EPA’s Fiscal Years 2020 and 2019 Hazardous Waste Electronic Manifest System Fund Financial Statements


OFFICE OF INSPECTOR GENERAL

U.S. ENVIRONMENTAL PROTECTION AGENCY

CUSTOMER SERVICE ~ INTEGRITY ~ ACCOUNTABILITY

Operating efficiently and effectively

EPA's Fiscal Years 2020
and 2019 Hazardous Waste
Electronic Manifest System
Fund Financial Statements

Report No. 22-F-0015	December 29, 2021

Hazardous Waste
Generation

Hazardous Waste
Transportation

Hazardous Waste
Disposal

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Report Contributors: Paul Curtis

Edgar Dumeng
Robert Evans
Damon Jackson
Carol Kwok
Mairim Lopez

Abbreviations:

C.F.R.	Code of Federal Regulations

e-Manifest	Hazardous Waste Electronic Manifest

EPA	U.S. Environmental Protection Agency

FY	Fiscal Year

OIG	Office of Inspector General

OLEM	Office of Land and Emergency Management

U.S.C.	United States Code

Cover Image:	The EPA collects user fees to cover the costs of operating the e-Manifest

system, which tracks off-site shipments of hazardous waste from their
points of generation to their ultimate destinations. (EPA photo)

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Office of Inspector General

U.S. Environmental Protection Agency

At a Glance

22-F-0015
December 29, 2021

Why We Did This Audit

We performed this audit pursuant
to the Hazardous Waste
Electronic Manifest
Establishment Act. The Act
requires the U.S. Environmental
Protection Agency to prepare
and the Office of Inspector
General to audit the
accompanying financial
statements of the EPA's
Hazardous Waste Electronic
Manifest System Fund. Our
primary objectives were to
determine whether:

were fairly stated in all
material respects.

over financial reporting were
in place.
• EPA management complied
with applicable laws,
regulations, contracts, and
grant agreements.

The Act also requires the OIG to
analyze the fees collected and

use of the system, and success
of the system in operating on a

This audit supports an EPA

•	Operating efficiently and
effectively.

This audit addresses a top EPA
management challenge:

•	Managing infrastructure funding
and business operations.

Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.

List of OIG reports.

EPA's Fiscal Years 2020 and 2019 Hazardous
Waste Electronic Manifest System Fund
Financial Statements

EPA Receives a Qualified Opinion

We rendered a qualified opinion on the EPA's
fiscal years 2020 and 2019 Hazardous Waste
Electronic Manifest System Fund, known as the
e-Manifest Fund, financial statements, meaning
that, except for material differences in accounts
receivable and earned revenue, the fiscal year
2020 financial statements were fairly presented.

We found the fund's
financial statements,
except for accounts
receivable and earned
revenue, to be fairly
presented.

Material Weaknesses and Significant Deficiency Noted

We noted the following material weaknesses:

•	The EPA continued to make errors in its financial statement preparation
process.

•	The EPA did not have adequate internal control over accounts receivable
and earned revenue.

We noted the following significant deficiency: the EPA misstated its
appropriated balances.

Compliance with Applicable Laws, Regulations, Contracts, and
Grant Agreements

We did not identify any instances of noncompliance that would result in a
material misstatement to the audited financial statements.

Other Governmental Reporting Requirements

During our user fee analysis, we identified various errors and discrepancies in
EPA-provided billing data that limited our ability to perform certain audit
requirements of the Hazardous Waste Electronic Manifest Establishment Act.

Recommendations and Planned Agency Corrective Actions

We recommend that the chief financial officer, in coordination with the assistant
administrator for Land and Emergency Management, enhance internal control
over accounting for expenses recorded under fund codes so that appropriation
balances are accurate. The EPA provided acceptable planned corrective
actions in response to this recommendation. This recommendation is resolved
with corrective actions pending. We also recommend that the chief financial
officer correct the expenses recorded in excess of appropriated balances. The
EPA completed corrective actions in response to this recommendation. These
recommendations address a significant deficiency finding related to misstated
appropriation balances.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

OFFICE OF
INSPECTOR GENERAL

December 29, 2021

MEMORANDUM

SUBJECT: EPA's Fiscal Years 2020 and 2019 Hazardous Waste Electronic Manifest System Fund
Financial Statements
Report No. 22-F-0015

FROM: Paul C. Curtis, Director -—

Financial Directorate
Office of Audit

TO: Faisal Amin, Chief Financial Officer

This is our report on the subject audit conducted by the Office of the Inspector General of the
U.S. Environmental Protection Agency. The project number for this audit was QA-FY21-0079. This
report contains findings that describe the problems the OIG has identified and the corrective actions the
OIG recommends. Final determinations 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 is responsible for the issues presented in this report.

In accordance with EPA Manual 2750, your office completed corrective actions for Recommendation 2.
Your office also provided acceptable planned corrective actions and estimated milestone dates in response
to Recommendation 1. This recommendation is resolved with corrective actions pending. 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 the accessibility requirements of Section 508 of the
Rehabilitation Act of 1973, as amended. The final response should not contain data that you do not want
to be released to the public; if your response contains such data, you should identify the data for redaction
or removal along with corresponding justification.

We will post this report to our website at www.epa.gov/oig.

cc: Barry Breen, Acting Assistant Administrator, Office of Land and Emergency Management

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EPA's Fiscal Years 2020 and 2019
Hazardous Waste Electronic Manifest
System Fund Financial Statements

22-F-0015

Table of C

Inspector General's Report on EPA's Fiscal
Years 2020 and 2019 Hazardous Waste Electronic
Manifest System Fund Financial Statements

Report on the Financial Statements	1

Report on Internal Control over Financial Reporting	2

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements	4

Other Governmental Reporting Requirements	4

Management's Discussion and Analysis	6

Prior Audit Coverage	6

Attachments

1.	Material Weaknesses	8

EPA Continued to Make Errors in Its Financial Statement Preparation Process	9

EPA Did Not Have Adequate Internal Control Over Accounts Receivable and

Earned Revenue	11

2.	Significant Deficiency	14

EPA Misstated Its Appropriated Balances 	15

3.	Status of Prior Audit Report Recommendations	17

4.	Status of Recommendations 	18

Appendixes

A For the Fiscal Years Ending September 30, 2020 and 2019 Hazardous Waste Electronic

Manifest System Fund (e-Manifest) Financial Statements	19

B Agency Response to Draft Report	41

C Distribution	45

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Inspector General's Report on EPA's Fiscal
Years 2020 and 2019 Hazardous Waste Electronic
Manifest System Fund Financial Statements

The Administrator

U.S. Environmental Protection Agency

Report on the Financial Statements

We have audited the accompanying financial statements of the U.S. Environmental Protection Agency's
Hazardous Waste Electronic Manifest System Fund, known as the e-Manifest Fund. These statements
comprise the balance sheets as of September 30, 2020, and September 30, 2019; the related statements
of net cost and changes in net position; the statement of budgetary resources for the years then ended;
and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America. This includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based 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 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 qualified audit opinion.

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Basis for Qualified Opinion

As discussed in Attachment 1, the EPA made material errors of approximately $1.7 million (net) in its
fiscal year 2020 Accounts Receivable and Earned Revenue financial statement line items. The EPA
adjusted its FY 2020 Accounts Receivable and Earned Revenue financial statement line items to correct
posting errors by approximately $3.1 million. The EPA did not adjust for the remaining difference of
$1.4 million. Accordingly, accounts receivable and earned revenue are overstated by approximately
$1.4 million as of and for the year ended September 30, 2020.

Qualified Opinion

In our opinion, except for the effects on the FY 2020 financial statements of the matter described in the
Basis for Qualified Opinion paragraph, the financial statements referred to above, including the
accompanying notes, present fairly, in all material respects, the assets, liabilities, net position, net cost,
changes in net position, and budgetary resources of the EPA's e-Manifest Fund as of and for the years
ended September 30, 2020 and 2019, in accordance with accounting principles generally accepted in the
United States of America.

Report on Internal Control over Financial Reporting

Opinion on Internal Control. In planning and performing our audit of the financial statements of the
e-Manifest Fund as of and for the year ended September 30, 2020, in accordance with auditing
standards generally accepted in the United States of America, we considered the fund'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
Office of Management and Budget's audit guidance, but not to express an opinion on the effectiveness
of the fund's internal control. Accordingly, we do not express an opinion on internal control over
financial reporting.

Material Weaknesses and Significant Deficiencies. Our consideration of the internal control was for the

limited purpose of expressing an opinion on the fund's financial statements and was not designed to
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies,
and, 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.

We noted two matters that we consider to be material weaknesses and one matter that we consider to
be a significant deficiency. These issues are summarized below and detailed in Attachments 1 and 2.

22-F-0015

2

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Material Weaknesses

mtinued to Make Errors in Its Financial Statement Preparation Process

We continued to find multiple errors and misstatements in the fund's financial statements. The Office of
Management and Budget requires that information in the financial statements be presented in
accordance with generally accepted accounting principles. During their financial statement preparation
process, EPA personnel did not detect and correct various errors and misstatements as described in
Attachment 1. Not properly recording financial transactions and exercising due diligence in preparing
financial statements compromise the accuracy of the financial statements and the reliance on them to
be free of material misstatement.

