and must prepare an adjusted trial balance at least monthly to verify that
debit and credit postings are equal and to validate the data. They also must ensure
that the balance in the [United States Standard General Ledger] account 101000 for
each fund symbol agrees with their internal supporting documents.
Additionally, Section 5130.20 states that federal agencies must compare their Fund Balance with
Treasury transactions in their general ledgers with the Fiscal Service reports and must reconcile any
differences. According to Section 5145, by not having a timely and effective reconciliation process,
agencies could increase the risk of fraud, waste, and mismanagement of funds, as well as affect their
ability to accurately measure the full cost of the government's programs.
The EPA's Resource Management Directive 2540-03-P1, Fund Balance with Treasury Management
Standard Form 224 Reconciliation, requires the Accounting and Cost Analysis Division to monthly review
the EPA's Fund Balance with Treasury in its financial system and report issues to the respective EPA
finance center. Every month, the finance centers and the Fees and Collection Branch are required to
reclassify the Budget Fiscal Service Fund Balance with Treasury to the EPA's Fund Balance with Treasury
in the accounting system of record for their respective agency location codes. Finance centers are also
required to provide comments, as needed, to the Accounting and Cost Analysis Division in the monthly
cash differences report.
22-F-0007
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We found that as of August 31, 2021, the EPA had not resolved $2,109,083.84 in cash differences
between the EPA's and Treasury's cash balances. These differences were unreconciled for nine months.
The differences are detailed in Table 1-1.
Table 1-1: Unreconciled cash differences
Treasury
Dollar amount
symbol
(absolute value)
6818/190108
$885,708.88
6819/200108
356,297.29
6820/210108
867,077.67
Total
$2,109,083.84
Source: OIG analysis of EPA data. (EPA OIG table)
The EPA records a monthly adjustment to clear cash differences with Treasury and reverses the
adjustment the following month. The monthly adjustments allow the EPA to agree with Treasury's
balances at the time of reporting; however, the Treasury Financial Manual requires the EPA to reconcile
the differences. Recurring cash differences in the monthly adjustments suggest that the EPA has not
properly reconciled its balances.
Upon our inquiries, the EPA stated that there are various reasons for the cash differences detailed in
Table 1-1, such as timecard corrections or adjustments, and that the differences are being reviewed and
efforts are underway to resolve the ongoing differences.
By not adequately reconciling all cash differences, the EPA increases the risk of unrecorded transactions,
fraud, waste, and mismanagement of funds. Unrecorded transactions could misstate the Agency's Fund
Balance with Treasury and EPA financial statements.
We have reported findings regarding the need for the EPA to improve its efforts to resolve cash
differences with Treasury in previous audits. While the EPA has made some progress in resolving its cash
differences, we continue to find unreconciled recurring differences during our audits.
Recommendation
We recommend that the chief financial officer:
1. Timely reconcile EPA cash differences with the U.S. Department of the Treasury.
Agency Response and OIG Assessment
The EPA concurred with our recommendation and provided acceptable planned corrective actions. The
EPA's estimated completion date for corrective actions is September 30, 2022. The Agency's response
can be found in Appendix II.
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2 - EPA Did Not Recognize Revenue for Water
Infrastructure Finance and Innovation Act of 2014 Fee
Fund Expenses
We found that the EPA did not recognize $4,513,689 and $2,057,300 in revenue for the WIFIA fee fund
for fiscal years 2021 and 2020, respectively. Federal accounting standards require agencies to recognize
revenue as expenses are incurred. This error occurred because the EPA did not establish the correct
accounting model for WIFIA fee fund expenses to reduce unearned revenue and recognize earned
revenue. When the EPA does not properly recognize revenue, the financial statements could be
materially misstated.
Statement of Federal Financial Accounting Standards Number 7, Accounting for Revenue and Other
Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, states that:
When advance fees or payments are received, ... revenue should not be recognized
until costs are incurred from providing the goods and services (regardless of whether
the fee or payment is refundable). An increase in cash and an increase in liabilities,
such as "unearned revenue," should be recorded when the cash is received.
WIFIA at 33 U.S.C. § 3909 authorizes the EPA to collect and spend fees to cover all or a portion of the
costs of servicing WIFIA loans.
The EPA recorded WIFIA fees collected as unearned revenue. When the EPA incurred $4,513,689 and
$2,057,300 in expenses related to the unearned revenue in fiscal years 2021 and 2020, respectively, it
did not properly recognize earned revenue. The EPA must recognize revenue from fees collected when
WIFIA fee fund expenses are incurred. These errors occurred because the EPA did not establish the
correct accounting model to properly decrease unearned revenue and increase earned revenue when
expenses are made. When the EPA does not use the proper accounting model, such as for recognizing
revenue when funds are expensed, the financial statements could be materially misstated.
Recommendations
We recommend that the chief financial officer:
2. Update the Water Infrastructure Finance and Innovation Act accounting model to properly
recognize earned revenue and unearned revenue as fee fund expenses are incurred.
3. Reclassify unearned revenue to earned revenue for Water Infrastructure Finance and Innovation
Act fee fund expenses incurred during fiscal years 2021 and 2020.
Agency Response and OIG Assessment
The Agency agreed with our findings and recommendations and has completed the corrective actions.
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3 - Accounts Receivable Source Documentation Not
Provided Timely by Regions
EPA regions did not timely submit supporting source documents to the CFC for over $50.7 million in
accounts receivable, which then delayed recording and processing those receivables. In one case,
Region 2 submitted receivable documentation over six months after the consent decree for that case
was effective. In another case, Region 9 did not timely submit documentation for three receivables
totaling approximately $8.1 million. As a result, the CFC did not record these four receivables in the
proper fiscal year. EPA policies state that responsible offices must forward to the CFC source documents
supporting an accounts receivable for settlements or orders demonstrating a debt owed to the Agency
within five business days as specified in the applicable EPA Resource Management directives. The
regional program office, the office of regional counsel, and the regional legal enforcement office staff
are responsible for providing these documents to the CFC. When the CFC is unable to create receivables
timely, the debtor may not be billed appropriately, interest may not accrue, and the EPA may not collect
all that it is owed. Furthermore, the EPA's delayed recording of accounts receivable could result in a
material misstatement of the financial statements.
According to the U.S. Government Accountability Office's Standards for Internal Control in the Federal
Government, transactions should be "promptly recorded to maintain their relevance and value to
management in controlling operations and making decisions." Statement of Federal Financial
Accounting Standards 1, Accounting for Selected Assets and Liabilities, requires that a receivable "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, (e.g., taxes not received by the date they are
due), or goods or services provided." Statement of Federal Financial Accounting Standards 7, Accounting
for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial
Accounting, requires that accounts receivable be recognized "when a collecting entity establishes a
specifically identifiable, legally enforceable claim to cash or other assets through its established
assessment processes to the extent the amount is measurable."
The EPA's Resource Management Directive System 2550D-14-P1, Financial Management of the
Superfund Program, Superfund Accounts Receivable and Billings, requires the office of regional counsel,
the legal enforcement office, or the regional program office, as applicable, to forward copies of all
signed administrative settlement agreements and EPA documents that formally assess stipulated
penalties within five business days of the effective date of the document. The office of regional counsel
or the legal enforcement office must forward copies of entered civil judgements, including consent
decrees, to the CFC within five business days of receipt of notice. The office of regional counsel or the
legal enforcement office must ensure that other source documents, such as Superfund State Contracts
or other official notices requiring payment, are forwarded to the CFC within five business days of final
signature.
Resource Management Directive System 2540-9-P3, Financial and Accounting Management,
Administrative and Civil Judicial Penalties, specifically addresses "the process for recognizing civil
penalties owed to the Agency resulting from administrative and civil judicial enforcement actions." The
directive requires that the originating office ensure documentation of administrative penalties and
bankruptcy proceedings are provided to the CFC within five business days of receipt of the order or
documentation. For regionally initiated administrative enforcement actions, the office of regional
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counsel or regional equivalent are to ensure that penalties are entered in the EPA Case Tracking System,
which automatically sends a request to the CFC to establish a billing document.
We found that EPA regional enforcement staff did not timely submit legal source documentation, such
as consent decrees and administrative orders, to the CFC for over $50.7 million in accounts receivable,
which then delayed recording and processing those receivables. The CFC received associated source
documents between one day and over six months after the due date. Table 3-1 provides a summary of
the relevant exceptions found throughout our audit.
Table 3-1: Summary of receivables support not recorded timely
OIG analysis
description
Number of
receivables
Number of
exceptions
Number of
business
days late
Amount
U.S. Department of Justice
report reconciliation
46
8
1 to 32 days
$28,287,715.00
Integrated Compliance
Information System report
reconciliation
71
1
69 days
$116,445.00
Superfund control
29
3
2 to 8 days
$11,785,762.16
Cut-off testing
4
4
4 to 138
days
$10,519,000.00
Total
150
16
$50,708,922.16
Source: OIG analysis of receivables tested. (EPA OIG table)
In one case, Region 2 submitted documentation for a $2.4 million receivable over six months after the
consent decree was effective. The regional enforcement staff sent the consent decree in October 2021,
outside of the proper accounting period. That required the CFC to process a journal voucher, which is a
manual adjustment created by the OCFO to adjust for financial statement purposes, to correct the
understated accounts receivable in the fiscal year 2021 financial statements. In another case, Region 9
did not timely submit documentation for three receivables totaling approximately $8.1 million. As a
result, the CFC did not record these four receivables in the proper fiscal year.
The regional enforcement staff are required to effectively communicate with the finance center
regarding the status of settlement agreements to prevent untimely recording of accounts receivable.
When the CFC is unable to create receivables timely, the debtor may not be billed appropriately,
interest may not accrue, and the EPA may not collect all that it is owed. Furthermore, the EPA's delayed
recording of accounts receivable could result in a material misstatement of the financial statements. The
EPA has policies and procedures in place to direct the regions to provide documents timely. The
frequency of the delays indicates that the regions are not adhering to those policies and procedures.
Therefore, we believe that regional offices should work with the CFC to resolve this control issue.
Recommendations
We recommend that the assistant administrator for Enforcement and Compliance Assurance:
4. Enforce the existing policies and procedures, which includes forwarding accounts receivable
source documents to the Cincinnati Finance Center, in accordance with the time frame provided
in the applicable resource management directives.
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5. Implement a system that tracks the dates when accounts receivable source documents need to
be submitted and are submitted by the Office of Enforcement and Compliance Assurance to the
Cincinnati Finance Center.
We recommend that the chief financial officer:
6. Record the three receivables totaling approximately $8.1 million in the fiscal year 2021 financial
statements.
Agency Response and OIG Assessment
The Agency agreed with our recommendations and has proposed ongoing corrective actions.
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4 - Office of the Chief Financial Officer Needs to
Conduct Periodic Reviews of Users' Accounts Within
EPA's Contract Payment System
The OCFO has not conducted periodic reviews of user accounts within the EPA's Contract Payment
System. The system reports and tracks contract payments and uploads the accounting data associated
with the payments into the EPA's core financial system. EPA users, such as contract officers, project
officers, and alternate project officers, have access rights in the Contract Payment System to enter,
approve, and disapprove contract invoices.
The EPA's information security procedure—CIO 2150-P-01.2, Information Security - Access Control
Procedure—requires system owners of EPA-operated systems to conduct periodic reviews of user
accounts and disable, remove, or terminate the accounts, as appropriate. However, the OCFO lacks a
strategy to conduct these required reviews to verify users' access and prevent unauthorized access to
sensitive financial data.
In addition, CIO 2150-P-04.2, Information Security - Security Assessment and Authorization Procedures,
requires system owners of EPA-operated systems to ensure that service providers:
• Document and manage discovered weaknesses and planned remedial actions by entering a Plan
of Action and Milestones into the Agency Information Security Repository within:
o 30 days of when the risk is determined to be "high," and the weakness cannot be or is
not remediated or mitigated within 30 days of discovery.
o 60 days of when the risk is determined to be "medium," and the weakness cannot be or
is not corrected within 60 days of discovery.
o 90 days of when the risk is determined to be "low," and the weakness cannot be or is
not corrected within 90 days of discovery.
• Document a senior information official or risk executive's decision to accept a weakness in a
Plan of Action and Milestones.
The OCFO commented that it has not conducted periodic reviews of user accounts within the Contract
Payment System because of other priorities and limited resources.
Not conducting these required reviews exposes the EPA to operational risks that could jeopardize the
confidentiality, integrity, and availability of financial data and access to the system. Unauthorized
personnel could expose the Contract Payment System to unidentified threats and vulnerabilities that
could put the system and the information it processes, stores, or transmits at risk of being disclosed,
modified, or destroyed.
We issued a discussion document on September 8, 2021, with proposed recommendations to develop a
strategy to conduct user account reviews and create a Plan of Action and Milestones to document the
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decision to either mitigate or accept the risk of not conducting periodic reviews of user accounts. In the
OCFO's response dated September 29, 2021, it provided the OIG with its User Access Control
Management Plan, which outlines activities to complete the required user account reviews within the
Contract Payment System by December 31, 2021.
Recommendation
We recommend that the chief financial officer:
7. Complete the review of user accounts within the Contract Payment System as outlined in the
Office of the Chief Financial Officer User Access Control Management Plan by the planned
milestone. If all the activities are not completed by that date, the Office of the Chief Financial
Officer should create a Plan of Action and Milestones within the Agency Information Security
Repository in accordance with the requirements described in CIO 2150-P-04.2, Information
Security - Security Assessment and Authorization Procedures.
Agency Response and OIG Assessment
The Agency concurred with the recommendation and provided documentation that all corrective actions
were completed on November 9, 2021. The OIG concurs with the actions taken and considers
Recommendation 7 complete.
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Attachment 2
Compliance with Laws and Regulations
Table of Contents
5 EPA Did Not Comply with OMB Circular A-136 17
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5 - EPA Did Not Comply with OMB Circular A-136
We found that the EPA did not comply with the required form and content on its fiscal year 2021
balance sheet. The OMB requires agencies to use line titles and the format detailed in its Circular A-136,
Financial Reporting Requirements, dated August 10, 2021. The EPA did not revise the line titles and
format of its balance sheet to meet the requirements. As a result, the EPA did not comply with federal
financial reporting requirements.
Circular A-136, which is updated annually, sets forth financial reporting requirements for federal
agencies that must submit annual audited financial statements. Section 11.3.2.2, "Balance Sheet
Template," states that entities must use the asset and liability line titles on the numbered lines shown in
the balance sheet template provided in that section. It also states that the "commitments and
contingencies" line should not contain balance amounts and should only be included as a heading to
direct readers to the applicable financial statement footnote. Section 11.3.2.3 states that under federal
accounting standards, stewardship land information is classified as basic information, requiring the
balance sheet to include a reference to a note disclosure.
Based on our preliminary examination of the balance sheet, we found that the EPA did not use the
required titles for certain asset and liability lines. The differences are detailed in Table 5-1.
Table 5-1: Differences between EPA's balance sheet and Circular A-136 balance sheet template
Circular A-136 balance sheet line title I
I EPA's balance sheet line title
Assets - Intragovernmental:
6. Other Assets
Other
10. Loans receivable, net
Direct Loans Receivable, Net
Assets-With the Public:
17. Other Assets
Other
Liabilities-lntragovernmental:
22. Accounts payable
Accounts Payable and Accrued Liabilities
24. Debt
Debt Associated With Loans
Not in Circular A-136
Custodial Liability
26. Other Liabilities
Other
Liabilities-With the Public:
28. Accounts payable
Accounts payable and Accrued Liabilities
30. Federal employee [and veteran] benefits payable
Pensions and Other Actuarial Liabilities
31. Environmental and disposal liabilities
Environmental Cleanup Costs
Not in Circular A-136
Cashout Advances, Superfund
32. Benefits due and payable
Payroll and Benefits Payable
37. Other Liabilities
Other
Source: OIG analysis of EPA data and OMB Circular A-136, section II.3.2.2, "Balance Sheet Template."
