Office of Inspector General

U.S. Environmental Protection Agency

At a Glance

22-P-0050
June 27, 2022

Why We Did This Audit

The Office of Inspector General
conducted this audit to determine
whether the U.S. Environmental
Protection Agency met the
requirements of the Payment
Integrity Information Act of 2019
as they relate to the formulation
and inclusion of payment integrity
information in the Fiscal
Year 2021 Agency Financial
Report and accompanying
materials.

The Payment Integrity
Information Act of 2019 requires
inspectors general to determine
and report their agencies'
compliance with the Act every
fiscal year. The Act also requires
the heads of each agency to
periodically review and identify all
programs and activities with
costs exceeding the $10-million
statutory threshold that may be
susceptible to significant
improper payments. Prior to
fiscal year 2021, the EPA had
designated its grants payments
as susceptible to significant
improper payments.

This audit supports EPA mission-
related efforts:

•	Compliance with the law.

•	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.

The EPA Was Not Compliant with the Payment
integrity Information Act for Fiscal Year 2021

The EPA needs to implement
appropriate control
measures to better identify
and reduce the risk of its
improper payments.

What We Found

The EPA was not compliant with the Payment
Integrity Information Act of 2019 because the
Agency did not adhere to all of the Office of
Management and Budget improper payment
reporting requirements for fiscal year 2021.

Specifically, the EPA did not adequately
conclude whether its programs with annual outlays greater than $10 million
were likely to make improper payments above or below the statutory threshold.

The EPA divides its expenditures into ten payment streams, eight of which have
annual outlays greater than $10 million. In fiscal year 2021, with respect to the
grants payment stream, while the Agency reviewed payments to determine the
error rate and estimate the value of improper payments, it did not incorporate
the cost-allowance principles set forth in 2 C.F.R. part 200, subpart E. This
oversight occurred because the Office of the Chief Financial Officer's Standard
Operating Procedure Grants Improper Payment Review, which was updated in
September 2021, was not completed in time to use for the fiscal year 2021 risk
assessment. The standard operating procedure is intended to be used to review
the allowability of grant payments. For the remaining seven payment streams
with outlays greater than $10 million, the EPA did not establish an adequate
methodology for determining risk-assessment attributes and results.

The Agency may not have reported approximately $10.3 million in improper
payments—of which approximately $8.6 million may be subject to recovery—
because it did not apply the cost-allowance principles in the Agency's review of
grants payments. Further, because the EPA has not established an adequate
methodology for risk assessments, the Agency's risk-assessment process does
not provide reasonable assurance that payment streams are not susceptible to
improper and unknown payments above the statutory threshold or, in other
words, are susceptible to significant improper payments.

Recommendations and Planned Agency Corrective Actions

We make four recommendations to the chief financial officer, which address
reviewing the OIG-identified questioned costs, determining the payment
allowability, recovering costs and recalculating the error rate, conducting an
off-cycle risk assessment, updating applicable standard operating procedures,
and training Agency personnel on the application of cost principles. The EPA
agreed with our recommendations and provided an acceptable corrective action
for one recommendation. However, it did not provide acceptable corrective
actions for the remaining three recommendations. Recommendation 3 is
resolved with corrective actions pending. Recommendations 1, 2, and 4 remain
unresolved.

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