I 11 \ I 'id Not Have Adequate Internal Control •< eivable and Earned
Revenue

We found that the EPA made material errors of $1,736,348 in its Accounts Receivable and Earned
Revenue financial statement line items.

Specifically, the EPA misstated Accounts Receivable and Earned Revenue by:

• Recording September 2019 billings in FY 2020 that should have been recorded in FY 2019 and
not recording September 2020 billings in FY 2020.

• Including prior months' outstanding amounts in the current months' billings.

• Preparing an inaccurate billing summary.

• Not analyzing the facility account status and adjustments.

These misstatements occurred due to inadequate internal control, such as a lack of integrated billing
and financial systems, reliance on manual workarounds, and ineffective management review and
analysis. Federal standards require a system of internal control to ensure accurate recording of
transactions and events. The e-Manifest billing system was not integrated with the EPA's financial
system used for financial reporting. Based on our analysis of the EPA's e-Manifest billings and the
number of errors we found, we do not believe that the billing data can be relied upon to provide
accurate information to support the financial statements.

Significant Deficiency

sstated Its Appropriated Balances

We found that the EPA recorded expenses totaling $390,842 that misstated its appropriations balance.
The EPA attempted to correct these expenses by recording an adjustment that created an abnormal
balance—a negative balance that we would not expect to be negative—in the Appropriations Used
financial statement line item. Federal standards for internal control require accurate recording of
transactions and events. The EPA recorded the transactions as expenses from appropriated amounts,
but they were covered by e-Manifest fees, which are not appropriated. If this error had not been
corrected, the misstatement would have made it appear that the EPA violated the Antideficiency Act by
authorizing expenditures that exceeded the available appropriations.

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Attachment 3 contains the status of issues reported in prior years' reports on the fund's financial
statements. The issues included in Attachment 3 should be considered among the material weaknesses
for FY 2020. We reported less significant internal control matters to the Agency during the course of the
audit. We will not issue a separate management letter.

Comparison > • il Manage nancial Integrity Ai . • oil with Our
Evaluation of internal Control

Office of Management and Budget 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 and identify material weaknesses
disclosed by the audit that were not reported in the Agency's report. The Agency's report is prepared
and submitted at the consolidated level, of which the e-Manifest Fund is a component. Accordingly,
there are no findings to report at the e-Manifest Fund level.

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 and the fund. As part of obtaining reasonable assurance about whether the
fund'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 fund's financial statements. However, since this testing was limited in
scope, we did not issue a related opinion, as stated below.

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.

Other Governmental Reporting Requirements

Specific Audit Requirements of the Hazardous Waste Electronic Manifest
Establishment Met

The Hazardous Waste Electronic Manifest Establishment Act, known as the e-Manifest Act, at 42 U.S.C.
§ 6939g, requires the OIG to perform an analysis, which is included below, of (1) the fees collected and
disbursed, (2) the reasonableness of the fee structure in place as of the date of the audit to meet
current and projected costs of the system, (3) the level of use of the system by users, and (4) the success
to date of the system in operating on a self-sustaining basis and improving the efficiency of tracking
waste shipments and transmitting waste shipment data.

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Fees Collected and Disbursed

The EPA began collecting e-Manifest user fees in August 2018. As required by the e-Manifest Act, the
EPA deposited fee collections into the e-Manifest Fund. The EPA received $24.5 million in fee collections
in FY 2020. The EPA is required, under the Further Consolidated Appropriations Act, 2020, to reduce the
appropriation provided by Congress for necessary expenses to carry out the e-Manifest system by the
amount of offsetting collections. The Agency reimbursed the U.S. Department of the Treasury $8 million
from e-Manifest fees collected in FY 2020 to cover the amount Congress previously appropriated for
expenses incurred.

Reasonableness of the Fee Structure to Meet Current and Projected Costs

The EPA established fees for each manifest type (fully electronic, hybrid, data plus image upload,
scanned image upload, and mailed paper) based on a fee model that focuses on the marginal labor cost
of processing each manifest type. Additionally, the EPA made a management decision to adjust the raw
output of this formula to distribute the costs across manifest types. Pursuant to 40 C.F.R. § 264.1313(a),
the EPA is required to revise the e-Manifest user fees at two-year intervals by using the applicable
fee-calculation formula, the most recent program cost, and manifest usage numbers. The EPA is also
required to publish the revised fee schedules through the e-Manifest program website by July 1 of each
odd-numbered calendar year. Table 1 compares the fees per manifest that were effective during
FYs 2019 and 2020.

Table 1: Comparison of FYs 2019 and 2020 fees by manifest type

Manifest type

FY 2019 fee per manifest

FY 2020 fee
per manifest

Fee increase percentage

Fully electronic and hybrid

$5.00

$8.00

60.00%

Data plus image upload

6.50

14.00

115.38%

Scanned image upload

10.00

20.00

100.00%

Mailed paper

15.00

25.00

66.67%

Source: FY 2020 and FY 2019 fee rates published on the EPA's website. (EPA OIG table)

The fee per manifest increased significantly in FY 2020, and the new rates were effective until FY 2021.
The EPA stated that the increase was due to various factors impacting the fee model, such as changes in
projected manifest usage and current and projected costs. According to the EPA, it expected a reduction
in manifest usage volume during FYs 2020 and 2021 based on changes in state regulation of state wastes
manifest requirements. The EPA also anticipated a greater shift from mailed paper manifests toward the
other three submission types. As of June 30, 2021, the EPA no longer accepted mailed paper manifests.

Level of Use of the System

When the e-Manifest system was launched on June 30, 2018, the EPA estimated that it would receive
approximately three million manifests annually. According to the EPA, actual data on manifest usage
were unavailable because, prior to the launch of the e-Manifest system, there was no national collection
of manifests. The Agency relied on manifest usage estimates from industry and other data sources. For
FY 2020, the EPA revised its estimate to approximately two million manifests annually.

During our analysis of EPA-provided billing data, we identified various errors and discrepancies
impacting the total number of manifests billed in FY 2020. As a result, we do not believe that the data

22-F-0015

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can be relied upon to analyze the level of use of the e-Manifest system. Further details on this finding
are in Attachment 1.

Success to Date of the System , eratiiing on a Self-Sustaining Basis and Improving
till- -1 iiiciency t >i 11 > ;king Waste Shipments ant'> 11 >i ismitting Waste Shipment Data

The e-Manifest Act requires the EPA to recover the full cost of providing system-related services. Based
on FY 2020 financial data, the EPA incurred $25.8 million in program costs. We identified various errors
and discrepancies impacting the revenue earned in FY 2020. Attachment 1 contains details on this
finding. We could not rely on the billing data to determine the success of the e-Manifest system in
operating on a self-sustaining basis and improving the efficiency of tracking waste shipments and
transmitting waste shipment data.

Management's Discussion and Analysis

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole.
The Management's Discussion and Analysis is presented for the purpose of additional analysis and is not
a required part of the basic financial statements. Such information is management's responsibility.
We obtained information from the fund's management about its methods for preparing the
Management's Discussion and Analysis, and we reviewed this information for consistency with the
financial statements.

Our audit was not designed to express an opinion, and, accordingly, we do not express an opinion on the
fund's Management's Discussion and Analysis.

We did not identify any material inconsistencies between the information presented in the fund's
financial statements and the information presented in the Management's Discussion and Analysis.

Prior Audit Coverage

During our prior year e-Manifest Fund financial statement audit—Report No. 21 F 0045, EPA's Fiscal
Years 2019 and 2018 Hazardous Waste Electronic Manifest System Fund Financial Statements, issued
January 5, 2021—we reported three material weaknesses:

• The EPA made errors in its financial statement preparation process.

• The EPA improperly recorded accounts receivable and earned revenue.

• An EPA posting error created the appearance of an Antideficiency Act violation.

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The Agency agreed with those findings and recommendations. The estimated completion date for the
corrective actions related to the errors made in the financial statement preparation process, as well as
the improper recording of receivables and earned revenues, was originally September 30, 2021;
subsequently, the Agency revised the estimated completion date to March 31, 2022. The EPA has
completed all corrective actions related to the posting error that created the appearance of an
Antideficiency Act violation.

Paul C. Curtis

Certified Public Accountant

Director, Financial Directorate

Office of Audit

Office of Inspector General

U.S. Environmental Protection Agency

December 2, 2021

22-F-0015	7

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Material Weaknesses

Table of Contents

Attachment 1

1	EPA Continued to Make Errors in Its Financial Statement Preparation Process	 9

2	EPA Did Not Have Adequate Internal Control Over Accounts Receivable and

Earned Revenue	 11

22-F-0015	8

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1—EPA Continued to Make Errors in Its Financial
Statement Preparation Process

We continued to find multiple errors and misstatements in the fund's financial statements. The Office of
Management and Budget requires that information in the financial statements be presented in
accordance with generally accepted accounting principles. During their financial statement preparation
process, EPA personnel did not detect and correct various errors and misstatements. Not properly
recording financial transactions and exercising due diligence in preparing financial statements
compromise the accuracy of the financial statements and the reliance on them to be free of material
misstatement.