(EPA OIG table)
We also found that the EPA erroneously included the commitments and contingencies line under the
liabilities section. The line should have been included as a heading below the "Total liabilities" line. In
addition, the EPA did not include in its balance sheet the "Stewardship PP&E" heading to direct the
reader to the applicable financial statement footnote. The EPA did not follow the prescribed template
22-F-0007
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for the net position section of the balance sheet. Figures 5-1 and 5-2 demonstrate the differences
between the EPA's and Circular A-136's net position section.
Figure 5-1: Line titles for the net position section of the balance sheet according to
Circular A-136's template
Net Position:
41.1 Unexpended Appropriations-Funds from Dedicated Collections (Note 20}
41.2 Unexpended Appropriations-Funds from Other than Dedicated Collections
41. Total Unexpended Appropriations {Combined or Consolidated)
42.1 Cumulative Results of Operations-Funds from Dedicated Collections (Note 20)
42.2 Cumulative Results of Operations-Funds from other than Dedicated Collections
42. Total Cumulative Results of Operations (Combined or Consolidated)
43. Total net position
Source: OMB Circular A-136, section II.3.2.2, "Balance Sheet Template." (OMB image)
Figure 5-2: Line titles on the net position section of EPA's balance sheet
NET POSITION
VnexpiKlrd App-.vjrumccr, - Fxii: fron: De:b: -,:e-:l Collection:-
C\uii\iisi:ive?.ev.ii::- e: -Fui:d-> icon Dsdic?.:s-i C cllecnojis
Total 'Net Position - Fumis from Dedicated Collections (Note li)
Yne'iu^xl-rd Appoprunc-a: - .-Ji 0:l:er riuidv
CuLnuliihtive p.?:dt; o: Oper.-:ioiiv - All F\m;l:
Total Net Position - Otter Finds
Total Xet Position
Source: EPA's fiscal year 2021 balance sheet. (EPA image)
The EPA was aware that the circular included a new format required for the balance sheet. The circular
was updated on August 27, 2020, to streamline reporting requirements and reflect current federal
generally accepted accounting principles. This update introduced new form and content for the balance
sheet for which early adoption was allowed. All entities are required to follow the new format in
preparing their fiscal year 2021 financial statements. The EPA followed its prior-year balance sheet form
and content without making the appropriate revisions to comply with Circular A-136's new format
requirements. By not complying with reporting requirements, the EPA undermines the trust and
reliability of its financial statements.
Recommendation
We recommend that the chief financial officer:
8. Update the fiscal year 2021 financial statements to comply with Office of Management and
Budget's Circular A-136, specifically, the balance sheet line items.
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Agency Response and OIG Assessment
The EPA concurred with our recommendation and completed most of the Circular A-136 form and
content issues. However, we noted several uncorrected line items in the balance sheet, which consists
mostly of account groupings. The amounts are not material to the overall financial statements. The
Agency's response can be found in Appendix II.
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Attachment 3
Status of Prior Audit Report Recommendations
The EPA continues to strengthen its audit management practices and procedures to address audit
findings in a timely manner and to complete corrective actions expeditiously and effectively. In fiscal
year 2021, the EPA's chief financial officer, as the agency follow-up official, continued to encourage
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 OCFO
accomplished the following actions to strengthen its audit management procedures:
• Worked closely with the agency audit follow-up coordinators during fiscal year 2021 to
ensure that corrective action dates were being met and the required certification
memorandums were being submitted.
• Provided monthly reporting for the agencywide metric on the number of late audit
corrective actions. The metric measures the completion of Agency-identified corrective
actions that were not completed in a timely manner. The intended purpose of the monthly
reporting is to facilitate the implementation of Agency corrective actions to OIG audit
recommendations and decrease the number of late audit corrective actions.
• Launched a new audit tracking tool—called the Enterprise Audit Management System—for
tracking OIG and Government Accountability Office audits and evaluations. The Enterprise
Audit Management System facilitates the tracking and reporting of the Agency's corrective
actions.
• Prepared a monthly OIG and Government Accountability Office tracker intended to provide
Agency senior leadership with visibility on OIG and Government Accountability Office
audits and evaluations. The tracker includes the most recent audit and evaluation updates
and is distributed monthly to Agency senior leaders.
• Maintained the audit community intranet site, which serves as a one-stop-shop resource
for the audit follow-up coordinators and liaisons. This collaborative site includes resources
and reference materials, such as standard operating procedures, response templates,
frequently asked questions, reporting links, deadlines, and other useful information.
• Provided training during the OCFO technical training series on the Agency's audit and
evaluation processes. The training provided an overview of the audit follow-up
coordinator's roles and responsibilities and emphasized the importance of preparing
effective corrective actions and completing them in a timely manner.
• Held periodic meetings with audit follow-up coordinators and audit liaisons to discuss issues
and concerns and to emphasize adherence to corrective action due dates and the need to keep
the Enterprise Audit Management System current.
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These and other efforts are a testament to the OCFO's continued commitment to improving the Agency's
audit and evaluation management practices. In addition, the EPA maintained its commitment to engage
early with the OIG on audit and evaluation findings and to develop effective corrective actions that
address OIG recommendations.
As noted in the table below, however, there are still recommendations from previous financial
statement audits that remain either unresolved or unimplemented.
Table 3-1: Significant deficiency issues not fully implemented
EPA Did Not Capitalize Lab Renovation Costs
During our fiscal year 2014 audit, we found that 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. We recommended that the chief financial officer capitalize and book the Research Triangle Park lab
renovation costs and calculate depreciation; improve and maintain support for how EPA lab renovation projects are
funded; review funding sources of all current and future lab renovations to ensure correct funding is utilized;
develop policies and procedures for capital improvements/betterments to real property, and request the Office of
General Counsel to determine whether the legal opinion represents a legally acceptable position regarding the
definition of "construction" and to provide adequate examples to guide determinations of when renovation work
should be funded out of Agency programs.
One corrective action was partially completed: the EPA's Office of General Counsel indicated continued agreement
with its 1999 legal opinion regarding EPA construction accounting but did not provide examples to guide the
Agency's determinations of when renovation work should be funded from Agency program appropriations or
building and facilities funds.
Corrective actions for other recommendations related to this finding were initially due in September 2017; however,
the Agency revised the estimated milestone date to February 28, 2018. On July 18, 2018, the Office of General
Counsel stated that determining whether renovation work should be funded out of program Agency dollars or
buildings and facilities funds is very fact-specific; therefore, providing global examples was not feasible. The Office
of General Counsel has no further information to provide and believes its review is complete. The OIG will continue
to report the issue as not fully resolved.
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to the
Finance Center
During our fiscal year 2014, we found that the EPA and the U.S. Department of Justice did not forward accounts
receivable source documents to the CFC in a timely manner. We recommended that the assistant administrator for
Enforcement and Compliance Assurance require enforcement officers to include the CFC on the stipulated penalty
letters mailing list; remind personnel to timely forward legal documents, and work with the Department of Justice to
ensure timely document submission.
We also recommended that the chief financial officer work with the Office of Enforcement and Compliance
Assurance to update EPA Superfund guidance to ensure timely submission of Superfund accounts receivable
control forms to the finance center. Finally, we recommended that the deputy assistant administrator for
Administration and Resources Management, under the Office of Mission Support, require the Office of Grants and
Debarment to instruct personnel to forward source documents for grant disallowed costs timely to the finance
center.
During fiscal year 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 CFC's timely receipt of legal documents, we still identified
instances of untimely receipt during fiscal years 2015 through 2021. 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 fiscal year 2022.
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EPA Should Improve Its Efforts to Resolve Long-Standing Cash Differences with Treasury
During our fiscal year 2018 audit, we found that the EPA had not resolved $2.2 million in long-standing cash
differences between the EPA's and Treasury's 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. We continued to find recurring
differences in fiscal years 2020 and 2021. Therefore, we do not consider the corrective actions complete.
EPA Improperly Recorded e-Manifest Receivables and Earned Revenue
During our fiscal year 2019 audit, the EPA did not properly record $15,682,808 of e-Manifest receivables. 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.
We recommended that the chief financial officer update the accounting models to properly record collections and
not reduce an account receivable account; establish accounting models to properly record e-Manifest account
receivables and recognize earned revenue at the transaction level; establish accounting models to properly classify
and record interest, fines, penalties, and fees; and establish accounting models to properly record receivables,
collections, and earned revenue from federal versus nonfederal vendors. The corrective actions have not been
completed as of our fiscal year 2021 audit. The EPA's estimated completion date for corrective actions was
originally September 30, 2021; subsequently, the EPA revised the estimated completion date to March 31, 2022.
EPA Needs to Improve Its Financial Statement Preparation Process
During our fiscal year 2019 audit, we found multiple instances whereby the Agency had major misstatements of its
financial transactions and financial statements. We recommended that the chief financial officer evaluate and
improve the EPA's process for preparing financial statements and provide accurate and reliable supporting
documentation for adjustments and corrections to the financial statements. The EPA agreed with our findings and
recommendations. The Agency's estimated completion date for corrective actions was originally July 31, 2020, for
Recommendation 1; subsequently, the EPA revised its estimated completion date to September 30, 2021. The
EPA's estimated completion date for Recommendation 2 was February 29, 2020. During fiscal year 2020, we
continued to find misstatements and adjustment errors in the EPA's financial statement preparation process. We
recommended that the chief financial officer develop a plan to strengthen and improve the preparation and
management review of the financial statements and adjustments entered into the accounting system so that errors
and misstatements are detected and corrected in a timely manner. The EPA's estimated planned completion date
for our fiscal year 2020 recommendation is December 31, 2021.
Source: OIG analysis of prior year recommendations and the Agency's corrective actions. (EPA OIG table)
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Attachment 4
Status of Recommendations
RECOMMENDATIONS
Rec.
No.
No.
Subject
Status1
Action Official
Planned Completion Date
Potential
Monetary
Benefits
(in $000s)
9 Timely reconcile EPA cash differences with the U.S.
Department of the Treasury.
10 Update the Water Infrastructure Finance and
Innovation Act accounting model to properly
recognize earned revenue and unearned revenue as
fee fund expenses are incurred.
10 Reclassify unearned revenue to earned revenue for
Water Infrastructure Finance and Innovation Act fee
fund expenses incurred during fiscal years 2021 and
2020.
12 Enforce the existing policies and procedures, which
includes forwarding accounts receivable source
documents to the Cincinnati Finance Center, in
accordance with the time frame provided in the
applicable resource management directives.
13 Implement a system that tracks the dates when
accounts receivable source documents need to be
submitted and are submitted by the Office of
Enforcement and Compliance Assurance to the
Cincinnati Finance Center.
13 Record the three receivables totaling approximately
$8.1 million in the fiscal year 2021 financial
statements.
15 Complete the review of user accounts within the
Contract Payment System as outlined in the Office of
the Chief Financial Officer User Access Control
Management Plan by the planned milestone. If all
the activities are not completed by that date, the
Office of the Chief Financial Officer should create a
Plan of Action and Milestones within the Agency
Information Security Repository in accordance with
the requirements described in CIO 2150-P-04.2,
Information Security - Security Assessment and
Authorization Procedures.
18 Update the fiscal year 2021 financial statements to
comply with Office of Management and Budget's
Circular A-136, specifically, the balance sheet line
items.
Chief Financial Officer
Chief Financial Officer
Chief Financial Officer
Assistant Administrator
for Enforcement and
Compliance Assurance
Assistant Administrator
for Enforcement and
Compliance Assurance
Chief Financial Officer
Chief Financial Officer
9/30/22
10/27/21
10/15/21
11/4/21
11/9/21
$8,100
Chief Financial Officer
11/4/21
1 C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
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Appendix I
EPA's FYs 2021 and 2020 (Restated) Consolidated
Financial Statements
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EPA's Fiscal Year 2021 and 2020
Consolidated Financial Statements (With Restatement)
Financial Section
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Table of Contents
Principal Financial Statements 3
Notes to Financial Statements 10
Note 1. Summary of Significant Accounting Policies 10-17
Note 2. Fund Balance with Treasury (FBWT) 17 - 18
Note 3. Cash and Other Monetary Assets 18
Note 4. Investments, Net 18
Note 5. Accounts Receivable, Net (Restated) 19
Note 6. Other Assets 19
Note 7. Loans Receivable, Net 19 - 21
Note 8. Accounts Payable (Restated) 22
Note 9. General Property, Plant and Equipment, Net 22-24
Note 10. Debt . 24
Note 11. Stewardship Property, Plant and Equipment 25
Note 12. Liability to the General Fund for Custodial Assets 25
Note 13. Other Liabilities 26 - 27
Note 14. Leases 27-28
Note 15. Other Deferred Revenue 28
Note 16. Commitments and Contingencies 28 - 30
Note 17. Funds from Dedicated Collections (Unaudited) (Restated) 31 - 33
Note 18. Environmental and Disposal Liabilities 34
Note 19. State Credits 34 - 35
Note 20. Preauthorized Mixed Funding As^eements 35
Note 21. Custodial Revenues and Accounts Receivable 35
Note 22. Reconciliation of President's Budget to the Statement of Budgetary Resources 35
Note 23. Recoveries and Resources Not Available, Statement of Budgetary Resources 36
Note 24. Unobligated Balances Available 36
Note 25. Undelivered Orders at the End of the Period 37
Note 26. Offsetting Receipts 37
Note 27. Transfers-In and Out, Statement of Changes in Net Position 37 - 38
Note 28. Imputed Financing (Restated) 38
Note 29. Federal Employee Benefits Payable 39
Note 30. Other Adjustments, Statement of Changes in Net Position 39
Note 31. Non-Exchange Revenue, Statement of Changes in Net Position 40
Note 32. Reconciliation of Net Cost of Operations to Net Outlays (Restated) 41 - 43
Note 33. Amounts Held by Treasury (Unaudited) 44 - 47
Note 34. COVID-19 Activity 47
Note 35. Reclassified Financial Statements for Government-wide Reporting 48 - 52
Note 36. Restatement 52
Required Supplementary Information (Unaudited) ,53 - 56
Deferred Maintenance 53
Supplemental Statement of Budgetary Resources 56
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Principal Financial Statements
United States Environmental Protection Agency
Consolidated Balance Sheet
As of September 30, 2021 and 2020 (Restated)
(Dollars in Thousands)
Restated
2021 2020
ASSETS
Intragovemmental:
Fund Balance With Treasury (Note 2) $ 11,778,430 $ 10,823,112
Investments, Net (Note 4) 6,155,838 5,969,666
Accounts Receivable, Net (Restated) (Note 5 and 36) 7,602 28,001
Advances and Prepayments 245.934 198.268
Total Intragovemmental 18.187.804 17.019.047
With the Public:
Cash and Other Monetary Assets (Note 3) 10 10
Accounts Receivable, Net (Restated) (Note 5 and 36) 580,736 503,725
Loans Receivable, Net (Note 7) 586,138 196,470
General Property, Plant and Equipment, Net (Note 9) 670,637 659,668
Other Assets (Note 6) 7.726 8.209
Total With the Public: 1.845.247 1.368.082
Total Assets S 20.033.051 S 18.387.129
Stewardship Property Plant and Equipment (Note 11)
LIABILITIES
Intragovemmental:
Accounts Payable (Restated) (Note 8 and 36) S 151,102 S 127,139
Debt (Note 10) 746,839 221,652
Advances from Others and Deferred Revenue 154,235 102,699
Other Liabilities
Liability to the General Fund for Custodial Assets (Note 12) 51,241 72,018
Other (Note 13) 60.827 55.084
Total Intragovemmental 1.164.244 578.592
With the Public:
Accounts Payable (Note 8) 56,319 52,696
Federal Employee Benefits Payable (Note 29) 232,635 235,230
Environmental and Disposal Liabilities (Note 18) 25,723 38,383
Advances from Others and Deferred Revenue 125,526 141,368
Other Liabilities
Deferred Revenue (Note 15) 3,476,737 3,472,784
Other (Note 13) 618.667 '550.719
Total With the Public: 4.535.607 4.491.180
Total Liabilities $ 5.699.851 S 5.069.772
Commitments and Contingencies (Note 16)
NET POSITION
LInexpended Appropriations - Funds from Dedicated Collections (Note 17) S 187 S (189)
Unexpended Appropriations - Funds from Other than Dedicated Collections 10.400.345 9.600.037
Total LInexpended Appropriations 10,400,532 9,599,848
Cumulative Results of Operations - Funds from Dedicated Collections
(Note 17) 3,551,640 3,307,079
Cumulative Results of Operations - Funds from Other than Dedicated Collections 381.028 410.430
Total Cumulative Results of Operations 3.932.668 3.717.509
Total Net Position 14.333.200 13.317.357
Total Liabilites and Net Position S 20.033.051 S 18.387.129
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 Kndin« September 30, 2021 and 2020
(Dollars in Thousands)
(Restated)
2021 2020
COSTS
Gross Costs (Note 36)
$
9,138,699 S
9,422,484
Earned Revenue
555.481
514.164
NET COST OF OPERATIONS (Note 32 and 36)
$
8.583.218 $
8.908.320
The accompanying notes are an integral part of these financial statements.