Office of Management and Budget Circular A-136, Financial Reporting Requirements, section 11.3.1,
requires that information in the financial statements be presented in accordance with generally
accepted accounting principles for federal entities issued by the Federal Accounting Standards Advisory
Board's Statement of Federal Financial Accounting Standards. The U.S. Government Accountability
Office's Standards for Internal Control in the Federal Government defines the five components of
internal control in government. With respect to the "control activities" component, this document
states that "management should design control activities to achieve objectives and respond to risks."
The standard for control activities requires appropriate documentation of transactions and internal
controls. Management is to clearly document internal control, all transactions, and other significant
events in a manner that allows the documentation to be readily available for examination. The standard
for control activities also requires management to design controls for the accurate and timely recording
of transactions and events.

We found that the EPA misreported accounts receivable, earned revenue, and appropriations in its
financial statements. We reported similar issues in a prior year audit: OIG Report No. 21 F 0045, EPA's
Fiscal Years 2019 and 2018 Hazardous Waste Electronic Manifest System Fund Financial Statements,
dated January 5, 2021. We also found various errors in the financial statements. The EPA:

• Did not have adequate internal control over accounts receivable and earned revenue. We

found that the EPA made material errors, totaling at least $1,736,348, in recording Accounts
Receivable and Earned Revenue due to inadequate internal control, such as a lack of integrated
billing and financial systems, reliance on manual workarounds, and ineffective management
review and analysis.

• Misstated its appropriations balance. We found that the EPA posted transactions and one
adjustment that misstated the appropriations balance, creating the appearance of an
Antideficiency Act violation.

• Made errors in footnote disclosures. We found that the EPA did not use the correct prior year
reported balances in its "Reconciliation of Net Cost of Operations to Budget" footnote. In
addition, the FY 2019 indirect cost rate in its "Income and Expenses from Other Appropriations"
footnote should have been 15.6 percent instead of 17.0 percent. The EPA also erroneously
reported withholdings and employer contributions payable that are not retained by the Agency
in its "Payroll and Benefits Payable" footnote.

During their financial statement preparation process, EPA personnel did not detect and correct the
errors and misstatements stated above. After we conducted account analyses of the activity and

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questioned the Agency, staff stated that the EPA would prepare additional adjustments and revise the
current adjustments to correct the material errors and misstatements we found. Had it not been for our
inquiries, material errors would have impacted the financial statements. These issues highlight the need
for the EPA to strengthen its processes so that amounts and accounts are accurate and properly posted
and comply with federal accounting standards.

Failure to properly record accounting transactions and exercise due diligence in the preparation and
management review of the financial statements compromises the accuracy of the financial statements
and the reliance on them to be free of material misstatement.

We reported similar findings regarding the EPA making errors in its financial statements process in OIG
Report No. 21 F 0045, EPA's Fiscal Years 2019 and 2018 Hazardous Waste Electronic Manifest System
Fund Financial Statements, dated January 5, 2021. In that report, we recommended that the chief
financial officer:

• Strengthen and improve the preparation and management review of the financial statements so
that errors and misstatements are detected and corrected.

• Analyze adjustments and corrections to the financial statements so that such adjustments are
appropriate, accurate, and properly supported by documentation.

The EPA concurred with those recommendations and provided acceptable planned corrective actions.
The EPA's estimated completion date for corrective actions was originally September 30, 2021;
subsequently, the Agency revised the estimated completion date to March 31, 2022. Because the EPA is
working on completing its corrective actions, we are not issuing additional recommendations regarding
the findings outlined above.

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2—EPA Did Not Have Adequate Internal Control Over
Accounts Receivable and Earned Revenue

We found that the EPA made material errors of $1,736,348 in its Accounts Receivable and Earned
Revenue financial statement line items. Specifically, the EPA misstated Accounts Receivable and Earned
Revenue by:

• Recording September 2019 billings in FY 2020 that should have been recorded in FY 2019 and
not recording September 2020 billings in FY 2020.

• Including prior months' outstanding amounts in the current months' billings.

• Preparing an inaccurate billing summary.

• Not analyzing the facility account status and adjustments.

The Government Accountability Office's Standards for Internal Control in the Federal Government
defines the five components of internal control in government. Per the standard for control activities,
"management designs control activities so that all transactions are completely and accurately recorded."
It also states:

Management performs ongoing monitoring of the design and operating effectiveness
of the internal control system as part of the normal course of operations. Ongoing
monitoring includes regular management and supervisory activities, comparisons,
reconciliations, and other routine actions.

Statement of Federal Financial Accounting Standards 1, Accounting for Selected Assets and Liabilities,
states:

A receivable should be recognized when a federal entity establishes a claim to cash
or other assets against other entities, either based on legal provisions, such as a
payment due date, (e.g., taxes not received by the date they are due), or goods or
services provided. If the exact amount is unknown, a reasonable estimate should be
made.

Statement of Federal Financial Accounting Standards 7, Accounting for Revenue and Other Financing
Sources and Concepts for Reconciling Budgetary and Financial Accounting, states:

Exchange revenues arise when a Government entity provides goods and services to
the public or to another Government entity for a price. Another term for "exchange
revenue" is "earned revenue."

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The e-Manifest system is not integrated with Compass Financials, the EPA's financial system. In order to
facilitate recording e-Manifest billings in its Compass Financials, the EPA has implemented a manual
journal-entry process. The Office of Land and Emergency Management compiles monthly aggregate
billings on a manually prepared spreadsheet to summarize monthly billings. The OLEM then provides the
billing summary to the Office of the Chief Financial Officer to post to Compass Financials. The OLEM bills
those facilities with an active account status based on total manifests processed through the e-Manifest
system during the month prior to the billings. Such bills include current fees owed; outstanding fees; and
late fees, if any. The OLEM does not submit invoices to facilities with an inactive account status. The
facility account status is determined by the states.

During our audit work, we found that the EPA made the following material errors:

• The EPA improperly recorded $1,338,204 of September 2019 billings in October 2019 that it
should have recorded in FY 2019. Further, it did not record $1,911,761 of September 2020
billings until October 2020. The two errors resulted in misstatements in Accounts Receivable and
Earned Revenue of approximately $573,557. The EPA did not analyze the billings and did not
detect the misstatement during its review process.

• The EPA compounded its monthly billings. The EPA recorded entire invoice amounts, which
included prior months' outstanding fees, instead of recording only current fees owed. It did not
analyze and reconcile the billings to determine the appropriate amount to record in its Accounts
Receivable and Earned Revenue. Recording the entire invoice amount on the bills each month
overstated FY 2020 Accounts Receivable and Earned Revenue.

• The EPA misstated its February 2020 Accounts Receivable by approximately $1,162,791. The
OLEM mistakenly submitted its monthly billing summary spreadsheet with an inaccurate
amount of $2,191,801 for February 2020 billings to the Office of the Chief Financial Officer for
recording the accounts receivable. The OLEM stated the amount should have been $3,354,592.

• The EPA did not bill all applicable facilities, and its billing summary spreadsheet was not reliable.
The OLEM provided us with inconsistent e-Manifest data about account statuses for some
facilities and billing adjustments. Our analysis revealed that the billings for some facilities were
different from the amounts due per the OLEM. The OLEM initially informed us that the
discrepancies we identified were due to an omission of the billings for inactive facilities that it
should have billed and recorded in the accounts receivable. Upon several inquiries, the OLEM
modified its response stating that it had billed the majority of the inactive facilities and collected
fees except for one facility. The omission of the billings for the active facilities could misstate the
Accounts Receivable and Earned Revenue if not detected. Prior to our inquiries, the EPA did not
detect that it had not billed all applicable facilities. In addition, the OLEM stated that some
differences identified in our analysis were due to the adjustments given to the facilities that it
did not initially identify in the information it provided to us. The OLEM provided explanations
regarding some of the differences but we continued to find additional discrepancies.

Based on our analysis of the EPA's e-Manifest billings and the errors described above, we conclude that
the billing spreadsheet cannot be relied upon to provide accurate information to support the financial
statements. Also, without adequate controls over (1) recording billings in the appropriate fiscal years,
(2) recording the correct billing amount each month, (3) providing an accurate billing summary to the
Office of the Chief Financial Officer, and (4) analyzing facility account statuses and adjustments, the EPA

22-F-0015

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distorted its accounts receivable and earned revenue. Inadequate internal control over financial
reporting could decrease reliability in the financial statements.

We reported findings about recording the Accounts Receivable in the inappropriate fiscal year and
inaccurate billings in OIG Report No. 21 F 0045. We recommended that the chief financial officer record
Accounts Receivable and Earned Revenue in the appropriate fiscal year. We also recommended that the
chief financial officer, in coordination with the assistant administrator for Land and Emergency
Management, analyze e-Manifest billings so that Accounts Receivable and Earned Revenue are recorded
accurately. The EPA concurred with our recommendations and provided acceptable planned corrective
actions. The EPA's estimated completion date for corrective actions was originally September 30, 2021;
subsequently, the Agency revised the estimated completion date to March 31, 2022. Part of the
Agency's corrective action plan included the integration of the e-Manifest billing system and Compass
Financials. The EPA indicated that the integration of these systems will not be complete until March
2022.

We are not reporting new recommendations for this finding since our earlier recommendations to
correct errors in Accounts Receivable and Earned Revenue misstatements remain outstanding.

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Attachment 2

Significant Deficiency

Table of Contents

1 EPA Misstated Its Appropriated Balances	15

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1—EPA Misstated Its Appropriated Balances

The Government Accountability Office's Standards for Internal Control in the Federal Government
defines the five components of internal control in government. The standard for control activities
requires accurate and timely recording of transactions and events.

The Antideficiency Act, at 31 U.S.C. § 1341(a)(1)(A), states:

[A]n officer or employee of the United States Government ... may not ... make or
authorize an expenditure or obligation exceeding an amount available in an
appropriation or fund for the expenditure or obligation.

We found that the EPA misstated e-Manifest appropriations by processing transactions totaling
$390,842 over the appropriated balance. The EPA recorded an adjustment in its financial statements to
remove the impact of these transactions. However, this adjustment created a negative balance in the
Appropriations Used financial statement line item. The Appropriations Used line item represents the
balance of expended appropriations for the year presented. When the Appropriations Used balance is
negative, it indicates that the EPA made erroneous charges or violated the Antideficiency Act by
exceeding the Agency's available appropriations.

According to the Agency, the purpose of the adjustment was to remove spending in excess of
appropriated balances of $390,842 in the general ledger. EPA staff stated that expenses did not exceed
the available funding for e-Manifest, but that the adjustment was needed to correct the general ledger
account balances. These expenses, according to EPA staff, were covered through e-Manifest fees that
the Agency collects from the public. The e-Manifest fees are not appropriated, and the EPA records
them under general ledger accounts that do not impact the appropriated amounts. Also, the EPA uses
fund code "M" to track spending from appropriated amounts and fund code "M3F" to track spending
from e-Manifest fees. Upon further analysis, we found that the EPA recorded expenses in its financial
system under fund code "M" that, according to the EPA, were covered by e-Manifest fees.

The EPA also stated that its staff identified an abnormal balance in the Appropriations Used financial
statement line item and believed it to be a result of trying to adjust multiple years of activity in FY 2020.
The Agency made the decision to submit the financial statements to the OIG with the abnormal balance
in the Appropriations Used line item. Based on our analysis, the transactions included in the adjustment
that caused the abnormal balance were expenses recorded in FY 2020.

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By not properly recording e-Manifest expenses and tracking balances at the fund level, the EPA
misstated its appropriations balance. The negative balance in the Appropriations Used financial
statement line item, if it had not been corrected, makes it appear that the EPA violated the
Antideficiency Act by authorizing expenditures that exceeded the available appropriations.

We reported findings about errors in the EPA's financial statements preparation process, as well as
posting errors that create the appearance of an Antideficiency Act violation in OIG Report No. 21 F 0045.
At that time, we recommended that the chief financial officer:

• Strengthen and improve the preparation and management review of the financial statements so
that errors and misstatements are detected and corrected.

• Analyze adjustments and corrections to the financial statements so that such adjustments are
appropriate, accurate, and properly supported by documentation.

The recommendations described above address our FY 2020 e-Manifest financial statements audit
findings. The EPA concurred with our recommendations and provided acceptable planned corrective
actions. The EPA's estimated completion date for corrective actions was originally September 30, 2021;
subsequently, the Agency revised the estimated completion date to March 31, 2022.

Recommendations

We recommend that the chief financial officer, in coordination with the assistant administrator for Land
and Emergency Management:

1. Enhance internal controls over accounting for expenses recorded under fund codes so that
appropriation balances are accurate. Specifically, the EPA needs to implement preventative
controls, so fund expenses are properly coded when processed, and implement detective
controls at the fund level to ensure fee-based expenses and appropriations-based expenses are
properly segregated, reconciled, and recorded in the general ledger.

We recommend that the chief financial officer:

2. Correct the expenses recorded in excess of appropriated balances.

Agency Response and OIG Assessment

The Agency concurred with our recommendations and provided acceptable planned corrective actions
with an estimated completion date of September 30, 2022, in response to Recommendation 1. This
recommendation is resolved. The EPA completed corrective actions in response to Recommendation 2.

The Agency's response to our draft report is in Appendix B.

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Attachment 3

Status of Prior Audit Report Recommendations

We identified material weaknesses in our financial statement audit that remain outstanding. Table 3-1
describes the recommendations from a previous financial statement audit for which agreed-to
corrective actions have not been completed.

Table 3-1: Material weaknesses resolved with corrective action pending
EPA Made Errors in Its Financial Statement Preparation Process

During our FY 2019 audit, we found multiple instances in which the EPA had major misstatements of its financial
transactions and financial statements.

We recommended that the chief financial officer (1) strengthen and improve the preparation and management
review of the financial statements so that errors and misstatements are detected and corrected and (2) analyze
adjustments and corrections to the financial statements so that such adjustments are appropriate, accurate, and
properly supported by documentation.

The EPA agreed with our findings and recommendations. The EPA's estimated completion date for corrective
actions was originally September 30, 2021; subsequently, the Agency revised the estimated completion date to
March 31, 2022. We continued to find material errors in the EPA's financial statement preparation process during
our FY 2020 audit. Attachment 1 contains further details on our findings.

EPA Improperly Recorded Accounts Receivable and Earned Revenue

During our FY 2019 audit, we found that the Agency made two material errors in recording accounts receivable and
earned revenue. The Agency improperly recorded $1.187 million in billings during FY 2019. We also found that the
Agency did not record $1,338 million of September 2019 billings until October 2019. The Agency recorded accounts
receivable and earned revenue without analyzing the e-Manifest bills, erroneously compounding its monthly billings.
Also, the Agency believed that the September 2019 billings represented FY 2020 accounts receivable and earned
revenue. While the two errors offset to only approximately $151,000, the compounding effect of the errors, if left
undetected, could materially distort e-Manifest accounts receivable and earned revenue, as well as decrease
confidence in the quality of the fund's financial statements.

We recommended that the chief financial officer record accounts receivable and earned revenue in the appropriate
fiscal year. We also recommended that the chief financial officer, in coordination with the assistant administrator for
Land and Emergency Management, analyze e-Manifest billings so that accounts receivable and earned revenue
are recorded accurately.

The EPA agreed with our findings and recommendations. The Agency's estimated completion date for corrective
actions was originally September 30, 2021; subsequently, the EPA revised the estimated completion date to
March 31, 2022. We continued to find material errors in the EPA's recording of accounts receivable and earned
revenue during our FY 2020 audit. Attachment 1 contains further details on our findings.

Source: OIG analysis of prior year recommendations, findings, and Agency corrective actions. (EPA OIG table)

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Attachment 4

Status of Recommendations

RECOMMENDATIONS

Rec.
No.

Page
No.

Subject

Status1

Action Official

Planned
Completion
Date

16 In coordination with the assistant administrator for Land and	R Chief Financial Officer 9/30/22

Emergency Management, enhance internal controls over
accounting for expenses recorded under fund codes so that
appropriation balances are accurate. Specifically, the EPA needs
to implement preventative controls, so fund expenses are
properly coded when processed, and implement detective
controls at the fund level to ensure fee-based expenses and
appropriations-based expenses are properly segregated,
reconciled, and recorded in the general ledger.

16 Correct the expenses recorded in excess of appropriated	C Chief Financial Officer	6/2/21

balances.

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 A

For the Fiscal Years Ending September 30, 2020
and 2019 Hazardous Waste Electronic Manifest
System Fund (e-Manifest) Financial Statements

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For the Fiscal Years Ending September 30, 2020 and 2019
Hazardous Waste Electronic Manifest System Fund (e-Manifest)

Financial Statements

^ PRffltC

Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of the Controller

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Table of Contents

Management. Discussion and Analysis													1 - 5

Principal Financial Statements												,6

Balance Sheet	.6

Statement of Net Cost	.7

Statement of Changes in Net Position	.8

Statement of Budgetary Resources	9

Notes to Financial Statements,.																					...,10

Note 1. Summary of Significant Accounting Policies	10 - 12

A.	Reporting Entity,	10

B.	Basis of Presentation	10

C.	Budgets and Budgetary Accounting	10

D.	Basis of Accounting	10 - 11

E.	Revenues and Other Financing Sources	11

F.	Funds with the Treasury	11

G.	General Property, Plant, and Equipment	11

H.	Liabilities	11

I.	Accrued Unfunded Annual Leave	11

J. Retirement Plan	12

K. Use of Estimates	12

L. Reclassification and Comparative Figures	12

Note 2,	Fund Balance with Treasury (FBWT)	13

Note 3.	Accounts Receivable, Net	13

Note 4.	Other Assets			13

Note 5.	Accounts Payable and Accrued Liabilities	14

Note 6,	General Property Plant and Equipment	14 - 15

Note 7.	Other Liabilities	15 - 16

Note 8.	Unobligated Balances Available	16

Note 9,	Undelivered Orders at the End of the Period	16

Note 10.	Payroll and Benefits Payable	16 - 17

Note 11.	Income and Expenses from Other Appropriations	17

Note 12.	Exchange Revenues, Statement of Net Cost	17

Note 13.	Intragovemmental Costs and Exchange Revenue	17

Note 14.	Reconciliation of Net Cost of Operations to Budget	18 - 19

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Management's Discussion and Analysis