4.
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United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Year Ending September 30, 2021
(Dollars in Thousands)
Environmental
Programs &
Management
Leaking
Underground
Storage Tanks
Science &
Technology
Superfund
State &
Tribal
.Assistance
Agreements
Other
Totals
Costs:
Gross Costs
WCF Elimination
$ 2,820,994
$ 86,157
$ 765,510
$1,364,410
$3,710,627
$ 698,694
(301.693)
$ 9,446,392
(307.6931
Total Costs
2.820.994
86.157
765.510
1.364.410
3.710.627
391.001
9.138.699
Less:
Earned Revenue
WCF Elimination
79,315
-
5,001
295,471
-
483,387
(307.6931
863,174
(307.6931
Total Earned Revenue
79.315
5.001
295.471
_
175.694
555.481
NET COST OF
OPERATIONS
$ 2.741.679
S 86.157
S 760.509
$ 1.068.939
S 3.710.627
$ 215.307
$8,583,218
United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Year Ending September 30, 2020 (Restated)
(Dollars in Thousands)
State &
Environmental
Programs &
Management
Leaking
Underground
Storage Tanks
Science &
Technology
Superfund
Tribal
Assistance
Agreements
Other
Totals
Costs:
Gross Costs (Note 36)
WCF Elimination
$ 2,793,833
$ 97,770
$ 721,616
$ 1,520,983
$ 3,999,283
$ 563,190
(274.1911
$ 9,696,675
(274.1911
Total Costs
2.793.833
97.770
721.616
1.520.983
3.999.283
288.999
9.422.484
Less:
Earned Revenue
WCF Elimination
26,615
-
6,978
362,342
-
392,420
(274.1911
788,355
(274.1911
Total Earned Revenue
26.615
_
6.978
362.342
_
118.229
514.164
NET COST OF
OPERATIONS
$ 2.767.218
$ 97.770
$ 714.638
$ 1.158.641
$3,999,283
$ 170.770
$8,908,320
The accompanying notes are an integral part of these financial statements.
5.
22-F-0007
29
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United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position
For the Fiscal Year Ending September 30, 2021
(Dollars in Thousands)
Funds from
Dedicated
Collections
Funds from
Other than
Dedicated
Collections
Consolidated
Total
Cumulative Results of Operations:
Net Position - Beginning of Period
$ 3,307,079
S 410,430
$ 3,717,509
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 31)
Nonexchange Revenue - Other (Note 31)
Transfers In/Out
Trust Fund Appropriations
(376)
6,421
270,567
(72,312)
1.153.462
8,351,063
70,871
(1.153.462)
8,350,687
6,421
270,567
(1,441)
Total Budgetary Financing Sources
1,357,762
7,268,472
8,626,234
Other Financing Sources (Non-Exchange)
Imputed Financing Sources (Note 28)
Other Financing Sources
26,006
769
146,137
(769)
172,143
Total Other Financing Sources
26,775
145,368
172,143
Net Cost of Operations
$ (1,139,976)
$ (7,443,242)
$ (8,583,218)
Net Change
244.561
(29.402)
215.159
Cumulative Results of Operations
$ 3.551.640
S 381.028
$ 3.932.668
Funds from
Dedicated
Collections
Funds from
Other than
Dedicated
Collections
Consolidated
Total
Unexpended Appropriations:
Net Position - Beginning of Period
$ (189)
S 9,600,037
$ 9,599,848
Budgetary Financing Sources:
Appropriations Received
Other Adjustments (Note 30)
Appropriations Used
Total Budgetary Financing Sources
376
376
9,200,494
(49,123)
(8.351.063)
800,308
9,200,494
(49,123)
(8.350.687)
800,684
Total Unexpended Appropriations
187
10,400,345
10.400.532
TOTAL NET POSITION
$ 3.551.827
$ 10.781.373
$ 14.333.200
The accompanying notes are an integral part of these financial statements.
22-F-0007
30
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United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position (Restated)
For the Fiscal Year Ending September 30, 2020
(Dollars in Thousands)
Funds from
Funds from
Dedicated
Collections
Other than
Dedicated
Collections
Consolidated
Total
Cumulative Results of Operations:
Net Position - Beginning of Period
$ 3,170,594
S 497,399
$ 3,667,993
Budgetary Financing Sources:
Other Adjustments
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 31)
Nonexchange Revenue - Other (Note 31)
Transfers In/Out
Transfers In/Out - Nonmonetary
Trust Fund Appropriations
(1,072)
(3)
90,116
239,795
(26,636)
544
1.076.535
8,458,703
47,609
(325)
(1.076.535}
(1,072)
8,458,700
90,116
239,795
20,973
219
Total Budgetary Financing Sources
1,379,279
7,429,452
8,808,731
Other Financing Sources (Non-Exchange)
Imputed Financing Sources (Note 28 and 36)
Other Financing Sources
24,250
415
124,855
(415)
149,105
Total Other Financing Sources
24,665
124,440
149,105
Net Cost of Operations
$ (1,267,459)
S (7,640,861)
S (8,908,320)
Net Change
136.485
(86.969}
49.516
Cumulative Results of Operations
$ 3.307.079
S 410.430
$ 3.717.509
Funds from
Dedicated
Collections
Funds from
Other than
Dedicated
Collections
Consolidated
Total
Unexpended Appropriations:
Net Position - Beginning of Period
S (1,264)
S 8,929,585
$ 8,928,321
Budgetary Financing Sources:
Appropriations Received
Other Adjustments (Note 30)
Appropriations Used
1,072
3
9,148,119
(18,964)
(8.458.703)
9,148,119
(17,892)
(8.458.700)
Total Budgetary Financing Sources
1,075
670,452
671,527
Total Unexpended Appropriations
(189)
9.600.037
9.599.848
TOTAL NET POSITION
$ 3.306.890
S 10.010.467
$ 13.317.357
The accompanying notes are an integral part of these financial statements.
22-F-0007
31
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United States Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Fiscal Years Ending September 30, 2021 and 2020
(Dollars in Thousands)
2021
2020
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget
Authority, Net (discretionary and mandatory)
(Note 23)
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority (discretionaiy and mandatoiy)
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): (Note 24)
Total Status of Budgetary Resources
OUTLAYS, NET AND DISBURSEMENTS, NET
Outlays, Net (total) (discretionary and mandatory) $ 9,852,094
Distributed Offsetting Receipts (-) (Note 26) n.481.4111
Agency Outlays, Net (discretionary and mandatory) S 8.370.683
Disbursements, Net (total) (mandatoiy)
Non-
Non-
Budgetary
Budgetary
Credit Reform
Credit Reform
Financing
Financing
Budaetarv
Account
Budaetarv
Account
; 5,951,313
$ 615,240
S 5,808,190
$ 20,914
10,832,321
_
10,737,950
_
-
4,726,214
-
3,576,684
463.239
141.081
398.507
5.805
; 17.246.873
$ 5.482.535
$ 16.944.647
$ 3.603.403
; 11,874,288
$ 5,482,535
S 11,304,380
$ 2,988,163
5,279,575
5,446,701
615,240
1,996
-
4,562
-
91.014
.
189.004
.
5.372.585
-
5.640.267
615.240
; 17.246.873
$ 5.482.535
S 16.944.647
$ 3.603.403
$ 10,092,803
(1.369.3961
S 8.723.407
494.357
221.381
The accompanying notes are an integral part of these financial statements.
22-F-0007
32
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United States Environmental Protection Agency
Statement of Custodial Activity
For the Fiscal Years Kndiii« September 30, 2021 and 2020
(Dollars in Thousands)
2021
2020
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
S 41,035 $
171,950
Other
22.085
(16.486>
Total Cash Collections
63,120
155,464
Accrual Adjustment
(20.623>
13.714
Total Custodial Revenue (Note 21)
$ 42.497 S
169.178
Disposition of Collections:
Transferred to Others (General Fund)
S 21,273 $
155,055
Increases/Decreases in Amounts to be Transferred
21.224
14.123
Total Disposition of Collections
$ 42.497 $
169.178
Net Custodial Revenue Activity
S - $
-
The accompanying notes are an integral part of these financial statements.
9.
22-F-0007
33
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(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 2021 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-136,
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 cany 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 (e-Manifest) to recover the full cost of providing the hazardous
waste electronic manifest fund system related services.
The EPA receives two-year appropriated funds to cany out the Frank R. Lautenberg Chemical Safety for the 21st
Century Act. Under the Act, the Agency is authorized to 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 Toxic
Substances Control Act Service Fee Fund (TSCA) implementation activities for existing chemicals.
The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) established a Federal credit program
administered by the EPA for eligible water and wastewater infrastructure projects. The program is financed from
appropria tions to cover the estima ted long-term cost of the loan. The long-term cost of the loans is defined as the net
present value of the estimated cash flows associated with the loans. A permanent indefinite appropriation is available
to finance the costs of re-estimated loans that occur in subsequent years after the loans are disbursed. The Agency
received two-year appropriations in fiscal years 2021 and 2020 to finance tire administrative portion of the program.
EPA re-estimates the risk on each individual loan annually, ftoceeds 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.
10.
22-F-0007
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 Reregistration and Expedited Processing Fund (FIFRA) and Hazardous Waste Electronic Manifest
System Fund (e-Manifest) 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 OK/IB for funds received for critical damage assessments and restoration of natural resources injured as a
result of the Deepwater Horizon oil spill.
III. Special Funds
The Environmental Services Receipts Account Fund obtains fees associated with environmental programs. The
Pesticide Registration Improvement Act Fund (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. The Toxic Substances Control Act Fund (TSCA) collects user fees to defray costs for new chemical reviews and
range of implementation activities for existing chemicals.
IV. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit accounts pending farther
disposition. Until a determination is made, these are not the EPA's funds. The amounts are reported to the U.S.
Treasury through the Government-Wide Treasury Account Symbol Adjusted Trial Balance System (GTAS).
V. Trust Funds
Congress enacts an annual appropriation for the Hazardous Substance Superfund, Leaking Underground Storage Tank
(LUST) and 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
Treasuiy 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
compri sed 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.
11.
22-F-0007
35
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 a
receiving (child) entity. Allocation transfers are legal delegations from one entity of its authority to obligate budget
authority and outlay funds to another entity. A separate fund account (allocation account) is created in the U.S.
Treasury as a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of
balances are credited to this account, and subsequent obligations and outlays incurred by the child entity are charged
to this allocation account as they execute the delegated activity on behalf of the parent entity. Generally, all financial
activity related to allocation transfers (e.g., budget authority, obligations, outlays) is reported in the financial
statements of the parent entity from which the underlying legislative authority, appropriations and budget
apportionments are derived. The EPA allocates funds, as the parent, to the Center for Disease Control. The
EPA receives allocation transfers, as the child, from the Bureau of Land Management.
D. Basis of Accounting
Generally Accepted Accounting 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,
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 operations 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.
12.
22-F-0007
36
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 operations and capital expenditures.
The WIFIA program receives additional funding to support awarding, servicing and collecting loans 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 and can obligate collections up to the amount of anticipated collections within the fiscal year on the approved
letter of apportionment The Hazardous Waste Electronic Manifest System Fund receives funding through fees
collected for use of the Hazardous Waste Electronic Manifest System and can obligate collections up to the amount of
anticipated collections on the approved letter of apportionment The Toxic Substances Control Act Fund (TSCA)
collects user fees to defray costs for new chemical reviews and arrange of implementation activities for existing
chemicals and can obligate collections up to the amount of anticipated collections on the approved letter of
apportionment. The WCF receives revenue through fees collected from the Agency program offices for services
provided. 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. (See Note 2.)
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 or premiums. Discounts or premiums 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.
13.
22-F-0007
37
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 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. (See Note 5.)
J. Advances and Prepayments
Advances and prepayments represent funds paid to other entities both internal and external to the Agency for which a
budgetary expenditure has not yet occurred.
K. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans receivable resulting from loans
obligated on or after October 1, 1991, are reduced by an 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 and Science and Technology
appropriations, remains in the respective Trust Funds managed by Treasury.
M. Property, Plant, and Equipment
The EPA accounts for its personal and real property accounting records in accordance with SFFAS No. 6, Accounting
for Property, Plant and Equipment as amended. For EPA-held property, the Fixed Assets Subsystem (FAS) maintains
the official records and automatically generates depreciation entries monthly based on in-service dates.
A purchase of EPA-held or contractor-held personal property is capitalized if it is valued at $25 thousand or more and
has an estimated useful life of at least two years. For contractor-held property, depreciation is taken on a modified
straight-line basis over a period of six years depreciating 10 percent the first and sixth year, and 20 percent in years
two through five. For contractor-held property, detailed records are maintained and accounted for in contractor
systems, not in EPA's FAS. Acquisitions of EPA-held personal property are depreciated using the straight-line method
over the specific asset's useful life, ranging from two to fifteen years.
Personal property includes capital leases. To be defined as a capital lease, a lease, at its inception, must have a lease
term of two or more years and the lower of the 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
14.
22-F-0007
38
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 a 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. This property is retained in EPA's FAS and 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 S150 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 ana lysis of the va lues 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 five 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, Debt
Debt payable to Treasury results from loans from Treasury to fund the non-subsidy portion of the WIFIA direct loans.
The Agency borrows the funds from Treasury when the loan disbursements agreed upon in the loan agreement are
made. Principal payments are made to Treasury periodically based on the collection of loan receivables. (See Note 10)
15.
22-F-0007
39
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
P. Accrued Unfunded Annual Leave
Annual, sick and other leave is expensed as taken during the fiscal year. Annual leave earned but not taken at the end
of the fiscal year is accrued as an unfunded liability. Accrued unfunded annual leave is included in the Balance Sheet
as a component of "Payroll and Benefits Payable." Sick leave earned but not taken is not accrued as a liability; it is
expensed as it is used.
Q. Retirement Plan
There are two primary retirement systems for federal employees. Employees hired prior to January 1, 1987, may
participate in the Civil Service Retirement System (CSRS). On January 1, 1987, the Federal Employees Retirement
System (FERS) went into effect pursuant to Public Law 99-335. Most employees hired after December 31, 1986, are
automatically covered by FERS and Social Security. Employees hired prior to January 1, 1987, elected to either join
FERS and Social Security or to 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.
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 British Petroleum (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 Natural Resource Damage Assessments (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 S184 thousand from BP and $2
million from the U.S. Coast Guard, to participate in addressing injured natural resources and seivice resulting from the
Deepwater Horizon Oil Spill. 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.
T. Use of Estimates
The preparation of financial statements requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabi lities, including environmental and grant liabilities, and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
16.
22-F-0007
40
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
U. 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 August 10, 2021. As a result the form and content of the Balance Sheet and
Statement of Changes in Net Position has changed to conform with OMB Circular No. A-136.
Note 2. Fund Balance With Treasury (FBWT)
Fund Balance with Treasury as September 30, 2021 and 2020 consists of the following;
2021 2020
Entity
Assets
Non-Entity
Assets Total
Entity
Assets
Non-Entity
Assets
Total
Trust Funds:
Superfund
S 138,254
$ - S 138,254
S 152,246
S
S 152,246
LUST
43,540
43,540
28,191
-
28,191
Oil Spill & Misc.
27,351
27,351
12,643
-
12,643
Revolving Funds:
FIFRA/Toleranee
38,362
38,362
52,574
-
52,574
Working Capital
109,800
109,800
87,215
-
87.215
E-Manifest
19,312
19,312
10,790
-
10,790
NRDA
2,161
2,161
1,916
-
1,916
WIFIA
30,837
30,837
6
-
6
Appropriated
10,798,706
10,798,706
9,936,774
-
9,936,774
Other Fund Types
566.449
3.658 570.107
535.447
5.310
540.757
Total
$ 11.774.772
S 3.658 $ 11.778.430
$ 10.817.802
$ 5.310
$ 10.823.112
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: 2021 2020
Unobligated Amounts in Fund Balance:
Available for Obligation S 5,278,005 $ 6,094,950
Unavailable for Obligation 97,541 191,669
Net Receivables from Invested Balances (5,055,979) (5,033,099)
Balances in Treasury Trust Fund (Note 33) 29,603 19,840
Obligated Balance not yet Disbursed 10,876,050 9,025,670
Non-Budgetary FBWT 553.210 524.082
Total $ 11.778.430 $ 10.823.112
17.
22-F-0007
41
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
The funds available for obligation may be apportioned by QMB for new obligations at the beginning of the following
fiscal year. Funds unavailable for obligation are mostly balances in expired funds, which are available only for
adjustments of existing obligations. For September 30, 2021 and 2020, no differences existed between Treasury's
accounts and the EPA's statements for fund balances with Treasury. See Note 1 paragraph F for additional
information.
Note 3. Cash and Other Monetary Assets
As of September 30, 2021 and 2020, the balance in the imprest fund was S10 thousand.
Note 4. Investments, Net
As of September 30, 2021 and 2020, investments related to Supeifund and LUST consist of the following:
Amortized
(Premium) Interest Investments, Market
Cost Discount Receivable Net Value
Intragovernmental Securities:
Non-Marketable FY 2021 $ 6,084,927 (64,613) 6,298 6,155,838 $ 6,155,838
Non-Marketable FY 2020 S 5,828,179 (135,189) 6,298 5,969,666 $ 5,969,666
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 17).
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. See Note 1 paragraphs G and H for additional information.
18.
22-F-0007
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 5. Accounts Receivable, Net (Restated)
Accounts Receivable as of September 30, 2021 and 2020, consist of the following:
Restated
2021 2020
Intr agovernm ent al:
Accounts & Interest Receivable
$
10,775
$
30,599
Less: Allowance for Uncollectible Accounts
(3.173}
(2.598)
Total
$
7.602
$
28.001
2021
2020
With the Public:
Unbilled Accounts Receivable
$
131,461
$
130.449
Accounts & Interest Receivable
2,664,810
2,556,734
Less: Allowance for Uncollectible Accounts
(2.215.535)
(2.183.458)
Total
$
580.736
$
503.725
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. See Note 1
paragraph I and Note 36 for additional information.
Note 6. Other Assets
Other Assets as September 30, 2021 and 2020, consist of the following:
2021
2020
With the Public:
Travel Advances
$ 73 $
77
Other Advances
7,225
7.844
Inventory Purchased for Resale
428
288
Total
$ 7.726 $
8.209
See Note 1 paragraph J for additional information.
Note 7. Loans Receivable, Net
Direct Loans Receivable disbursed from obligations made after FY 1991 are governed by the Federal Credit Reform
Act, which mandates that the present value of the subsidy costs (i.e., interest rate differentials, interest subsidies,
anticipated delinquencies, and defaults) associated with direct loans be recognized as a cost in the year the loan is
disbursed. The net loan present value is the gross loan receivable less the subsidy present value. EPA does not have
any loans obligated prior to 1992.
EPA administers the WIFIA Direct Loans program. In fiscal years 2021 and 2020, the Agency received borrowing
authority of $6.0 billion and $3.6 billion respectively for the non-subsidy portion of loan proceeds disbursed. The
cumulative loan limit for the WIFIA Loan Program through fiscal year 2021 is $41.1 billion. For the fiscal year ended
September 30, 2021 and 2020, the Agency closed $5.7 billion and $3.2 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,
2021 and 2020, the WIFIA program has incurred $38.2 and $9.7 million in administrative expenses, respectively.
19.
22-F-0007
43
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Obligated after FY 1991
2021 Loans
Receivable,
Direct Loan Program Gross
Interest and
Fees
Receivable
Foreclosed
Property/
Allowance
for
Loan Losses
Value of Assets
Allowance for Related to
Subsidy Direct
Cost Loans, Net
WIFIA $ 734,357
566
-
(148,785) S
586,138
2020 Loans
Receivable,
Direct Loan Program Gross
Interest
Receivable
Foreclosed
Property/
Allowance
for
Loan Losses
Value of Assets
Allowance for Related to
Subsidy Direct
Cost Loans, Net
WIFIA $ 220,970
"
~
(24,500) S
196,470
Total Amount of Direct Loans Disbursed (Post-1991)
Direct Loan Program 2021 2020
WIFIA $ 545,668
S 220,970
Subsidy Expense for Direct Loans by Program and Component
Subsidy Expense for New Direct Loans Disbursed
2021 Interest
Direct Loan Program Differential
Defaults
Fees and Other
Collections
Other Subsidy
Costs
Total
WIFIA $
-
-
(2,577) S
(2,577)
2020 Interest
Direct Loan Program Differential
Defaults
Fees and Other
Collections
Other Subsidy
Costs
Total
WIFIA $
-
-
(1,043) $
(1,043)
Modifications and Reestimates
Direct Loan Program
2021
Total
Modifications
Interest
Rate
Reestim ates
Technical
Reestimates
Total
Reestim ates
WIFIA
s
7,226
114,482 S
121,708
Direct Loan Program
2020
Total
Modifications
Interest
Rate
Reestimates
Technical
Reestimates
Total
Reestimates
WIFIA
S
-
(23,459) $
(23,459)
22-F-0007
44
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Total Direct Loans Subsidy Expense
Direct Loan Program 2021 2020
WIFIA $ 26,448 $ 1,043
Budget Subsidy Rates for Direct Loans for the Current Year Cohort
2021 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA -.03% 0.83% 0% 0% 0,80%
2020 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA 0% 0,75% 0% 0% 0.75%
The subsidy rates disclosed pertain to the current year's cohort. The rates cannot be applied to the direct loans
disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported
in the current year could result from disbursement of loans from both current year cohorts and prior year cohorts. The
subsidy expense reported in the current year also includes modifications and re-estimates.
2021
(24,500) S
(2.577) S_
(2,577)
(7,226)
(114.482) $_
(121.708)
(148.785) $_
2020
(1.043)
(1,043)
Schedule for Reconciling Subsidy Cost Allowance Balances
Beginning Balance, Changes and Ending Balance
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 Collections
Other Subsidy Costs
Total of the Above Subsidy Expense Components
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
The economic assumptions of the WIF'IA 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 2021 loan disbursements
were higher than the interest rate assumptions used during the budget formulation process at loan origination. See
Note 1 paragraph K for additional information.
(23.459)
(23.459)
(24.500)
21.
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45
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 8. Accounts Payable (Restated)
The Accounts Payable are current liabilities and consist of the following amounts as of September 30, 2021
and 2020:
Restated
2021 2020
Intr agovernm ental:
Accounts Payable
$
3,367 $
3,216
Accrued Liabilities
144,640
121,142
Capital Lease Liabilities
2,325
2,369
Direct Loans Subsidy Liabilities
770
412
Total
s
151.102 $
127.139
2021
2020
With the Public:
Accounts Payable
$
56,306 S
52,693
Advances Payable
(2)
(2)
Interest Payable
15
5
Total
s
56.319 $
52.696
See Note 36 for additional information.
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. See Note 1 paragraph M for additional information.
As of September 30, 2021, General PP&E Cost consisted of the following:
2021
EPA-
Held
Eauinment
Software
(production1)
Software
(development)
Contractor
Held
Equipment
Land
and
Buildinss
Capital
Leases
Total
Balance,
Beginning of
Year
$ 321,002
S 439,787
S 45,865
S 33,895
$ 802,321
$ 24,485
S 1,667,355
Additions
23,898
1,109
11,959
12,010
30,623
-
79,599
Dispositions
(14,389)
-
(2,262)
(14,287)
(4,228)
-
(35,166)
Revaluations
68
-
(25)
-
-
-
43
Balance,
September
30,2021
$ 330.579
$ 440.896
$ 55.537
S 31.618
S 828.716
$ 24.485
$ 1.711.831
22.
22-F-0007
46
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
As of September 30, 2021, General PP&E Accumulated Depreciation consisted of the following:
2021
EPA-
Contractor
Land
Held
Software
Software
Held
and
Capital
Equipment
(production)
(development)
Equipment
Buildings
Leases
Balance,
Beginning of
Year
$ 217,928
$ 420,502
$
$ 26,484
$ 321,799
$ 20,948
Additions
(14,481)
(63)
-
-
-
-
Dispositions
1,518
63
-
(3,742)
-
-
Revaluations
68
-
-
-
-
-
Depreciation
Expense
20.949
13.320
-
(2.891)
17.976
816
Balance,
Septemeber
30,2021
$ 225.982
S 433.822
$
S 19.851
S 339.775
$ 21.764
Total
(14,544)
(2,161)
50.170
As of September 30, 2021, General PP&E, Net consisted of the following:
2021
EPA-
Contractor
Land
Held
Software
Software
Held
and
Capital
Equipment
(production)
(development)
Equipment
Buildings
Leases
Total
Balance,
September
30,2021
$ 104.597
$ 7.074
$ 55.537
$ 11.767
$ 488.941
$ 2.721 !
S 670.637
As of September 30, 2020, General PP&E Cost consisted of the following:
2020
Balance,
Beginning of
Year
Additions
Dispositions
Revaluations
Balance, End
of Year
EPA-
Held
Equipment
304,453
36,393
(19,777)
321.069
Software
(production)
$ 439,787
439.787
Software
(development)
27,046
18,794
Contractor
Held
Equipment
44,707
1,581
(5,633)
(6.760)
Land
and
Buildings
794,192
18,184
(10,056)
Capital
Leases
$ 24,485
Total
$ 1,634,670
74,952
(35,466)
(6.160)
45.840
33.895 S 802.320 $ 24.485 S 1.667.396
23.
22-F-0007
47
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
As of September 30, 2020, General PP&E Accumulated Depreciation consisted of the following:
2020
Balance,
Beginning of
Year
Dispositions
Revaluations
Depreciation
Expense
Balance, End
of Year
EPA-
Held
Equipment
Software
(production)
Software
(development)
Contractor
Held
Equipment
Land
and
Buildings
Capital
Leases
Total
$ 212,886
(18,780)
$ 398,613
$
$ 28,593
(2,825)
$ 303,239
$ 20,132
$ 963,463
(18,780)
(2,825)
23.889
21.889
.
716
18.560
816
65.870
$ 217.995
$ 420.502
$
S 26.484
$ 321.799
$ 20.948
$ 1.007.728
As of September 30, 2020, General PP&E, Net consisted of the following:
2020
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (production) (development) Equipment Buildings Leases Total
Balance, End
of Year, Net S 103.074 S 19.285 S 45.840 S 7.411 S 480.521 S 3.537 S 659.668
Note 10. Debt
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, 2021 and 2020, the EPA had debt due to Treasury consisting
entirely of funds borrowed to finance the non-subsidy portion of the WIFIA Direct Loan Program:
2020 2021
Beginning Net Ending Net Ending
Balance Borrowing Balance Borrowing Balance
Debt to the
Treasury $ 266 S 221.386 S 221.652 S 525.187 $ 746.839
See Note 1 paragraph O for additional information.
24.
22-F-0007
48
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 11. Stewardship Property, Plant and Equipment
The Agency acquires title to certain property and property rights under the authorities provided in Section 104(j)
CERCLA related to remedial clean-up sites. The property rights are in the form of fee interests (ownership) and
easements to allow access to clean-up sites or to restrict usage of remediated sites. The Agency takes title to the land
during remediation and transfers it to state or local governments upon the completion of clean-up. A site with "land
acquired" may have more than one acquisition property. Sites are not counted as a withdrawal until all acquired
properties have been transferred under the terms of 104(j).
As of September 30, 2021 and 2020, the Agency possessed the following land and land rights:
2021 2020
Superfund Sites with Easements:
Beginning Balance
43
40
Additions
2
3
Ending Balance
45
43
Superfund Sites with Land Acquired:
Beginning Balance
32 $
31
Additions
1
1
Withdrawals
(1)
-
Ending Balance
32
32
Note 12. Liability to the General Fund for Custodial Assets
Liability to the General Fund for Custodial Assets represents the amount of net accounts receivable that, when
collected, will be deposited to the Treasuiy 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, 2021 and 2020, custodial liability is approximately $51,241 and $72,018 thousand, respectively.
25.
22-F-0007
49
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2021:
Covered by
Not Covered
Budgetary
by
Resources
Resources
Total
Current
Employer Contributions & Payroll Taxes
$ 29,503
$ - $
29,503
Liability for Deposit Funds
(2)
-
(2)
Non-Current
Unfunded FEC A Liability
-
9,018
9,018
Unfunded Unemployment Liability
-
308
308
Payable to Treasury Judgement Fund
-
22.000
22.000
Total Intragovernmental
$ 29.501
S 31.326 $
60.827
Other Liabilities - With the Public:
Current
Liability for Deposit Funds, With the Public
$ 5,626
S - $
5,626
Grant Liabilities
369,003
-
369,003
Other Accrued Liabilities
147,393
-
147,393
Accrued Funded Payroll and Benefits
94,136
-
94,136
Employer Contributions Payable - Thrift Savings Plan
2.509
-
2.509
Total With the Public
$ 618.667
s - $
618.667
26.