Introduction

The Hazardous Waste Electronic Manifest System Fund (e-Manifest) w as established as a result of the
Hazardous Waste Manifest Establishment Act (Public Law 112-195, October 5. 2012). The e-Manifest Act
requires the United States Environmental Protection Agency ("EPA" or 'the Agencj*) to establish, and own a
hazardous waste electronic manifest program information technology ("IT") system that will enable electronic
manifesting as a means to augment or replace the use of paper manifests for tracking hazardous waste
shipments. The e-Manifest Act requires that the e-Manifest system:

1. Meets the needs of the user community

2. Attracts sufficient, user participation and service revenues to ensure the viability of the system (the
e-Manifest Act authorizes EPA to collect reasonable user fees)

3. Decreases the administrative burden on the user community

Current EPA RCRA Manifest Program

The EPA Office of Land and Emergency Management (OLEM) provides policy, guidance and direction for
the Agency's emergency response and waste programs. The Office of Resource Conservation and Recovery
(ORCR) w ithin OLEM works to protect human health and the environment by ensuring responsible national
management of hazardous and nonhazardous waste. Working with delegated state waste programs, ORCR
implements the 1976 Resource Conservation and Recovery Act (RCRA), and ensures that the resource
conservation, recovery and waste management goals of RCRA are met. All states with the exception of Iowa
and Alaska have been delegated RCRA authority, meaning that states implement many if not all aspects of
RCRA policy.

The manifest program as implemented by EPA and the states ensures that hazardous waste shipments are
consistently tracked, and that hazardous wastes in fact arrive at permitted waste management facilities. The
manifest program is based on both RCRA and Department of Transportation (DOT) hazardous materials law
(The Hazardous Materials Transportation Act (HMTA)). These laws together require uniformity in the
content and use of the hazardous waste manifest form.

Launched at the end of June of 2018, e-Manifest. now receives about 5,000 hazardous waste manifests a day
and generates more than $1 million in fees each month to support the system. EPA estimates that e-Manifest
will save state and industry users, on average, $50 million annually, once electronic manifests are widely-
adopted. In FY 2020, EPA. received -1.8 million manifests.

e-Manifest System Planning Activities

Discussion of the e-Manifest system itself has taken place over many years; beginning back in the 1.990's
when the concept of an electronic manifest system was first taking shape. Further activities continued over
the years to envision the e-Manifest system through various stakeholder discussions and pilots. For more
information on EPA's efforts prior to the passage of the e-Manifest Act in 2012, please visit
http://www.epa.gov/osw/1iazard/transportation/nianifest/e-man-pastnieetings.htm.

EPA's FY 2020 e-Manifest. Financial Statements

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Iii early calendar year (CY) 2013, EPA conducted various stakeholder requirements meetings to reengage
with the user community. The purpose of these meetings was to build on past e-Manifest work to determine
high level system functional requirements. Following this, a system alternatives analysis was conducted to
look at various system implementation approaches, all assuming (among other things) a full electronic
mobile workflow. The alternatives analysis recommended that EPA leverage cloud hosting for initial system
development and system launch, and for long term operations and maintenance (O&M), consider re-
negotiating the cloud contract model or potentially migrate to an on-premise hosting model to keep costs
down.

Also as a part of the planning work, a system Concept of Operations (CONOPS)« as completed that, at a
high level, outlines both what the current manifest process entails for higbro ay and rail transporters as well as
what the future system may look like. The CONOPS document provides a process and conceptual model for
how data will flow from stakeholder to stakeholder and through the system during the manifest workflow.

The technical architecture for e-Manifest was completed in FY 2015. This architecture includes the specific
components and data flows as currently defined to illustrate a technical solution for the e-Manifest system. In
doing so, it defines the specific boundaries of the e-Manifest system, and how the different parts of the system
work together to provide the required services based on current requirements. For example, areas such as
system Cross-Media Electronic Reporting Regulation (CROMERR) integration, paper manifest processing
and manifest data quality assurance (QA) were analyzed as a part of this effort.

As a part of this technical architecture planning work, EPA conducted targeted meetings with states and
industry separately in order to further flesh out current processes as well as expectations for the above areas.
The meetings were more detailed than previous discussions and provided critical information to inform

system requirements.

The technical architecture work completed in FY 2015 serves as baseline for the current manifest program
and provides very strong foundation for future system buiidout. It meets user needs and provides flexibility
for future iterations of the system.

Building on FY 2015, in FY 2016 the e-Manifest program realized significant progress while leveraging
existing ORCR software applications. EPA initially conceived e-Manifest as a standalone system and
allowed the system architects to consider a broad range of approaches without inherent constraints from an
existing system, design. However, as designs matured, it was recognized that the e-Manifest technical
solution aligned closely with RCRAInfo in terms of end user functionality, data integration, and required
technical infrastructure. These factors led to the decision to implement e-Manifest as a unique module of
RCRAInfo.

Many of the new capabilities of e-Manifest can be implemented in RCRAInfo using the existing modular
architecture present in RCRAInfo. In addition, some of the more innovative design aspects of e-Manifest
could also be incorporated into RCRAInfo, improving both systems.

Furthermore, by leveraging e-Manifest and RCRAInfo modules, opportunities for reuse of existing
technology investments were present, reducing the burden of e-Manifest implementation.

These factors led to the decision to develop e-Manifest. and RCRAInfo modules as distinct, but interrelated
entities which will meet the current and future needs of Industry, Government and the Public.

Acquisition Strategy Change

Hie EPA's system development work is focused on ensuring user needs are met from day one of national

EPA's FY 2020 e-Manifest. Financial Statements

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system deployment. To accomplish this, the agency is conducting user-centered design and development, and
is utilizing agile software development methodologies. This approach embodies continuous improvement
through pilots and testing, using iterative processes, and continued regular engagement with users and
stakeholders throughout the process to provide on-going opportunities for input.

Instead of locking in on. one source, the new e-Manifest Program services contract (multi-vendor indefinite
delivery/indefinite quantity (IDIQ)) will utilize a variety of vehicles for the following segments of the system:

•	Project management including integration services

•	Paper manifest processing

•	User help desk and user training

•	Quality assurance for manifest data amongst industry, states, and the EPA

•	Services to calculate, collect, and support reporting of user fees for paper and electronic manifest
processing

•	Support for stakeholder communication, including outreach and meeting support

Research has shown that using this type of lean start-up methodology, with agile techniques, lowers the cost
of system development by addressing uncertainties promptly, and by ensuring that the work being completed
brings real value to users.

The agency will continue to work closely with users, adding more functionality in an incremental manner and

providing continuous improvement for the lifetime of the system. By taking this iterative approach the EPA
will refine remaining uncertainties from our architecture planning work in the most cost-effective manner.

e Manifest System Development

As a follow-on to the completed technical and conceptual architecture, e-Manifest embarked on a pilot to
create initial system functionality with the General Service Administration's (GSA) 18F consulting shop.
18F provided the IT expertise to create the foundation of e-Manifest and also provided agile project
management support. Specifically, 18F:

•	Introduced user-centered design/development, which engages industry/state users in the early
phases of development

•	Created the development platform and hosting environment for e-Manifest

•	I everaged open source technologies (Trello, GitHub, biweekly online meetings showcasing
recent system updates) to allow users and other stakeholders to follow and participate in system
development.

Ill September 2015, as part of the agile development focus, EPA, in partnership with 18F, completed an
initial system demonstration. This focused on a key aspect of the system: the transaction at the end of the
chain-of-custody when the hazardous waste arrives at the designated waste management facility, and that
facility signs the electronic manifest to verify that all the hazardous waste types and quantities were received.
Getting the system to properly electronically execute this all-important manifest transaction was a critical
first step. EPA worked with several industry users to complete this initial system functionality.

Although not as straightforward as standard government IT development projects, this course correction from
traditional lifecycle system development ("waterfall") methodology to agile will ultimately deliver a better
system in a quicker, more value-added method going forward.

EPA'sFY 2020 e-Manifest Financial Statements

3.

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24

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Starting with this initial system, EPA has been adding more functionality in an incremental manner. Research
has shown that using this type of lean start-up methodology with agile techniques lowers the cost of current
and future system development by addressing uncertainties sooner rather than later. Therefore, EPA has been
conducting user-centered design and development, starting with the small-scale demonstration phase. Open
source code and project engages industry and state users in the early phases of development, creation of
development platform, and hosting environment. EPA will expand engagement efforts to all users over time
(e.g., states with no systems, large and small generators, etc.).

The agile software development methodology embodies continuous improvement through iterative
development and delivers software in sprints. Agile embraces change, continuous and regular feedback and
improvement, value-driven delivery, full-team collaboration, and learning through discover}'. Agile
techniques cannot eliminate the challenges intrinsic to high-discovery software development, but by focusing
011 continuous delivery of incremental value and shorter feedback cycles, they expose challenges as early as
possible to allow for immediate correction.