22-F-0007
50
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Other Liabilities consist of the following as of September 30, 2020:
Current
Employer Contributions & Payroll Taxes
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgement Fund
Total Intragovernmental
Other Liabilities - With the Public
Current
Liability for Deposit Funds, With the Public
Grant Liabilities
Other Accrued Liabilities
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable - Thrift Savings Plan
Commitment and Contingencies
Total With the Public:
Covered by Not Covered
Budgetary by
Resources Resources Total
$ 23,764 S - $ 23,764
9,223 9,223
97 97
- 22.000 22.000
$ 23.764 $ 31.320 $ 55.084
$ 5.945 $ - $ 5,945
159.004 - 159,004
317,258 - 317,258
36,385 - 36,385
30,297 - 30,297
1,792 - 1,792
- 38 38
$ 550.681 $ 28 $ 550.719
Liabilities not covered by budgetary resources require future congressional action whereas liabilities covered by
budgetary resources reflect prior congressional action. Regardless of when the congressional action occurs, when the
liabilities are liquidated. Treasury will finance the liquidation in the same way that it finances all other disbursements,
using some combination of receipts, other inflows, and borrowing from the public (if there is a budget deficit).
Other Accrued Liabilities are mostly comprised of contractor accruals.
See Note 1 paragraph N for additional information.
Note 14. Leases
The value of assets held under Capital Leases as
of September 30, 2021 and 2020, are as follows:
Capital Leases:
2021
2020
Summary of Assets Under Capital Lease:
Real Property
S 24.485 $
24.485
Total
24.485
24.485
Accumulated Amortization
$ 21,764 $
20.948
27.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(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
2022 S 786
2023 786
2024 786
2025 262
Total Future Minimum Lease Payments 2,620
Less: Imputed Interest (295)
Net Capital Lease Liability 2.325
Liabilities not Covered by Budgetary Resources S 2.325
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 $786 thousand from 2015 until 2024. Fiscal year 2025 is a partial year.
Note 15. Deferred Revenue
Other liabilites deferred revenue is fully comprised of cashout advances. Cashout advances are funds received by tire
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 CERCL A 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, 2021 and 2020,
cash-out advances total $3,476,737 thousand and $3,472,784 thousand, respectively.
Note 16. 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, suite, 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, 2021, there was no accrued liabilities for commitments and potential loss contingencies. As of
September 30, 2020, there were $38 thousand of 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
28.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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, 2021, 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 S314
million but they are only reasonably possible and the final outcomes are not probable.
B. Flint, Michigan
The EPA has received claims from over 9,400 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 amount 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 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 tire 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 for two cases totaling $20.4 million. For these cases, they
are only reasonably possible and the final outcomes are not probable. These two cases are: Land O' Lakes (Hudson Oil
refinery Superfund Site) for $17.7 million (petition for reimbursement for not being liable under CERCLA); and
August Mack Environmental, Inc. v. EPA for $2.7 million. August Mack Environmental (AME) was a contractor for
Vertellus, one of three PRPs at the Big John Salvage Site in Fairmont, WV. The site was being cleaned up pursuant to
a consent decree which named Vertellus the performing defendant. There is a special account at the site funded by the
PRPs. Vertellus filed for bankruptcy and AME did not recover in bankruptcy the moneys it claimed it was owed by
Vertellus. AME made a claim against the Superfund and/or the Special Account R3 denied the claim and AME
appealed to the ALJ who also denied it. AME then filed suit in district court. The court ruled in favor of EPA on a
Motion to Dismiss and AME appealed to the 4th Circuit. The 4th Circuit ruled in AME's favor and case was
remanded.
D. Environmental Liabilities
As of September 30,2021, there are two cases pending against the EPA that are reported under Environmental
Liabilities. The first case is Bob's Home Service Landfill for $900 thousand but it is only reasonably possible and the
final outcome is not probable. The second case is for ThermalKem a,k.a. Phillip Services CERCLA Site. This is a
claim against several EPA regions for generator liability under CERCLA based on waste sent to site from other sites
being cleaned-up by EPA and'or under EPA oversight, which is also reasonably possible and the final outcome is not
probable. It also includes a claim for generator liability for waste sent to site from EPA's labs and research facilities.
For this second case, the estimate amount or range of potential loss is unknown.
E. Other Pending Cases
As of September 30, 2021, legal claims exist for which the potential loss could not be determined. These include
cases: United Affiliates Corp., et al. v. United States (involving alleged taking of property for which plaintiff is
seeking just compensation under the 5th Amendment); State of New York v. Regan (State and environmental plaintiffs
allege that EPA has unreasonably delayed issuance of regulations for sources in the oil and gas sector under Clean Air
29.
22-F-0007
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Act section 111(d)); Resort Center Associates, LLC v. Wheeler (Plaintiff alleges that EPA violated CERCLA and
failed to perform non-discretionary duties under CERCLA in connection with designating a portion of its development
property as part of the Richardson Flat Tailings Superfund site. The matter also includes 5th Amendment taking and
Federal Tort Claims Act allegations); and Hennis v. United States (EPA built and operates an interim water treatment
plant to treat ongoing discharge of mine impacted water from the Gold King Mine on plaintiffs property. Plaintiff
alleges that the Government's ongoing access to, occupation, and use of his property constitutes a physical taking
without just compensation).
In addition, as of September 30, 2021, legal claims exist for cases related to TSCA liability, for which the potential
loss could not be determined and the total amount claimed is not material to the financial statements.
F. Judgement Fund
In cases that are paid by the U.S. Treasury Judgment Fund, the EPA must recognize the foil cost of a claim regardless
of which entity is actually paying the claim. Until these claims are settled or a court judgment is assessed where 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 an $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, 2021, there is no other case pending in the court.
G. Other Commitments
EPA has a commitment to fund the U.S. Government's payment to the Commission of the North American Agreement
on Environmental Cooperation between the Government 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 $2.6 million to the
CEC in the period ending September 30, 2021 and $2.5 million in the period ending September 30, 2020.
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 30, 2021 and $8.3 million in the period ending September 30, 2020.
30.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 17. Funds from Dedicated Collections (Unaudited) (Restated)
Other Funds Total Funds
Environmental from Dedicated from Dedicated
Services LUST Superfund Collections Collections
Balance Sheet for Fiscal Year Ended
2021
Assets
Fund Balance with Treasury
$
546,001 $
43,540 $
138,254 $
135,505 $
863,300
Investments
-
1,037,121
5,118,717
-
6,155,838
Accounts Receivable, Net
-
85,921
406,184
129,593
621,698
Other Assets
-
228
42.321
589.987
632.536
Total Assets
$
546.001 $
1.166.810 $
5.705.476 S
855.085 $
8.273.372
Other Liabilities
93.864
3.806.220
821.461
4.721.545
Total Liabilities
$
S
93.864 $
3.806.220 S
821.461 $
4.721.545
Unexpended Appropriations
(104)
291
187
Cumulative Results of Operations
546.001
1.072.946
1.899.360
33.333
3.551.640
Total Liabilities and Net Position
$
546.001 $
1.166.810 $
5.705.476 $
855.085 $
8.273.372
Statement of Net Cost for Fiscal Year
Ended 2021
Gross Program Costs
-
86,157
1,364,410
137,107
1,587,674
Less: Earned Revenues
13
295.471
152.214
447.698
Net Costs of Operations
$
ri3> $
86.157 $
1.068.939 $
fl5.107^ $
1.139.976
Statement of Changes in Net Position
for Fiscal Year Ended 2021
Net Position, Beginning of Period
$
518,165 $
916,564 $
1,849,646 $
22,511 $
3,306,886
Nonexchange Revenue - Securities
Investments
-
476
5,927
18
6.421
Nonexchange Revenue
27,823
241,786
(2,759)
3,717
270,567
Other Budgetary Finance Sources
-
-
1,089,924
(8,774)
1,081,150
Other Financing Sources
-
277
25,457
1,046
26,780
Net Cost of Operations
13
('86.157)
(1.068.939)
15.107
O.l 39.976*1
Change m Net Position
27,836
156.382
49.610
11.114
244.942
Net Position
$
546.001 S
1.072.946 $
1.899.256 S
33,625 $
3.551.828
31.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Other Funds Total Funds
Environmental from Dedicated from Dedicated
Services LTJST Superfund Collections Collections
Balance Sheet for Fiscal Year 2020
Assets
Fund Balance with Treasury $
518,165 $
28,191 $
152,246 $
95,212 $
793,814
Investments
-
895,016
5,074,650
-
5,969,666
Accounts Receivable, Net
-
82,281
346,291
27,135
455,707
Other Assets
_
424
44.685
201,757
246.866
Total Assets $
518,165 $
1.005,912 $
5.617.872 S
324.104 $
7.466.053
Other Liabilities
89.348
3.768.226
301.589
4.159.163
Total Liabilities $
$
89.348 $
3.768.226 S
301.589 $
4.159.163
Unexpended Appropriations
(2)
(187)
(189)
Cumulative Results of Operations
518.165
916.564
1.849.646
22.702
3.307.077
Total Liabilities and Net Position $
518.165 S
1.005.912 $
5.617.870 $
324.104 $
7.466.051
Statement of Net Cost for Fiscal Year
Ended 2020 (Restated)
Gross Program Costs (Note 36)
-
97,770
1.520,983
116,583
1,735,336
Less: Earned Revenues
_
362.428
105.449
467,877
Net Costs of Operations (Note 36) $
$
97.770 $
1.158.555 S
11.134 $
1.267.459
Statement of Changes in Net Position
for the Fiscal Year Ended 2020
(Restated)
Net Position, Beginning of Period $
491,972 $
788,492 $
1,863,347 $
25,519 $
3,169,330
Nonexchange Revenue - Securities
Investments
-
6,282
83,301
533
90,116
Nonexchange Revenue
26,193
219,210
3,225
(8,833)
239,795
Other Budgetary Finance Sources
-
-
1,033,974
15,697
1,049,671
Other Financing Sources (Note 36)
-
350
24,356
729
25,435
Net Cost of Operations (Note 36)
-
(97.770)
fl.158.555s)
("11.134)
("1.267.459)
Chanee in Net Position
26.193
128.072
fl 3.699)
(3.008)
137.558
Net Position $
518.165 $
916.564 S
1.849.648 S
22.511 $
3306.888
A. Funds from Dedicated Collections
L Environmental Services Receipt A ccount:
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 environmenta l programs, including radon
measurement proficiency ratings and training, motor vehicle engine certifications, and water pollution permits.
Receipts in this special fund can only be appropria ted 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 oversea! cleanup and enforcement programs which are implemented by the states. Funds are
allocated to the states through cooperative agreements and prevention grants to inspect and clean up those sites posing
the greatest threat to human health and the environment. Funds are used for grants to non-state entities including
Indian tribes under Section 8001 of the Resource Conservation and Recovery Act.
32.
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56
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
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 LIS. 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 was authorized by a 2004 Act, "Consolidated Appropriations Act (P.L. 108-199),"
and reauthorized until September 30, 2023, for the expedited processing of certain registration petitions and the
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 the reassessment of tolerances for pesticides used in or on food and animal feed,
as required by law.
iv. Tolerance Revolving Fund:
The Tolerance Revolving Fund was authorized in 1963 for the deposit of tolerance fees. Fees were paid by industry
for Federal services to set pesticide chemical residue limits in or on food and animal feed. Fees collected prior to
January 2, 1997 were accounted for under this fund. Presently, collection of these fees is prohibited by statute enacted
in the Consolidated Appropriations Act, 2004 (P.L. 108-199).
v. Hazardous Waste Electronic Manifest System
The Hazardous Waste Electronic Manifest System Fund, authorized in 2014, receives funding through fees collected
for use of the Hazardous Waste Electronic Manifest System.
33.
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57
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 18. Environmental and Disposal Liabilities
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.
As of September 30, 2021, the EPA has one site that requires clean up stemming from its activities. The claimants'
chances of success are characterized as reasonably possible with costs amounting to $900 thousand that may be paid
out of the Treasury Judgment Fund. Secondly, in January 2020, the CDPHE found several violations of Colorado
hazardous waste laws after inspecting an EPA lab where Region 8 and OECA's NEIC are co-located. $38 thousand of
the penalty amount has been accrued, which is categorized under probable.
The EPA has 30 sites for which it is required to fund the environmental cleanup. As of September 30, 2021, the
estimated costs for site clean-up were $25.7 million unfunded, and $971 thousand funded, respectively. In 2020 the
estimated costs for site clean-up were $38.4 million unfunded, and $1,836 thousand funded, respectively. Since the
clean-up costs associated with permanent closure were not primarily recovered through user fees, the EPA has elected
to recognize the estimated total clean-up cost as a liability and record changes to the estimate in subsequent years.
In FY 2021, the estimate for unfunded clean-up cost decreased by $12.7 million from the FY 2020 estimate. This is
primarily due decreased estimates of future lab cleanup actions.
Note 19. 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 bome 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 with the public funds for remedial action.
34.
22-F-0007
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Once the EPA has reviewed and approved a state's claim for credit, the state must first apply the credit at the site
where it was earned. The slate may apply any excess/remaining credit to another site when approved by the EPA. As
of September 30, 2021 and 2020, the total remaining state credits have been estimated at $17.9 million, and S20.2
million, respectively.
Note 20. 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, 2021, the EPA had three outstanding preauthorized mixed funding agreements with
obligations totaling $10.2 million. As of September 30, 2020, the EPA had three outstanding preauthorized mixed
funding agreements with obligations totaling $11.5 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 21. 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. As of
September 30, 2021 and 2020 Custodial Revenues and Accounts Receivable are:
2021 2020
Fines, Penalties and Other Miscellaneous Receipts
Accounts Receivable for Fines, Penalties and Other Miscellaneous
Receipts:
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Total
$ 42.497
$
169.178
$ 174,590
$
191,307
(144.142^
(141.118)
S 30.448
$
50.189
Note 22. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited FY 2021 Statement of Budgetary
Resources, will be reconciled to the amounts included in the FY 2021 Budget of the United States Government when
they become available. The Budget of the United States Government with actual numbers for FY 2021 has not yet
been published. We expect it will be published by early 2022, 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, 2020 are listed immediately below (dollars in
millions):
FY 2020 Budgetary Offsetting
Resources
Statement of Budgetary Resources
Reported in the Budget of the U.S. Government
$
20.548
$ 14.293 :
S 1.369 $
10.093
$
22.447
$ 16.314 !
£ 1.369 $
10.316
35.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 23. Recoveries and Resources Not Available, Statement of Budgetary Resources
Recoveries of Prior Year Obligations, Temporarily Not Available, and Permanently Not Available on the Statement of
Budgetary Resources consist of the following amounts as of September 30, 2021 and 2020:
2021 2020
Unobligated Balance Brought Forward, Oct 1.
S 5.640.267 $
5.460.757
Adjustments to Budgetary Resources Made During the Current Year
Downward Adjustments of Prior Year Undelivered Orders
Downward Adjustments of Prior Year Delivered Orders
Permanent Reduction Prior Year Balances
Other Adjustments
Total
335,603
19,061
(27,991)
(15.6271
311,046
339,024
26,546
(18.1371
347,433
Unobligated Balance from Prior Year Budget Authority, Net
(discretionary and mandatory)
$ 5.951.313 $
5.808.190
Temporarily Not Available - Rescinded Authority
S (6.428) $
(2.000)
Permanently Not Available:
Rescinded Authority
Cancelled Authority
Total Permanently Not Available
$ 6,428 $
27.991
S 34.419 $
19.140
19.140
Note 24. 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, 2021and 2020:
2021 2020
Unexpired Unobligated Balance
S 5,281,571 J
> 6,066,503
Expired Unobligated Balance
91.014
189.004
Total
$ 5.372.585 3
> 6.255.507
36.
22-F-0007
60
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 25. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders as of September 30, 2021 and 2020:
2021 2020
Intragovernmental:
Unpaid Undelivered Orders $ 617,433 $ 448,888
Paid Undelivered Orders 300,357 335,082
With the public:
Unpaid Undelivered Orders 20,650,862 14,213,791
Paid Undelivered Orders 297.852 820.475
Total S 21.866.504 $ 15.818.236
Note 26. Offsetting Receipts
Distributed offsetting receipts are amounts that an agency collects from the public or from other Government
agencies that are used to offset or reduce an agency's budget outlays. Agency outlays are measured on both a
gross and net basis, with net outlays being reduced by offsetting receipts (and other amounts). As of
September 30, 2021 and 2020, the following receipts were generated from these activities:
2021 2020
Trust Fund Recoveries
S 249,937 J
i 237,778
Special Fund Services
76,466
51,502
Trust Fund Appropriation
1,153,462
1.076,535
Miscellaneous Receipt and Clearing Accounts
1.546
3.581
Total
$ 1.481.411 S
! 1.369.396
Note 27. Transfers-In and Out, Statement of Chan ges in Net Position
A. Appropriations Transfers, In/Out:
As of September 30, 2021 and 2020, 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, 2021 and 2020:
2021 2020
Net Transfers from Invested Funds $ 1,525,315 $ 1,396,692
Transfer to the Department of Transportation - 101,700
Transfers to Another Agency 29.854 809
Total of Net Transfers on the Statement of Budgetary Resources S 1.555.169 $ 1.499.201
37.
22-F-0007
61
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
B. Transfers In/Out Without Reimbursement, Budgetary:
For September 30, 2021 and 2020, 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, 2021 and
2020:
2021 2020
Funds From
Funds From
Dedicated
Dedicated
Type of Transfer/Funds:
Collections
Other Funds
Collections
Other Funds
Transfers-in (out) nonexpenditure, Earmark to
Science and Technology and Office of The
Inspector General funds
$
S 28,624
$ (42,748)
$
42,081
Transfers-in (out) nonexpenditure, Oil Spill
20,098
-
19,581
-
Transfers-in (out) nonexpenditure, e-Manifest
-
-
23
-
Transfers-in (out), TSCA
(28,624)
-
(5,528)
-
PRIA
(708)
-
389
-
National Resource Damage Assessment
1.229
.
1.647
.
Total Transfer in (out) without Reimbursement,
Budgetary
S (8.005)
S 28.624
S (26.636)
$
42.081
Note 28. Imputed Financing (Restated)
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 2021 were S128.5
million. For FY 2020, the estimates were $115.2 million (Restated).
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 2021 total imputed costs were S32.6 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, Ac counting for Treasury Judgment Fund
Transactions. For FY 2021, entries for Judgment Fund payments totaled $11 million. For FY 2020, entries for
Judgment Fund payments totaled $4.1 million.
38.
22-F-0007
62
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 29. Federal Employee Benefits Payable
Payroll and benefits payable to the EPA employees for the fiscal years ending September 30, 2021 and 2020, consist
of the following:
FY 2021 Payroll and Benefits Payable
Actuarial FECA Liability
Accrued Unfunded Annual Leave
Total - Current
Covered by
Budgetary
Resources
Not Covered
by Budgetary
Resources
Total
51,143
181.492
232,635
51,143
181.492
232J35
Covered by Not Covered
Budgetary by Budgetary
Resources Resources Total
FY 2020 Payroll and Benefits Payable
Actuarial FECA Liability
S - S 50,451 $
50,451
Accrued Unfunded Annual Leave
184.779
184.779
Total - Current
$ - $ 235.230 $
235.230
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. The FY 2021 present value of these estimated
outflows is calculated using a discount rate of 2.414 percent in the first year, and 2.414 percent in the years thereafter.
The estimated future costs are recorded as an unfunded liability.
See Note 1 paragraph P for additional information.
Note 30. 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 Adjustments, Statement of Changes in Net Position for the years ended September
30, 2021 and 2020, consist of the following:
Other Other
Funds Funds
2021 2020
Cancelled General Authority
S 49.123 $
18.964
Total Other Adjustments
$ 49,123 $
18.964
39.
22-F-0007
63
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 31. Non-Exchange Revenue, Statement of Changes in Net Position
Non-Exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net Position for the fiscal
years ended September 30, 2021 and 2020:
2021
2020
Interest on Trust Fund
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue
Funds from
Dedicated
Collections
$ 6,421
241,786
(2,740)
31.521
S 276.988
All Other
Funds
Funds from
Dedicated
Collections
S 90,116
219,210
3,239
17.265
S 329.830
All Other
Funds
81
81
40.
22-F-0007
64
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 32. Reconciliation of Net Cost of Operations to Net Outlays (Restated)
For the Fiscal Year Ended September 30, 2021:
Intra- With the
governmental Public Total 2021
NET COST
Com ponents of Net Cost That Are Not Part of Net Outlays:
Property, Plant and Equipment Depreciation
Property, Plant and Equipment Disposal & Revaluation
Applied Overhead/Cost Capitalization Offset
$ 1,500,235 $
7,082,983 $
57,687
4,186
(72,607)
8,583,218
57,687
4,186
(72,607)
Increase/(Decrease) in Assets:
Accounts Receivable
Loans Receivable
Investments
Other Assets
(20,495)
50
(70,576)
47,670
77,112
513,387
(624)
56,617
513,437
(70,576)
47,046
(Increase)/Decrease in Liabilities:
Accounts Payable and Accrued Liabilities
Debt Due to Treasury
Environmental Cleanup Costs
Payroll and Benefits Payable
Other Liabilities
29,710
525,187
56,867
3,623
(12,660)
(2,595)
56,111
33,333
525,187
(12,660)
(2,595)
112,978
Other Financing Sources:
Other Imputed Financing
Total Components of Net Cost That Are Not Part of Net
Outlays
(172,143)
1.896.505
7.706.603
(172,143)
9.603.108
Components of Net Outlays That Are Not Part of Net Cost:
Acquisition of Inventory
Acquisition of Other Assets
:
375
375
Other Financing Sources:
Transfer Out (In) Without Reimbursement
(25,286)
-
(25,286)
Total Components of Budget Outlays That Are Not Part of
Net Operating Cost
(25.286)
375
(24.9111
Miscellaneous Items
Custodial/Non-Exchange Revenue
Appropriated Receipts for Trust Fund'Special Funds
23
22,106
20.028
22,129
20.028
Other Temporary Timing Differences
-
231,740
231,740
NET OUTLAYS
$ 1.871.242 S
7.980.852 $
9.852.094
41.
22-F-0007
65
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
For the Fiscal Year 2020: (Restated)
Intra- With the
governmental Public Total 2020
NET COST $
1,418,263 S
7,490,057 $
8,908,320
Components of Net Cost That Are Not Part of Net Outlays:
Property, Plant and Equipment Depreciation
-
68,599
68,599
Property, Plant and Equipment Disposal & Revaluation
-
(1,373)
(1,373)
Year-end Credit Reform Subsidy Re-estimates
(23,459)
-
(23,459)
Other
-
57,917
57,917
Increase/(Decrease) in Assets:
Accounts Receivable (Restated)
(6,802)
2,840
(3,962)
Loans Receivable
-
196,206
196,206
Investments
(27,990)
-
(27,990)
Other Assets
(12,323)
495
(11,828)
(Increase)/Decrease in Liabilities:
Accounts Payable and Accrued Liabilities (Restated)
8,684
15,062
23,746
Debt Due to Treasury
(221,385)
-
(221,385)
Pensions and Other Actuarial Liabilities
-
(8,408)
(8,408)
Environmental Cleanup Costs
-
(5,573)
(5,573)
Cashout Advances, Superfund (Note 36)
-
100,456
100,456
Commitments and Contingencies
-
(38)
(38)
Payroll and Benefits Payable
-
(49,269)
(49,269)
Other Liabilities
19,100
(9,132)
9,968
Other Financing Sources:
Federal Employee Retirement Benefit Costs Paid by OPM and
(115,246)
-
(115,246)
Imputed to the Agency
Transfer Out (In) Without Reimbursement
15,509
-
15,509
Other Imputed Financing
G3.859)
-
(33.859)
Total Components of Net Cost That Are Not Part of Net
Outlays
1,020,492
7,857,839
8,878,331
Components of Net Outlays That Are Not Part of Net Cost:
Effect of Prior Year Agencies Credit Reform Subsidy Re-
estimates
-
-
-
Acquisitions of Capital Leases
-
-
-
Acquisition of Inventory
-
567
567
Acquisition of Other Assets
-
15,915
15,915
Other
-
474,408
474,408
Total Components of Net Outlays That Are Not Part of Net
Cost
-
490.890
490.890
Other Temporary Timing Differences
-
(645,814)
(645,814)
NET OUTLAYS $
1.020.492 S
7.702.915 $
8.723.407
22-F-0007
66
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Budgetary and financial accounting information differ. Budgetary accounting is used for planning and control
purposes and relates to both the receipt and use of cash, as well as reporting the federal deficit. Financial accounting is
intended to provide a picture of the government's financial operations and financial position, so it presents
information on an accrual basis. The accrual basis includes information about costs arising from the consumption of
assets and the incurrence of liabilities. The reconciliation of net outlays, presented on a budgetary basis, and the net
cost, presented on an accrual basis, provides an explanation of the relationship between budgetary and financial
accounting information.
The reconciliation serves not only to identify costs paid for in the past and those that will be paid in the future, but
also to assure integrity between budgetary and financial accounting. The reconciliation explains the relationship
between the net cost of operations and net outlays by presenting components of net cost that are not part of net outlays
(e.g., depreciation and amortization expenses of assets previously capitalized, change in asset/liabilities), components
of net outlays that are not pait of net cost (e.g., acquisition of capital assets), other temporary timing difference (e.g.,
prior period adjustments due to correction of errors). The analysis above illustrates this reconciliation by listing the
key differences between net cost and net outlays.
43.
22-F-0007
67
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 33. Amounts Held by Treasury (Unaudited)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by Treasuiy 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, 2021 and 2020. 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 2021
EPA
Treasury
Combined
Undistributed Balances
Uninvested Fund Balance
s
-
S
3.917
$ 3.917
Total Undistributed Balance
-
3,917
3,917
Interest Receivable
-
6,298
6,298
Investments, Net
4.970.058
142.361
5.112.419
Total - Assets
$
4.970.058
$
152.576 :
$ 5.122.634
Liabilities and Equity
Equity
s
4.970.058
s
152.576
$ 5.122.634
Total Liabilities and Equity
$
4.970.058
$
152.576 :
S 5.122.634
Receipts
Cost Recoveries
s
-
$
249,937
S 249,937
Fines and Penalties
-
1.656
1.656
Total Revenue
-
251,593
251,593
Appropriations Received
-
1,153,462
1,153,462
Interest Income
-
5.927
5.927
Total Receipts
s
-
s
1.410.982 :
S 1.410.982
Outlays
Transfers to/from EPA Net
S 1.475.171 S
(1.475.171) 8
-
Total Outlays
S 1,475,171 S
(1.475.1711 $
-
Net Income
$ 1.475.171 $
(64,189) $
1.410.982
44.
22-F-0007
68
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
In FY 2021, the EPA received an appropriation of $1.2 billion for Superfund. Treasury's Bureau of the Fiscal Service
(BFS), the manager of the Superfund Trust Fund assets, records a liability to the EPA for the amount of the
appropriation. BFS does this to indicate those trust fund assets that have been assigned for use and therefore are not
available for appropriation. As of September 30, 2021 and 2020, the Treasury Trust Fund has a liability to the EPA for
previously appropriated funds and special accounts of $5.1 billion and $5.2 billion, respectively.
SUPERFUND FY 2020 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance $ - $ 5.759 $ 5.759
Total Undistributed Balance
5,759
5,759
Interest Receivable
-
6,298
6,298
Investments, Net
4.863.644
204.708
5.068.352
Total - Assets
$ 4.863.644 :
$ 216.765 $
5.080.409
Liabilities and Equity
Equity
$ 4.863.644 :
$ 216.765 S
; 5.080.409
Total Liabilities and Equity
$ 4.863.644 :
S 216.765 $
5.080.409
Receipts
Cost Recoveries
$ - :
S 237,778 $
; 237,778
Fines and Penalties
-
4.278
4.278
Total Revenue
-
242,056
242,056
Appropriations Received
-
1,076,535
1,076,535
Interest Income
-
83.302
83.302
Total Receipts
S - :
S 1.401.893 $
1.401.893
Outlays
Transfers to/from EPA, Net
$ 1.548.747 :
$ (1.548.747) S
Total Outlays
$ 1.548.747 :
S (1.548.74") $
Net Income
$ 1.548.747 !
S (146.854) $
1.401.893
45.
22-F-0007
69
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
B. LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FY 2021 and 2020, 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 2021 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$ 25.686
$
25.686
Total Undistributed Balance
-
25,686
25,686
Investments, Net
85.921
951.201
1.037.122
Total - Assets
$
85.921
S 976.887
$
1.062.808
Liabilities and Equity
Equity
$
85.921
$ 976.887
$
1.062.808
Total Liabilities and Equity
$
85.921
$ 976.887
$
1.062.808
Receipts
Highway I F Tax
-
214,252
214,252
Airport TF Tax
-
28,268
28,268
Inland TF Tax
-
(734)
(734)
Total Revenue
-
241,786
241,786
Interest Income
-
476
476
Total Receipts
$
-
S 242.262
$
242.262
Outlays
Transfers to/from EPA Net
$ 92.203 S
(92.203) $
-
Total Outlays
$ 92.203 S
(92.203) $
-
Net Income
S 92.203 S
150.059 S
242.262
46.
22-F-0007
70
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
LUST FY 2020 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance S - S 14.081 $ 14.081
Total Undistributed Balance
-
14,081
14,081
Investments, Net
82.270
812.746
895.016
Total - Assets
$ 82.270
$
826.827
$
909.097
Liabilities and Equity
Equity
$ 82.270
$
826.827
$
909.097
Total Liabilities and Equity
$ 82.270
$
826.827
$
909,097
Receipts
Highway TF Tax
$
$
207,604
$
207,604
Airport TF Tax
-
11,575
11,575
Inland TF Tax
-
31
31
Total Revenue
-
219,210
219,210
Interest Income
-
6.282
6.282
Total Receipts
$
$
225.492
$
225.492
Outlays
Transfers to/from EPA, Net
$ 101.700
$
(101.7001
$
-
Total Outlays
$ 101,700
s
(101.700)
$
-
Net Income
$ 101.700
$
123.792
$
225.492
Note 34. CQVID-19 Activity
On March 27, 2020, President Donald Trump signed into law The Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in response to the economic fallout of the COVID-19 pandemic in the United States. The EPA
received a supplemental appropriation of $7.2 million to support Environmental Program Management, Science and
Technology, Building and Facilities, and Superfund program efforts related to the virus. As of September 30, 2021
$110.2 thousand remains available for obligation.