EPA has adopted the lean start-up product development strategies with agile, user-centered software
design/development methodologies and has implemented the following:

•	Two-week sprint intervals

•	Using modular development practices, relying heavily on available off-the-shelf software
modules, by building individual working pieces of the system and integrating them into the whole

•	Addressing uncertainties that arose during the initial architecture planning work, and engaging
early with users and stakeholders

•	Bringing down the cost of current and future development by addressing risk upfront and ensuring
that the work being completed brings actual value to stakeholders and users

•	Continuously improving, using iterative processes, and engaging regularly with users and
stakeholders throughout the life of the program

EPA has made every effort to involve industry users in the development process to build the strongest
possible system. During the system development phase, the e-Manifest team is working alongside industry,
states, and other stakeholders, focusing on issues raised and addressing the issues, including the following:

•	How the national e-Manifest system will connect with state and industry systems

•	User testing of the web application

•	Addressing state data access needs

The e-Manifest team communicates regularly with states, industry, and related stakeholders about ongoing
developments (i.e., continued release and testing of system iterations), updates on e-Manifest related rules
(i.e., user fees for the e-Manifest system and amendments to manifest regulations), and the national launch, of
the e-Manifest system.

EPA'sFY 2020 e-Manifest Financial Statements

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Our primary methods of communication include the following:

•	The e-Manifest website

•	User testing

•	Conferences

•	Site visits

•	Regional implementation working groups

•	Listserv (general interest and development-focused)

•	Public webinars

•	Blog posts

•	GitHub - code repository and project management

•	FACA Meetings

•	Meetings with stakeholders.

e-Manifest will follow this path of milestones to system launch and beyond in 2020

•	September 2015— initial system functionality completed.

•	Spring of 2016- minimal viable product development.

•	Spring through fall of 2016 - early full-scale development,

•	Fall of 2016 through, winter of 2018 - rolling iterative releases/testing of system.

•	Winter 2018 - finalize user fee rale

•	June 30, 2018 System Launch

•	Continued development, enhancements and user outreach

•	Summer 2019 - update user fees

•	Winter 2020 - deployed updated electronic signature approach

•	Summer 2021 - update user fees

EPA's FY 2020 e-Manifest Financial Statements

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Principal Financial Statements

U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Balance Sheet
As of September 30, 2020 and 2019
(Dollars in Thousands)

2020

2019

ASSETS

Intragovernmentai:

Fund Balance With Treasury (Note 2)
Other (Note 4)

Total Intragovernmentai

10,790

10,801

8,029
	55

8,084

Accounts Receivable, Net (Note 3)

General Property, Plant and Equipment, Net (Note 6)

Total Assets

6,167

3.624

20,592 $_

1,338
5.008

14.430

LIABILITIES
Intragovernmentai:

Accounts Payable and Accrued Liabilites (Note 5)
Other (Note 7)

$

57
9

$

58
3

Total Intragovernmentai



66



61

Accounts Payable and Accrued Liabilities (Note 5)
Payroll and Benefits Payable (Note 10)

Total Liabilites



2,948
318



748
143

$

3,332

$

952

NET POSITION









Unexpended Appropriations - Funds from Dedicated Collections
Cumulative Results of Operations - Funds from Dedicated Collections

$

94
17.166

$

186
13.292

Total Net Position







13.478

Total Liabilities and Net Position

$

20 592

$

H-ao

The accompanying notes are an integral part of these financial statements
EPA's FY 2020 e-Manifest Financial Statements

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U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Statement of Net Cost
For the Fiscal Years Ended September 30, 2020 and 2019
(Dollars in Thousands)

2020



COSTS

Gross Costs

$ 25,818 $

13,896

Expenses from Other Appropriations (Note 11)

4,379

2,139

Less:





Earned Revenue

29.374

15.265

NET COST OF OPERATIONS (Notes 13 and 14)

S 823 S

770

The accompanying notes are an integral part of these financial statements
EPA's FY 2020 e-Manifest Financial Statements

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U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Statement of Changes in Net Position
For the Fiscal Years Ended September 30, 2020 and 2019
(Dollars in Thousands)

2020	2019

Cumulative Results of Operations:

Net Position - Beginning of Period	$ 13,292 $ 8,060

Budgetary Financing Sources:

Appropriations Used
Transfers In < )ut

Income from Other Appropriations (Note 11)
Total Budgetary Financing Sources

92
23
4.379
4,494

3,665
8

2.139
5,812

Other Financing Sources (Non-Exchange)
Imputed Financing Sources
Total Other Financing Sources

203
203

190
190

Net Cost of Operations

$ (823)

$ (770)

Net Change

3.874

5.232

Cumulative Results of Operations

S 17.166

$ 13.292

Unexpended Appropriations:

2020

2019

Net Position - Beginning of Period

$ 186

$ 3,851

Budgetary Financing Sources:
Appropriations Used
Total Budgetary Financing Sources

(92)
(92)

(3.6651
(3,665)

Total Unexpended Appropriations

94

186

TOTAL NET POSITION

$ 17.260

$ 13.478

The accompanying notes are an integral part of these financial statements
EPA's FY 2020 e-Manifest Financial Statements

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U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Statement of Budgetary Resources
For the Fiscal Years Ended September 30, 2020 and 2019
(Dollars ill Thousands)

	2020	2019	

BUDGETARY RESOURCES

Unobligated Balance From Prior Year Budget Authority, Net (discretionary and

mandatory)	$ 2,104 $	931

Spending Authority from Offsetting Collections (discretionary and mandatory)	24.551	15.581

Total Budgetary Resources	$ 26.655 $ 16.512

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward adjustments (total)	$ 20,465	$ 14,486
Unobligated Balance, End of Year:

Vpportioned, Unexpired Accounts	5,909	1,764

Expired I 'nobligated Balance, End of Year		281 	262

Unobligated Balance, End of Year (total): (Note 8)		6.190 	2.026

Total Status of Budgetary Resources	$ 26.655	$ 16.512

OUTLAYS, NET

Outlays, Net (total) (discretionary and mandatory)	$ (2.761)	$ (4.147)

Agency Outlays, Net (discretionary and mandatory)	$	(2.761) $	(4.147)

The accompanying notes are an integral part of these financial statements
EPA's FY 2020 e-Manifest Financial Statements

9.

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U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

Note 1. Summary of Significant Acrounting Policies

A. Reporting Entity

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 Hazardous Waste Electronic Manifest System Fund (e-Manifest) was authorized by the establishment of

the Hazardous Waste Electronic Manifest System Act. The act mandates that the Agency, within three years,
establish a hazardous waste electronic manifest system that can be accessed by any user. The act authorized
the administrator to impose users' fees to pay the costs incurred in developing, operating, maintaining, and
upgrading the system, including any costs incurred in collecting and processing data from paper manifests
submitted to the system after the date on which the system enters operations.

The e-Manifest fund charges some administrative costs directly to the fund, and charges the remainder of the
indirect administrative costs to Agency-wide appropriations. These {mounts are included as "Income from
Other Appropriations" on the Statement of Changes in Net Position and as "Expenses from Other
Appropriations" on the Statement of Net Cost.

B. Basis of Presentation

These financial statements have been prepared to report the financial position and results of operations of the

EPA for the e-Manifest Fund in accordance with the Chief Financial Officers Act of 1990 and the
Government Management Reform Act of 1994. The reports have been prepared from the books and records
of the EPA in accordance with Office of Management and Budget (OMB) Circular A-136 Financial
Reporting Requirements, and the EPA's accounting policies which are summarized in this note. These
statements are therefore different from the financial reports also prepared by the EPA pursuant to OMB
directives that are used to monitor and control the EPA's use of budgetary resources. The balances in these
reports have been updated from the EPA consolidated financial statements to reflect the use of fiscal year
2020 cost factors for calculating imputed costs for Federal civilian benefits programs. These updates impact
the Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.

C» Budgets and Budgetary Accounting

For fiscal year 2020 the e-Manifest fund was funded through offsetting collections. For fiscal year 2019 the
e-Manifest fund was funded through appropriations and offsetting collections.

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.

EPA's FY 2020 e-Manifest Financial Statements

10.

22-F-0015

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.

E. Revenues ami Other Financing Sources

For fiscal years 2020 and 2019 EPA received funding from fees collected and recognized revenues from
collections to the extent that expenses were incurred during the fiscal, year.

F. Funis with tlie Treasury

The e-Manifest fund deposits receipts and processes disbursements through its operating account maintained
at the U.S. Department of Treasury.

G. General Property, Plant, and Equipment

General property, plant and equipment for e-Manifest consists of software in development. Internal use
software includes purchased commercial off-the-shelf software, contractor developed software and software
that was internally developed by Agency employees. In fiscal year 2017, EPA reviewed its capitalization
threshold levels for PP&E. The Agency performed an analysis of the values of software assets and increased
capitalization threshold from $250 thousand to $5 million to better align with major software acquisition
investments. The $5 million threshold will be 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. The Hazardous Waste Electronic Manifest System was placed into production
August 23, 2018.

II. 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. IIow ever, no liability can be paid by the Agency \\ itliout 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.

I. 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.

EPA'sFY 2020 e-Manifest Financial Statements

11.

22-F-0015

J. Retirement Plan

There are two primarj retirement systems for federal employees. Employees hired prior to January 1, 1987,
may participate in the Civil Service Retirement System (CSRS). On January 1, 1987, the Federal Employees
Retirement System (FERS) went into effect pursuant to Public Law 99-335. Most employees hired after
December 31, 1986, are automatically covered by FERS and Social Security. Employees hired prior to
January 1, 1987, elected to either join FERS and Social Security or remain in CSRS. A primary feature of
FERS is that it offers a savings plan to w hich 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 pro grams
(Retirement, Health Benefits, and Life Insurance). SFFAS No. 5 requires that the employing agencies
recognize the cost of pensions and other retirement benefits during their employees' active years of service.
SFFAS No. 5 requires that the Office of Personnel Management (OPM), as administrator of the CSRS and
FERS, the Federal Employees Health Benefits Program, and the Federal Employees Group Life Insurance
Program, provide federal agencies with the actuarial cost factors to compute the liability for each program.

K. Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities, including environmental and grant liabilities, and the
reported amounts of revenue and expenses during the reporting period. Actual result s could differ from those

estimates.

L, 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 27, 2020.

EPA'sFY 2020 e-Manifest Financial Statements

12.

22-F-0015

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

Note 2. Fund Balance With Treasury (FBWT)

Fund Balance with Treasury as of September 30, consists of the following:

20|9_

Entity

Non-Entitv

Entity

Non-Entitv





Assets

Assets Total

Assets

Assets



Total

Revolving Funds:











E-Manifest $ 10.790

$ - $ 10.790

*0

00

$

$

8.029

Total $ 10,790

$ - $ 10.790

$ 8.029

$

$



Status of Fund Balances:









Unobligated Amounts in Fund Balance:











Available for Obligation



$

6,452

$

2,580

Obligated Balance not. yet Disbursed





4.338



5,449

Total



$

10.790

$ 8.029

Note 3. Accounts Receivable, Net











Accounts Receivable as of September 30,

2020 and 2019, consist of the following:













2020



2019

Non-Federal:











Accounts & Interest Receivable



$

6 J 71

$

1,338

Less: Allowance for Uncollectible





(4)



-

Total



$

6.167

$

1.338

Note 4. Other Assets











Other Assets as of September 30, 2020 and 2019, consist of the following:













2020



2019

Intragovernmental:











Advances to Working Capital Fund



$

11

$

55

Total



$

11

$

55

EPA'sFY 2020 e-Manifest Financial Statements

13.

22-F-0015

34

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

Note 5, Accounts Payable and Accrued Liabilities

The Accounts Payable and Accrued Liabilities are current liabilities and consist of the following amounts as

of September 30, 2020 and 2019:

2020	2019

Intragovernmental:

Accounts Payable	$ -	$	2

Accrued Liabilities		57 	56

Total	$	57 $	58

2020	2019

Non-Federal:

Accounts Payable	$ 1,228 $

Advances Payable	-	(2)

Other Accrued Liabilities		1.720 	750

Total	$ 2.948 $.	748

Note 6. General Property, Plant and Equipment, Net

As of September 30, 2020, General PP&E Cost consisted of the following:

2020



EPA





Contractor

Land







Held

Software

Software

Held

and

Capital





Equipment



(development)

Eauioment

Buildings

Leases

Total

Balance,















Beginning of















Year

$

$ 6.907

$

$

$ -

S -

$ 6,907

Balance, End















of Year

$

$ 6.907

$

$

$ -

$ -

$ 6,907

EPA'sFY 2020 e-Manifest Financial Statements

14.

22-F-0015

35

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

As of September 30, 2020, General PP&E Accumulated Depreciation consisted of the following:

	2020	

EPA-	Contractor Land

Held	Software Software	Held	and Capital

Equipment (production) (development) Equipment Buildings Leases Total

Balance,

Beginning of

Year	$ - $ 1,899 $	S - $ - S - S 1,899

Depreciation

Expense	-		1.384 	-	-	-	-	1.384

Balance, End

of Year S	$ 3.283 $	$	S	S	S 3.283

As of September 30, 2020, General PP&E, Net consisted of the following:

2020

Balance, End
of Year, Net

EPA-





Contractor

Land





Held

Software

Software

Held

and

Capital



Equipment

(production)

(development)

Equipment

Buildings

Leases

Total

$

$ 3.624

$

$

$ -

$ -

$ 3,624

Note 7, Other Liabilities

Other liabilities consist of the following as of September 30, 2020:

Covered by
Budgetary
Resources

Current

Employer Contributions & Payroll Taxes
Total Intragovernmental

Not Covered
by

Budgetary
Resources

Total

_2 S_

EPA'sFY 2020 e-Manifest Financial Statements

15.

22-F-0015

36

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

Other Liabilities consist of the following as of September 30, 2019:

Not Covered
Covered by	by

Budgetary Budgetary
Resources Resources Total

Current

Employer Contributions & Payroll Taxes
Non-Current

Total Intragovernmental

s

3 $

$

3

$

3 $

$

3

Note 8. Unobligated Balances Available

Unobligated balances are a combination of two lines on the Statement of Budgetary Resources: Apportioned,
Unobligated Balances and Unobligated Balances Not Available. Unexpired unobligated balances are
available to be apportioned by the OMB for new obligations at the beginning of the following fiscal year.
The expired unobligated balances are only available for upward adjustments of existing obligations.

The unobligated balances available consist of the following as of September 30, 2020 and 2019:

2020	2019

Apportioned, Unexpired Accounts

$

5.909 $

1,764

Expired Unobligated Balance, End of Year



281

262

Total

$

6.190 $

2.026

Note 9. Undelivered Orders at the End of the Period

Budgetary resources obligated for undelivered orders at September 30, 2020 and 2019, were $1,485 and
$4,654, respectively.

Note 10. Payroll and Benefits Payable

Payroll and benefits payable to the EPA employees for the year's September 30, 2020, and 2019, consist of
the following:

Covered by Not Covered
Budgetary by Budgetary
Resources Resources

Total

FY 2020 Payroll and Benefits Payable
Accrued Funded Payroll and Benefits
Accrued Unfunded Annual Leave

$

202 S

$

116

202
116

Total - Current

$

202 $

116 $

318

EPA'sFY 2020 e-Manifest Financial Statements

16.

22-F-0015

37

Covered by Not Covered
Budgetary by Budgetary
Resources Resources Total

FY 2019 Payroll and Benefits Payable

Accrued Funded Payroll and Benefits

$ 47 $

Accrued Unfunded Annual Leave

Total - Current

S 47 $

96 $

143

Note 11. Income and Expenses from Other Appropriations

The Statement of Net Cost reports the program costs that include the full cost of the program outputs and

consist of the direct costs and all other costs that can be directly traced, assigned on a cause and effect basis,
or reasonably allocated to program outputs.

During FYs 2020 and 2019, the indirect rate was 17.00% and 15.60%, respectively.

As illustrated below there is no impact on e-Manifest's Statement of Changes in Net Position.

2020 20W

Income from Other Appropriations

$ 4.379 $

2,139

Expenses from Other Appropriations

4.379

2.139

Net Effect

S - $

Note 12. Exchange Revenues, Statement of Net Cost

For FYs 2020 and 2019, the exchange revenues reported on the Statement of Net Cost include both Federal
and non-Federal amounts.

Note 13. Intragovernmental Costs and Exchange Revenue

2020 2019

Costs:

Intragovernmental

1,970 $

2,837

With the Public

23,848

11,059

Expenses from Other Appropriations

4.379

2.139

Total Costs

30.197 S

16.035

Revenue:

With the Public

29.374

15.265

Total Revenue

29,374

15,265

Net Cost of Operations:

823 $

770

Intragovernmental costs relate to the source of the goods or services not the classification of the related
revenue.

EPA'sFY 2020 e-Manifest Financial Statements

17.

22-F-0015

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

Note 14. Reconciliation of Net Cost of Operations to Net Outlays
For the Fiscal Year Ended FY202O:

Intra-
governmental

With the
Public

Total 2020

NET COST

Components of Net Cost That Are Not Part of Net Outlays:
Property, Plant and Equipment Depreciation
Expenses from Other Appropriations

$ 1,971

$ (1,148)

(1384)
(4,379)

$ 823

(1,384)
(4,379)

Increase/(Decrease) in Assets:
Accounts Receivable
Other Assets

(45)

4,981

4,981
(45)

(Increase)/Decrease in Liabilites:

Accounts Payable and Accrued Liabilites

Payroll and Benefits Payable
Other Liabilites

(7)

(2,380)
(261)

(2.380)
(261)

(7)

Other Financing Sources:

Transfer Out (In) Without Reimbursement
Other Imputed Financing

Total Components of Net Cost That Are Not Part of Net
Outlays

23
203

-

23
203

2,145

(4,571)

(2,426)

Other Temporary Timing Differences

-

(335)

(335)

NET OUTLAYS

$ 2.145

$ (4.906)

$ (2,761)

EPA'sFY 2020 e-Manifest Financial Statements

18.