On March 11, 2021 President Joe Biden signed into law the American Rescue Plan Act (American Rescue Plan) also
called the COVID-19 Stimulus Package, to speedup the United States' recovery from the economic and health effects
of the COVID-19 pandemic and the ongoing recession. The EPA received a supplemental appropriation of $100
million to support Environmental Program Management and State and Tribal Assistance Grants program efforts
related to recovery from the virus. As of September 30, 2021, $86.1 million remains available for obligation.
Additional COVID-19 activities are discussed in Section I, Management's Discussion and Analysis, Financial
A nalysis and Stewardship Information.
47.
22-F-0007
71
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Note 35. 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. Treasuiy 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 2020 FR can be found here: https://www.fiscal.treasurv.gov/reports-statements/ and a copy
of the 2021 FR will be posted to this site as soon as it is released.
The term "intragovernmental" is used in this note to refer to amounts that result from other components of the Federal
Government.
The term "Non-Federal" is used in this note to refer to Federal Government amounts that result from transactions with
non-Federal entities. These include transactions with individuals, businesses, non-profit entities, and State, local, and
foreign governments.
48.
22-F-0007
72
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(Dollars in Thousands)
Reclassification of Balance Sheet to Line Items used for the Government-wide Balance Sheet as of September 30, 2021
FY 2021 EPA Balance Sheet
Line Items Used to Prepare the FY 2021 Government-wide Balance Sheet
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Financial
Statement line
ASSETS
ASSETS
Intra-Governmental Assets
Intra-Governmental Assets
FBWT
11,778,430
1,114,893
(251,593)
10,915,170
-
11,778,470
FBWT
Federal Investment
6,149,540
6,149,540
6,149,540
Federal Investments
Investments, Net
6,298
6,298
6,298
Interest Receivable -
Investments
Total Investments. Net
6,155,838
6,155,838
6,155,838
Total Reclassified
Investments, Net
Accounts Receivable,
Capital Transfers
5,055,979
(5,055,979)
Accounts Receivable,
Capital Transfers
Accounts Receivable, Net
7,602
124,014
(117,190)
.
6,824
Accounts Receivable, Net
Total Accounts Receivable
7,602
5,179,993
(5,055,979)
(117,190)
-
6,824
Total Reclassified - A/R
Interest Receivable - Loans
and Not Otherwise
Classified
516
515
(515)
Interest Receivable - Loans
and Not Otherwise
Classified
Advances to Others and
Prepa"yments
245,934
17,695
228,245
245,940
Advances to Others and
Prepayments
Total Other
246,450
18,210
227,730
245,940
Total Reclassified Other
Total Intra-Governmental
Assets
18,188,320
12,468,934
(5,307,572)
11,025,710
18,187,072
Total Intra-Governmental
Assets
Cash and Other Monetary
Assets
10
10
10
Cash and Other Monetary
Assets
Accounts Receivable, Net
580,736
497,683
82,492
580,175
Accounts Receivable, Net
Loans Receivable, Net
585,622
585,571
567
-
586,138
Loans Receivable, Net
Inventory and Related
Property, Net
428
428
428
Inventory and Related
Property, Net
General PP&E
670,637
27,996
657,376
-
685,372
General PP&E, Net.
Other
7,298
777
6,521
7,298
Other
Total Assets
20,033,051
13,580,961
(5,307,572)
11,773,104
-
20,046,493
Total Assets
LIABILITIES
LIABILITIES
Intra Governmental
Liabilities
Intra-Governmental
Liabilities
Accounts Payable
151,102
59,390
110,610
170,000
Accounts Payable
Accounts Payable, Capital
Transfers
5,085,447
(5,055,979)
(29,468)
Accounts Payable, Capital
Transfers
Debt
746,839
746,839
746,839
Debt
Other - Custodial Liability
51,241
22,362
28,109
50,471.
Other - Custodial Liability
Other - Miscellaneous
Liabilities
32,600
32,600
Benefit Program
Contributions Payable
Advances from Others &
Deferred Credits
154,235
139,829
13,296
153,125
Advances from Others &
Deferred Credits
Interest Payable
-
Interest Payable
Other Liabilities
60,827
202
8,538
8,740
Other Liabilities
Total Other - Miscellaneous
Liabilities
215,062
140,031
54,434
194,465
Total Reclassified Other -
Miscellaneous Liabilities
Total Intra-Go vernm ental
Liabilities
1,164,244
6,054,069
(5,055,979)
163,685
1,161,775
Total Intra-Governmental
Liabilities
Accounts Payable
56,319
32,989
23,196
-
56,185
Accounts Payable
Federal Employee Benefits
Payable
232,635
17,348
215,289
232,637
Federal Employee and
Veteran Benefits
Environmental and Disposal
Liabilities
25,723
25,723
25,723
Environmental and Disposal
Liabilities
Advances and Deferred
Revalue
3,602,263
3,568,981
11,978
3,580.959
Advances and Deferred
Revenue
Miscellaneous Liabilities
618,667
104,154
537,521
641,675
Other Liabilities
Total Miscellaneous
Liabilities
618,667
3,723,472
537,521
4,260,993
Total Reclassified
Miscellaneous Liabilities48
49.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Total Liabilities
5,699,851
9,777,541
(5,055,979)
977,392
-
5,698,954
Total Liabilities
NET POSITION
NET POSITION
Unexpended Appropriations
- Funds from Dedicated
Collections
187
187
187
Net Position - Funds from
Dedicated Collections
Unexpended Appropriations
- All Other Funds
10,400,345
10,395,591
10,395,591
Net Position - Funds Other
Than Those From Dedicated
Collections
Cumulative Results of
Operations - Funds from
Dedicated Collections
3,551,640
3,803,233
(251,593)
3.551,640
Cumulative Results of
Operations - All Other
381,028
400,121
400,121
Total Net Position
14,333,200
3,803,420
(251,593)
10,795,712
14,347,539
Total I,labilities & Net
Position
20,033,051
13,580,961
(5,307,572)
11,773,104
20,046,493
Total Liabilities & Net
Position
Reclassification of Statement of Net Cost to line Items Used for the Government-wide Statement of Net Cost for
For the Year Ended September 30,2021
FY 2021 EPA SNC
Line Items Used to Prepare the FY 2021 Government-wide SNC
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Statement
Line
Gross Costs
9,138,699
Non-Federal Costs
1,165,442
6,397,382
7,562,824
Non-Federal Gross Costs
1,165,442
6,397,382
7,562,824
Total Non-Federal Costs
Intragovernmental Costs
90,956
346,188
437,144
Benefits Program Costs
26,006
113,575
139,581
Imputed Costs
282,533
664,256
946,789
Buy/Sel! Costs
110
110
Purchase of Assets
22,737
22,737
Borrowing and Other
Interest Expense
(3,286)
(3,286)
Other Expenses (w/o
Reciprocals)
422,232
1,120,843
1,543,075
Total Intragovernmental
Costs
Total Gross Costs
9,138,699
1,587,674
7,518,225
9,105,899
Total Reclassified Gross
Costs
Earned Revenue
555,481
671,109
(249,937)
2,492
423,664
Non-Federal Earned
Revenue
Intragovernmental
Revenue
26,525
86,686
113,211
Buy/Sell Revalue
110
110
Purchase of Assets Offset
26,525
86,796
113,321
Total Intragovernmental
Earned Revenu e
Total Earn ed Revenue
555,481
697,634
(249,937)
89,288
536,985
Total Reclassified Earned
Revenue
NET COST
8,583,218
890,040
249,937
7,428,937
-
8,568,914
NET COST
50.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Ending September 30,2021 and September 30, 2020
(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, 2021
FY 2021 EPA SCNP
Line Items Used to Prepare the FY 2021 Government-wide SCNP
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Statement
Line
UNEXPENDED
APPROPRIATIONS
UNEXPENDED
APPROPRIATIONS
Unexpended appropriations,
Beginning Balance
9,599,848
(188)
9,593,529
9,593,341
Unexpended appropriations,
Beginning Balance
Appropriations Received
9,200,494
9,152,443
.
9.152,443
Appropriations Received
Other Adjustments
(49,123)
(70)
70
-
Other Adjustments
Appropriations Transferred
In/Out
Appropriations Transferred
In/Out
Appropriations Used
(8,350,687)
(376)
(8,350,451)
(8,350,827)
Appropriations Used
Total Unexpended
Appropriations
10,400,532
CUMUL. RESULTS OF
OPERATIONS
Cumulative Results,
Beginning Balance
3,717,509
3,285,516
435,966
3,721,482
Cumulative Results,
Beginning Balance
Oth er Adjustments
Other Budgetary Financing
Sources
Appropriations Used
8,350,687
376
8,350,451
8,350,827
Appropriations Used
Non-Federal Non-
Exchange Revenues
Nonexchange Revalue -
Securities Investment
6,421
6,421
6,421
Nonexchange Revenue -
Securities Investment
Nonexchange
61,939
61,939
Borrowings and other
interest revenue
769
9,933
10,702
Borrowings and other
interest revenue
Nonexchange Revalue -
Other
270,567
272,223
(1,656)
(28,781)
241,786
Other Taxes and Receipts
1,002,766
1,002,766
Collections Transferred to a
TAS other than the General
Fund
276,988
279,413
(1,656)
1,045,857
1,323,614
Total Non-Federal Non-
Exchange Revenues
Borrowings and Other
Interest Revenue
.
Other Taxes and Receipts
Transfers In/Out w/o
Reimbursement-Budgetary
(3,441)
1,102,649
(1,081,322)
21,327
Non-Expenditure Transfers-
In of Unexpended
Appropriations and
Financing Sources
(2,004)
(2,004)
Revenue and Other
Fnancing Sources -
Cancellations
Total Transfers In/Out -w/o
Reimbursement-B udgetaiy
134
(2,004)
(1,870)
Total Reclassified Transfers
In/Out w/o Reimbursement-
Budgetary
Imputed Financing Sources
172,143
26,006
113,576
139,582
Imputed Financing Sources
(Federal)
Trust Fund Appropriations
(1,064,079)
(1,064,079)
Non-entity collections
transferred to the General
Fund of the U.S.
Government
21,182
21,182
Accrual of collections yet to
be trans, to the Gen. Fund
9,431
9,431
Other non-budgetary
financing sources
Total Financing Sources
172,143
26,140
-
(921,894)
-
(895,754)
Net Cost, of Operations
(8,583,218)
(890,040)
(249,937)
(7,428,937)
-
(8,568,914)
Net Cost of Operations
51.
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Year Eliding September 30,2021 and September 30, 2020
(Dollars in Thousands)
Ending Balance -
Cumulative Results of
Operations
3,932,668
3,804,054
(251,593)
400,121
3,952,582
Total Net Position
14,333,200
3,803,420
(251,593)
10,795,712
-
14,347,539
Total Net Position
Note 36. Restatements
During FY 2021 EPA determined that OPM imputed costs related to Pension, Health and Life insurance were
materially understated for FY 2020. Only 4th quarter's costs of S28.1 million were recorded; the cost for the entire
year should have been SI 15 million, leaving Imputed Financing Sources on the Statement of Changes in Net Position
and Gross Costs on the Statement of Net Cost understated by approximately S87 million each.
The change impacts the FY2020 Gross Costs and Net Cost on the Statement of Net Costs and Other Financing
Sources (Non-Exchange) Imputed Financing Sources on the Statement of Changes in Net Position.
For the Year Ended September 30, 2020
Previously
Reported
Restatement
Restated
Amount
Gross Cost - Statement of Net Cost
Net Cost of Operations - Statement of Net Cost
S 9,335,328
$ 8,821,164
87,156 $ 9,422,484
87,156 $ 8,908,320
Imputed Financing Sources - Statement of Changes in Net Position
61,949
87,156 S 149,105
During FY21 EPA did not eliminate the upward reestimate for the WIFIA loan program leaving Intragovernmental:
Accounts Receivable and Intragovernmental: Accounts Payable overstated by S23.9 million.
For the Year Ended September 30, 2020
Previously Restated
Reported Restatement Amount
Accounts Receivable
Accounts Payable
See Note 1 paragraph R for additional information.
31,474
126,460
(23,872) $
23,872 $
7,602
150,332
52.
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Required Supplementary Information (Unaudited)
United States Environmental Protection Agency
September 30, 2021 and 2020
(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:
2021
2020
Asset Category
Buildings
Total Deferred Maintenance
s.
s.
119.869 $ 128.924
119.869 S 128.924
53.
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In Fiscal Year 2021, 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:
j}uil
-------
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 main tain 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-eapitalized or fully depreciated general PP&E.
All vehicles are capitalized.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
None.
Explain significant changes from the prior year.
No significant changes.
Beginning in FY 2015, requirements for recognizing and reporting significant and expected-to-be-permanent
impairment of general PP&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.
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Supplemental Combined Statement of Budgetary Resources (Unaudited)
United States Environmental Protection Agency
For the Fiscal Year Ended September 30, 2021
(Dollars in Thousands)
Leaking
Environmental Underground
Programs &
Management
Storage
Tanks
State Tribal
Assistance
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget Authority, Net
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority From Offsetting Collection
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 26)
Agency Outlays, Net (discretionary and mandatory)
Disbursements, Net (total) (mandatory)
Other
$ 539,838 $
2,835,674
<29.616) _
2,921,42.2 $
353,252
71.222
424.474
92,203
$ 2,616,620 $
$ 2.616.620
40.360
8,139 118,440
16.362
8-139 134.802
S 737.246 $,
i 3,756,194
$ 1,104,803
$
994,703
$ 6,566,555
1,471,761
4,368,401
1,334,951
10,832,319
4,726,214
4,726,214
23.171
570.405
604.320
; 5,251,126
$ 5,473,204
S
7.626,273
$ 22,729,408
i 1,696,484
$ 4,557,270
s
7,291,679
$ 17,356,823
3,554,042
915,934
329,768
5,279,575
600
1,396
1,996
3.430
91.014
3.554.642
915.934
334.594
5.372.585
; 5,251,126
$ 5,473,204
$
7,626.273
i"*
1 1,382,313
$ 3,714,197
$
1,316,911
$ 9,852,095
(1,403,3995
(78.012)
(1.481.411)
1 (21.086) $3,714,197
s
1.238.899
S 8.370.684
* 494.357 $ 494.357
56.
22-F-0007
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Appendix
Agency Response to Draft Report
s
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
November 10, 2021
OFFICE OF THE
CHIEF FINANCIAL OFFICER
MEMORANDUM
SUBJECT: Response to the Office of Inspector General Draft Report, Project No. OA-FY21-0170,
"EPA's Fiscal Years 2021 and 2020 (Restated) Consolidated Financial Statements, "
dated November 9, 2021
FROM: Faisal Amin, Chief Financial Officer
Office of the Chief Financial Officer
Amin, Faisal
Digitally signed by
Amin, Faisal
Date: 2021.11.10
19:48:50 -05'00'
TO:
Paul C. Curtis, Director
Financial Directorate
Office of Audit
Thank you for the opportunity to respond to the issues and recommendations in the subject draft
report. The following is a summary of the U.S. Environmental Protection Agency's overall
position, along with its position on the report's recommendations.
AGENCY'S OVERALL. POSITION
The draft report contains six recommendations for the Office of the Chief Financial Officer and
two recommendations for the Office of Enforcement and Compliance Assurance. The OCFO and
the OECA agree with the Office of Inspector General's recommendations; however, the OCFO
has provided clarification below on some of the OIG's positions. Additionally, the OECA has
identified areas within the report where information may have been misrepresented or misstated
(see Attachment A - "OECA t$ Review and Comment of the OIG's Position Paper No. 1
Accounts Receivable Source Documentation Not Provided Timely by Regions ").