22-F-0015

39

-------
U.S. Environmental Protection Agency
Hazardous Waste Electronic Manifest System Fund
Notes to the Financial Statements
Fiscal Years Ended September 30,2020 and September 30, 2019
(Dollars ill Thousands)

For the Fiscal Year Elided FY2019:

NET COST

Components of Net Cost That Are Not Part of Net Outlays;
Property. Plant and Equipment Depreciation
Expenses from Other Appropriations

Increase/I Decrease) in Assets:

Accounts Receivable
Other Assets

(Increase)/Decrease in Uabilites:

Accounts Payable and Accrued Liabilites
Payroll and Benefits Payable
Other Liabilites

Other Financing Sources:

Transfer Out (In) Without Reimbursement
Other Imputed Financing

Total Components of Net Cost That Are Not Part of Net

Outlays

Other Temporary Timing Differences

NET OUTLAYS

Intra

With the



governmental

Public

Total 2019

S 2,837

$ (2,067)

$ 770



(1,381)

(1,381)

-

(2,140)

(2,140)



(443)

(443)

16

~

16

12

(353)

(341)

-

(26)

(26)

7



7

8

190

-

8
190

3,070

(6,410)

(3,340)

-

(807)

(807)

$ 3,070

$ (7,217)

$ (4,147)

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. Hie reconciliation of net outlays, presented on a
budgetary basis, and the net cost, presented on an accrual basis, provides an explanation of the relationship
between budgetary and financial accounting information. The reconciliation serves not only to identify costs
paid for in the past and those that will be paid in the future, but also to assure integrity between budgetary
and financial accounting. The reconciliation explains the relationship between the net cost of operations and
net outlays by presenting components of net cost that are not part of net outlays (e.g. depreciation and
amortization expenses of assets previously capitalized, change in asset/liabilities), components of net outlays
that are not part of net cost (e.g. acquisition of capital assets), other temporary timing difference (e.g. prior
period adjustments due to correction of errors). The analysis above illustrates this reconciliation by listing the
key differences between net cost and net outlays.

EPA'sFY 2020 e-Manifest Financial Statements

19.

22-F-0015

40

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Appendix B

Agency Response to Draft Report

a
*?

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON. D.C. 20460

November 12. 2021

OFFICE OF THE
CHIEF FINANCIAL OKFICER

MEMORANDUM

SUBJECT: Response to the Office of Inspector General Draft Report. Project No. OA-FY21-0079.

"EPA's Fiscal Years 2020 and 2019 Hazardous Waste Electronic Manifest System Fund
Financial Statements," dated October 25. 2021

FROM: Faisal Aniin. Chief Financial Officer
Office of the Chief Financial Officer

Amin, Faisal

Digitally s-gneci by Amin,
Faisal

Date. 2021.11.12 18:12:06
-0500

TO: Paul C. Curtis. Director

Financial Dir ectorate
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 two recommendations for the Office of the Chief Financial
Officer. The OCFO does not agree with the categorization of the issue presented by the
Office of Inspector General as a significant deficiency but concurs with the
recommendations and has provided corrective actions.

AGENCY RESPONSE TO QIG STATEMENTS

OIG Statement: We found that EPA recorded expenses totaling $390,842 that misstated its
appropriations balance. EPA attempted to correct these expenses by recording an adjustment
that createdan abnormal balance—a negative balance that we would not expect to be
negative—in the Appropriations Used financial statement line item. Federal standards for
internal control require accuraterecording of transactions and events. EPA recorded the
transactions as expenses from appropriated amounts, but they were covered by e-Manifest
fees which are not appropriated. If this error is not corrected, the misstatement makes it

appear that EPA violated the Antideficiency Act by authorizing expenditures that exceeded

22-F-0015

-------
the available appropriations.

Agency Response

The agency believes more clarity is needed to capture accurately the issue raised by the
OIG. Asnoted in the draft report, the Antideficiency Act states:

[A]n officer or employee of the United States Government. . . may not. . . make or authorize
expenditure or obligation exceeding an amount available in an appropriation or fund for the
expenditure or obligation.

The Antideficiency Act does not apply at the level of the internal fund codes used by the
EPA. At nopoint in FY 2020 did the agency spend in excess of its appropriations received
for any Treasury Symbol for the e-Manifest program. From the period of the inception of the
e-Manifest program to the end of FY 2020, the e-Manifest program has had several different
types of legislatively mandatedfunds. The types of funds included are appropriated three-
year funds, appropriated no-year funds, and non-appropriated funds from fees. As the
lifecycle of these funds and the amount of fees collected have evolved, so has the accounting
for the program.

FY 2020 was the first year that the e-Manifest program completely used the carryover
balance previously received from appropriated funds as well as the full $8 million advance
appropriation it received for FY 2020. Any spending in excess of the amount of advanced
appropriations received would be considered allowable. The EPA reconciled its spending at
year end and made the appropriate adjustment to remove the impact of any funds recorded
in excess of the appropriated amount received. When preparing this adjustment, the agency
did not consider the reversal of a prior-year financial statement accrual that impacted
appropriations used. The EPA has prepared an updated adjustment, which will be reflected
in the final financial statements, but disagrees that the abnormal balance in the
"appropriations used" account represents a significant deficiency in internalcontrols.
Nevertheless, the agency will seek to implement additional safeguards to enhance the
controls.

22-F-0015

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AGENCY RESPONSE TO DRAFT REPORT RECOMMENDATIONS

No.

Recommendation

High-Level Corrective Action(s)

Estimated
Completion Date

1

In coordination with the assistant
administrator for Land and
Emergency Management, enhance
internal controls over accounting for
expenses recorded under fund codes
so that appropriation balances are
accurate. Specifically, EPA needs to
implement preventative controls, so
fund expenses are properly coded
when processed, and implement
detective controls at the fund level to
ensure fee-based expenses and
appropriations-based expenses are
properly segregated, reconciled, and
recorded in the general ledger.

Concur. As the accounting for e-
Manifest continues to evolve, the
agency will continue to review and
implement appropriate safeguards in its
financial system to ensure the
appropriate accounting models are
used. The OCFO's Office of Budget
will work with the EPA's financial
system contractor to implement
additional funds control measures. In
addition, the OCFO's Office of the
Controller will complete a full review
of posting models after implementation
of the new e-Manifest interface with
Compass.

September 30,
2022

2

Correct the expenses recorded in
excess of appropriated balances.

Concur. The agency has corrected its
adjustment in Compass.

Completed
June 2, 2021

CONTACT INFORMATION

If you have any questions regarding this response, please contact the OCFO's Audit
Fol 1 ow-upCoordinator, Andrew LeBlanc, at 1 eblanc.andrew@epa.gov or (202) 564-1761.

cc: David Bloom
Carol Terris
Lek Kadeli
Jeanne Conklin
Charles Sheehan
Edward Shields
Katherine Trimble
Meshell Jones-Peeler
Richard Gray
Maria Williams
Angel Robinson
Barry Breen
Carlton Waterhouse
Nigel Simon

22-F-0015

43

-------
Nick Hilosky
Kecia Thornton
Caroline Hoskinson
Sonya Sasseville
Laura Nicolosi
James Hatfield
Damon Jackson
OCFO-OC-MANAGERS
Mairim Lopez
Edgar Dumeng
Sheila May
Andrew LeBlanc
Jose Kercado

22-F-0015

44

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Appendix C

Distribution

The Administrator

Deputy Administrator

Chief of Staff, Office of the Administrator

Deputy Chief of Staff, Office of the Administrator

Assistant Administrator for Land and Emergency Management

Agency Follow-Up Coordinator

General Counsel

Associate Administrator for Congressional and Intergovernmental Relations

Associate Administrator for Public Affairs

Deputy Chief Financial Officer

Associate Chief Financial Officer

Associate Chief Financial Officer for Policy

Principal Deputy Assistant Administrator for Land and Emergency Management

Deputy Assistant Administrator for Land and Emergency Management

Controller

Deputy Controller

Associate Deputy Controller

Director, Office of Continuous Improvement, 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
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer

Chief, Management, Integrity and Accountability Branch, Policy, Training, and Accountability Division,

Office of the Controller
Director, Office of Program Management, Office of Land and Emergency Management
Director, Office of Resource Conservation and Recovery, Office of Land and Emergency Management
Director, Program Management, Communications, and Analysis Office, Office of Resource Conservation

and Recovery, Office of Land and Emergency Management
Director, Program Implementation and Information Division, Office of Resource Conservation and

Recovery, Office of Land and Emergency Management
Branch Chief, Information Collection and Analysis Branch, Office of Resource Conservation and

Recovery, Office of Land and Emergency Management
Associate Branch Chief, Information Collection and Analysis Branch, Office of Resource Conservation and

Recovery, Office of Land and Emergency Management
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Land and Emergency Management
Audit Liaison, Office of Resource Conservation and Recovery, Office of Land and Emergency
Management

22-F-0015

45

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