OCFO RESPONSE
OIG Statement: We found that the EPA did not reconcile $2,109,083.84 in cash differences
between the EPA's and the Treasury's cash balances.
22-F-0007 81
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Response:
The agency concurs with the OIG's recommendation but notes that although the absolute
value of the differences is $2,109,083.84, the net value of the differences is $337,666.08.
Unreconciled cash differences
Treasury symbol
Dollar amount
6818/190108
$885,708.88
6819/200108
(356,297.29)
6820/210108
(867,077.67)
Total
$337,666.08
OIG Statement: We found that the EPA did not recognize $4,513,689 and $2,057,300 in
revenue for the WIFIA fee fund for fiscal years 2021 and 2020, respectively. Federal accounting
standards require agencies to recognize revenue as expenses are incurred. This error occurred
because the EPA did not establish the correct accounting model for WIFIA fee fund expenses to
reduce unearned revenue and recognize earned revenue. When the EPA does not properly
recognize revenue, the financial statements could be materially misstated.
Response:
Although the agency concurs with the OIG's recommendations, the accounting models
lacked only the transaction to recognize earned revenue and reduce unearned revenue; all the
incurred expenses for the Water Infrastructure Finance and Innovation Act Fee Fund were
properly recorded as expenses in Compass.
OIG Statement: We found that the EPA did not comply with the required form and content on
its fiscal year 2021 balance sheet. The Office of Management and Budget requires agencies to
use line titles and the format detailed in its Circular A-13 6, Financial Reporting Requirements,
dated August 10, 2021. The EPA did not revise the line titles and format of its balance sheet to
meet the requirements. As a result, the EPA did not comply with federal financial reporting
requirements. By not complying with reporting requirements, the EPA undermines the trust and
reliability of its financial statements.
Response:
The EPA agrees it did not update the titles for certain asset and liability lines in the balance
sheet as noted in Table 5-1 of the report. The EPA realizes federal guidelines are a critical
component to maintain trust and reliability in the EPA's financial statements. However,
although some line titles need to be updated, the financial statements are accurate and reflect
reliable data.
The differences stated in Table 5-1, Differences between EPA's balance sheet and Circular
A-136 balance sheet template, labeled as "Not in Circular A-l36" for the EPA's balance
sheet line title "Custodial Liability" and "Cashout Advances, Superfund" are not instances of
noncompliance. These two EPA balance sheet line titles are in agreement with the A-136 as
per Section II. 3.2.2, "Balance Sheet Template, " where it states "An entity may disaggregate
22-F-0007
82
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a required line title into two or more entity-specific line titles. The detail must sum to the
total that would otherwise be requiredfor the numbered line item. " These two-line titles are
unique to the EPA and they do properly sum to the total that would otherwise be required for
the numbered line item.
The agency agrees that Circular A-136 Section II.3.2.2, "Balance Sheet Template," states
that entities must use the asset and liability line titles on the numbered lines shown in the
balance sheet template provided in that section. However, the OMB's Circular A-136 does
not state that agencies "must" use the line titles in the net position section.
The agency agrees that the balance sheet presentation needs to be updated, yet these needed
revisions do not"undermine the trust and reliability of its financial statements." The asset
and liability line titles not being verbatim with the OMB's Circular A-136 on the balance
sheet has no negative impact on the accuracy and reliability of the financial statements.
For full compliance with the new OMB Circular A-136 balance sheet format, the agency has:
• Updated the balance sheet presentation to be verbatim for the line titles.
• Added the Stewardship PP&E line item to the balance sheet.
• Added the Commitments and Contingencies line item to the balance sheet.
• Updated the Net Position section for line titles.
As stated above, these revisions are simply changes in form and not changes in substance to the
displayed balance sheet, which accurately presents the agency's financial position as of
September 30, 2021.
OECA RESPONSE:
The OECA agrees with the OIG that it is important for the EPA's enforcement offices to submit
timely supporting enforcement documentation to the Cincinnati Finance Center. However, the
timeliness figures in the OIG's draft report are unclear and do not accurately reflect the EPA's
timeliness performance in FY 2021. We request that the OIG correct several factual errors noted
below. Further, we request that the OIG disaggregate its review of this measure to show where
the EPA needs improvement and where the EPA has met or exceeded the timeliness goal,
according to the EPA's policy.
The OIG's accounts receivable timeliness table states that the EPA and the Department of Justice
had 150 receivables, 16 of which were late in FY 2021. According to this table, the OIG obtained
this data from a DOJ report, an Integrated Compliance Information System (ICIS) report,
"Superfund Control," and "Cut-Off testing." While we appreciate the emails the OIG provided to
the OECA on November 1, 2021, we do not fully understand what "Superfund Control" and
"Cut-Off testing" mean, where the associated numbers come from, how they align with the
applicable Resource Management Directives, or why the OIG reviewed samples of accounts
receivable and not the entire universe of accounts receivable data. We suggest the best place to
obtain accounts receivable timeliness information is from EPA's Compass system, which houses
the EPA's financial data and is the system the agency uses to track its obligations under the
applicable directives. The data in the quarterly reports that the OECA sends to regional managers
on the EPA's timeliness performance are taken from Compass. Please see the data in Appendices
22-F-0007
83
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A and B of the attached OECA's Review and Comment of the OIG's Position Paper No. 1
Accounts Receivable Source Documentation Not Provided Timely by Regions (October 28,
2021). Only when the OECA and the OIG are reviewing the same data can we meaningfully
understand and discuss the EPA's timeliness performance. We would like to meet with you to
discuss the appropriate data sources for review of enforcement documentation.
The OIG's draft report highlights two examples of specific late accounts receivable related to
consent decrees-one from Region 2 and another from Region 9. The CFC sends quarterly reports
to the DOJ and manages the timeliness measure for civil judicial consent decrees on behalf of the
EPA. The Region 2 document was sent late to the CFC, but the $2.4 million receivable amount is
misleading. Because only 25 percent of the debt could be collected, the true value of this debt
was approximately $600,000, not $2.4 million. For the $8 million in receivables from Region 9,
representing three related consent decrees, the DOJ was late sending the consent decree to
Region 9. There was little the EPA could have done to achieve timeliness in this instance. In
addition, the OIG's draft report states that these receivables were not recorded in the proper
fiscal year as a result of the documentation not being timely provided. However, the court
entered the consent decrees on September 28, 2021, and the receivables would have likely been
recorded after the fiscal year ended even if the documentation had been provided within the
allowed five days. This is a relatively common occurrence when settlements are completed at the
end of the fiscal year. We request that the OIG correct the information with regard to the Region
2 and Region 9 examples.
The OECA is responsible for managing the timeliness of sending the CFC administrative penalty
orders and final EPA stipulated penalty demand letters. For administrative penalty orders, the
EPA has been meeting the five-business day submittal standard set forth in the Resource
Management Directive System 2540-9-P3 at least 95 percent of the time for the past four years,
including FY 2021. In FY 2018, the EPA was timely 95 percent of the time (1,014 of 1,070
instances); in FY 2019, the EPA was timely 96 percent of the time (881 of 920 instances); in FY
2020, the EPA was timely 95 percent of the time (874 of 920 instances); and in FY 2021, the
EPA was timely 98 percent of the time (897 of 918 instances). Please see Appendix A of the
attached OECA letter for more detailed information. The EPA has been meeting or exceeding the
95 percent goal for several years, and the OECA will continue our focus on this measure.
Accordingly, we do not believe that this task warrants continued OIG annual review, and we
request that the scope of the OIG's review of accounts receivable for FY 2021 and in the future
exclude administrative penalty orders.
The second type of enforcement document timeliness measure that the OECA manages is final
EPA stipulated penalty demand letters. When a party enters into a settlement with the EPA, the
settlement may require the party to perform certain actions. If the party fails to perform those
actions, the party is subject to stipulated penalties. The EPA may issue a stipulated penalty
demand letter to the party stating the party violated a provision of the settlement and request the
party pay a stipulated penalty. After the EPA issues the final stipulated penalty demand letter, the
EPA must send the letter to the CFC within five business days. While the EPA had a timeliness
rate of 19 percent in FY 2017 (timely in 7 out of 37 instances), since then the OECA has taken
aggressive measures to increase that percentage to 90 percent in FY 2021 (timely in 18 out of 20
instances). See Appendix B in the attached OECA letter for more detailed information.
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Stipulated penalty demand letters may also come from other sources besides the EPA, such as
the DOJ or a co-plaintiff (e.g., state). Additionally, a defendant may self-report the violation and
submit a stipulated penalty payment to the EPA without a government entity issuing a demand
letter. The EPA has been working with and implementing protocols with the DOJ, co-plaintiffs,
and defendants to send demand letters and self-reporting letters to the CFC within five business
days of the debt being triggered (as a result of an action that triggers the penalty obligation);
however, these instances are outside of what the OCFO's RMDS policies require of the EPA,
outside the control of the EPA, and thus outside the scope of this measure. As such, we
respectfully request the OIG's review of accounts receivable focus on final EPA-issued
stipulated demand letters and not stipulated penalty demand letters from other sources and self-
reporting stipulated penalties by defendants for which the EPA has no control.
The analysis in the OIG's draft report is also misleading because it fails to recognize significant
results achieved as a result of changes the OECA has implemented to improve the timeliness of
the EPA's submissions to the CFC of final EPA stipulated penalty demand letters. As noted
above, we request that the OIG's report show where the EPA needs improvement and where the
EPA has met or exceeded the timeliness goal, according to the EPA's policy. We look forward to
discussing with you the corrective actions taken in FY 2021 and planned for FY 2022 to continue
to improve the EPA's timeliness.
AGENCY RESPONSE TO DRAFT REPORT RECOMMENDATIONS
No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
1
Timely reconcile EPA cash
OCFO/
Concur. The OCFO has
September 30,
differences with the U.S.
OC
established a workgroup
2022
Department of the Treasury.
that will resolve the cash
differences and enhance the
standard operating
procedures to ensure timely
cash reconciliation.
2
Update the Water Infrastructure
OCFO/
Concur. The posting models
Completed
Finance and Innovation Act
OC
have been updated.
October 27, 2021
accounting model to properly
recognize earned revenue and
unearned revenue as fee fund
expenses are incurred.
3
Reclassify unearned revenue to
OCFO/
Concur. The unearned
Completed
earned revenue for Water
OC
revenue for those expenses
October 15, 2021
Infrastructure Finance and
has been reclassified to
Innovation Act fee fund expenses
earned revenue.
incurred during fiscal years 2021
and 2020.
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No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
4
Enforce the existing policies and
procedures, which includes
forwarding accounts receivable
source documents to the Cincinnati
Finance Center, in accordance with
the time frame provided in the
applicable resource management
directives.
OECA
Concur. The OECA agrees
that existing EPA policies,
particularly the OCFO's
Resource Management
Directives, should be
followed. The OECA has
been sending quarterly
reports on the EPA's
timeliness performance to
regional managers for years,
including in FY 2021, and
follows up with regional
managers to identify
systemic problems causing
untimely submissions. The
OECA will continue this
practice in FY 2022 and
beyond.
Completed and
Ongoing
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No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
5
Implement a system that tracks the
dates when accounts receivable
source documents need to be
submitted and are submitted by the
Office of Enforcement and
Compliance Assurance to the
Cincinnati Finance Center.
OECA
Concur. The OECA concurs
with the substance/intent of
the recommendation. The
OECA believes there are
benefits to having such a
system and is working with
several EPA offices to
develop an electronic case
management system that has
these capabilities (i.e.,
regions will automatically
transmit accounts receivable
documentation to the
Cincinnati Finance Center).
Currently, there is an
agency effort to develop and
implement this new system,
and while the OECA serves
as a partner, it is being led
by another agency office.
Accordingly, we will
continue to support the
agency on the development
of this new system;
however, due to our limited
role in the development of
this system, we cannot
commit to when
implementation will be
completed.
Ongoing
6
Record the three receivables
totaling approximately $8.1 million
in the fiscal year 2021 financial
statements.
OCFO/
OC
Concur. The three
receivables have been
recorded in the FY 2021
financial statements.
Completed
November 4,
2021
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No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
7
Complete the review of user
accounts within the Contract
Payment System as outlined in the
Office of the Chief Financial
Officer's User Access Control
Management Plan by the planned
milestone. If all the activities are
not completed by that date, the
Office of the Chief Financial
Officer should create a Plan of
Action and Milestones within the
Agency Information Security
Repository in accordance with the
requirements described in CIO
2150-P-04.2, Information Security
- Security Assessment and
Authorization Procedures.
OCFO/
OTS
Concur. The OCFO's Office
of Technology Solutions
completed the annual
review of CPS user
accounts before the planned
milestone. PTS POA&M
#19 was created in the
Agency Information
Security Repository,
XACTA. Supporting
artifacts were attached to
the POA&M and the status
updated to "Complete."
Only OISP can change the
status to "Closed." Artifacts
uploaded include the CPS
User Access Plan (with
scheduled milestones) and
spreadsheet containing
recertification information
for CPS Users.
Completed
November 9,
2021
8
Update the fiscal year 2021
financial statements to comply with
Office of Management and
Budget's Circular A-136,
specifically, the balance sheet line
items.
OCFO/
OC
Concur. The FY 2021
financial statements have
been updated to comply
with the OMB's Circular A-
136.
Completed
November 4,
2021
CONTACT INFORMATION
If you have any questions regarding this response, please contact the OCFO's Audit Follow-up
Coordinator, Andrew LeBlanc, at leblanc.andrew@epa.gov or (202) 564-1761.
cc: Lawrence Starfield
David Bloom
Carol Terris
Lek Kadeli
Jeanne Conklin
Michael Clanton
Charles Sheehan
Edward Shields
Katherine Trimble
Meshell Jones-Peeler
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Richard Gray
Derek David
Mark Badalamente
Laura Nicolosi
James Hatfield
Damon Jackson
OCFO-OC-MANAGERS
David Devere
Kimberly Jackson
Wanda Arrington
Mairim Lopez
Claire McWilliams
Demetrios Papakonstantinou
Gwendolyn Spriggs
Alana Maye
Andrew LeBlanc
Jose Kercado
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Appendix III
Distribution
The Administrator
Deputy Administrator
Chief of Staff, Office of the Administrator
Deputy Chief of Staff, Office of the Administrator
Chief Financial Officer
Agency Follow-Up Coordinator
General Counsel
Assistant Administrator for Enforcement and Compliance Assurance
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Deputy Chief Financial Officer
Associate Chief Financial Officer
Associate Chief Financial Officer for Policy
Principal Deputy Assistant Administrator for Enforcement and Compliance Assurance
Controller
Deputy Controller
Associate Deputy Controller
Director, Office of Continuous Improvement, Office of the Chief Financial Officer
Director, Office of Budget, Office of the Chief Financial Officer
Director, Office of Planning, Analysis and Accountability, Office of the Chief Financial Officer
Director, Office of Resource and Information Management, Office of the Chief Financial Officer
Director, Office of Technology Solutions, Office of the Chief Financial Officer
Director, Accounting and Cost Analysis Division, Office of the Controller
Director, Policy, Training, and Accountability Division, Office of the Controller
Branch Chief, Management, Integrity, and Accountability Branch; Policy, Training, and Accountability
Division, Office of the Controller
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Liaison, Office of Budget, Office of the Chief Financial Officer
Audit Liaison, Office of the Controller
Audit Liaison, Office of Technology Solutions, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Enforcement and Compliance Assurance
Backup Audit Follow-Up Coordinator, Office of the Chief Financial Officer
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