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ABOUT THIS REPORT
The U.S. Environmental Protection Agency is pleased to
present the Fiscal Year 2022 Agency Financial Report.
This report provides an overview of the financial and
performance results for the fiscal year spanning October
1, 2021, through September 30, 2022.
The information, data, and analyses presented in this
AFR is to provide assistance to the President, Congress,
and the American people in evaluating the agency's
yearly activities and accomplishments towards its
mission of protecting human health and the
environment.
The FY 2022 AFR encompasses the EPA Office of
Inspector General's FY 2022 Financial Statements Audit
Report and the agency's FY 2022 Federal Managers'
Financial Integrity Act Report, including the
Administrator's statement assuring the soundness of
the agency's internal controls.
The AFR reports information in accordance with the
Chief Financial Officers Act and Office of Management
and Budget Circular A-136, Financial Reporting
Requirements, and fulfills the requirements set
How the Report Is Organized
forth in OMB Circular A-11, Preparation,
Submission and Execution of the Budget,
and the Government Performance and Results
Act Modernization Act of 2010.
The AFR is one of two annual reports publishing
information on EPA's programmatic and financial
activities. The financial information within the AFR will
be supplemented by the EPA's Annual Performance
Report, which will present the agency's FY 2022
performance results as measured against the targets
established in its FY 2022 Annual Performance Plan and
Budget and the goals established in the FY 2022-2026
EPA Strategic Plan. The EPA's FY 2022 APR will be
included with the agency's FY 2024 Congressional
Budget Justification and will be posted on the agency's
website.
Collectively, the AFR and APR present a complete
summary of the agency's activities, accomplishments,
progress, and financial information for each fiscal year.
Both prior year reports are available at:
https://www.epa.gov/planandbudget/fv-2022-2026-
data-quality-records.
The EPA's FY 2022 AFR is organized into three sections to
provide clear insight into the agency's financial results.
Section I—Management's Discussion and
Analysis
This section contains an overview on the EPA's
mission and organizational structure; a summary of
performance results; an analysis of the financial
statements and stewardship data; information on
systems, legal compliance, and controls; and other
management initiatives.
Section II—Financial Section
This section includes the agency's independently
audited financial statements, which comply with
the Chief Financial Officer Act, the related
Independent Auditors' Report and other
information on the agency's financial
management.
Section III—Other Accompanying Information
This section contains additional material as
specified under OMB Circular A-13 6, Financial
Reporting Requirements, and the Reports
Consolidation Act of 2000. The subsection titled
"Management Integrity and Challenges" describes
the EPA's progress toward strengthening
management practices to achieve program results
and presents the OIG's list of top management
challenges.
Appendices
The appendices include links to relevant
information on the agency website and a glossary
of acronyms and abbreviation.
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Table of Contents
ABOUT THIS REPORT 1
Table of Contents 2
Message from the Administrator 4
SECTION 1 - Management's Discussion and Analysis
ABOUT EPA 7
History and Purpose 7
Mission 7
Organization 8
Regional Map 9
Collaborating with Partners and Stakeholders 9
FY 2022 PROGRAM PERFORMANCE 10
FINANCIAL ANALYSIS AND STEWARDSHIP INFORMATION 11
Sound Financial Management: Good for the Environment, Good forthe Nation 11
Financial Condition and Results 14
Financial Management for the Future 18
Limitations of the Principal Financial Statements 18
IMPROVING MANAGEMENT AND RESULTS 19
Office of Inspector General Audits, Evaluations, and Investigations 19
Grants Management 19
ACCOUNTABILITY: SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE 20
Federal Managers' Financial Integrity Act 20
The Digital Accountability and Transparency Act 20
Federal Financial Management Improvement Act (FFMIA) 21
Fiscal Year 2022 Annual Assurance Statement 22
SECTION II - Financial Section
Message from the Chief Financial Officer 24
EPA'S FISCAL YEARS 2022 AND 2021 CONSOLIDATED FINANCIAL STATEMENTS (WITH
RESTATEMENT) 26
AUDIT OF EPA'S FISCAL YEARS 2022 AND 2021 CONSOLIDATED FINANCIAL
STATEMENTS 83
SECTION III - Other Accompanying Information
MANAGEMENT INTEGRITY AND CHALLENGES 114
Overview of EPA's Efforts 114
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2023 KEY MANAGEMENT CHALLENGES 115
Office of Inspector General-Identified Key Management Challenges 115
FY 2023 EPA MANAGEMENT CHALLENGES (OIG Report) 116
Agency Response to Office of Inspector General-Identified Management Challenges 117
PROGRESS IN ADDRESSING FY 2022 WEAKNESSES 118
Material Weakness 118
Summary of Financial Statement Audit 119
Summary of Management Assurances 119
PAYMENT INTEGRITY 120
L Payment Reporting 120
IL Risk Assessment 122
III. Recoveries of Improper Payments 124
Programs Susceptible to Improper Payments 124
Recoveries of Improper Payments 125
IV.Agency Improvement of Payment Accuracy with the Do Not Pay Initiative 129
CIVIL MONETARY PENALTY ADJUSTMENT FOR INFLATION 130
BIENNIAL REVIEW OF USER FEES 134
GRANTS PROGRAM 135
CLIMATE-RELATED FINANCIAL RISK 136
SECTION IV - Appendices
APPENDIX A PUBLIC ACCESS 138
APPENDIX B ACRONYMS AND ABBREVIATIONS 140
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Message from the Administrator
November 15, 2022
The President
The White House
Washington, D.C, 20500
Dear Mr. President:
It is my privilege to present the U.S. Environmental Protection Agency's
Fiscal Year 2022 Agency Financial Report and to inform you that the EPA
for the 23rd consecutive year has earned a clean, unmodified financial
audit opinion from its independent auditors - an achievement that speaks
to the dedication, professionalism, and integrity of the agency's career
staff. This report outlines how the EPA used its financial resources to
advance the Administration's public health and environmental priorities, ensure accountability and
demonstrate financial integrity.
This Administration has made it clear since its first day that America is back as the global leader on
climate change. We promised bold action to tackle the climate crisis and advance environmental
justice, and FY 2022 will be remembered as a pivotal year for the agency's commitment to facing these
environmental challenges. It is also the year when the EPA established a new national office charged
with advancing environmental justice and civil rights, another key priority of the Administration. The
new Office of Environmental Justice and External Civil Rights elevates these critical issues to the
highest levels of the government and solidifies the agency's commitmen t to delivering justice and
equity for all.
The Biden-Harris Administration and the American people have entrusted the EPA with historic levels
of funding through the Bipartisan Infrastructure Law and the Inflation Reduction Act The
unprecedented increase in funding is approximately 10 times the amount that the agency sees in a
typical year. The American people expect the EPA to do big things, and I assure you that the agency is
advancing this bold agenda and addressing our nation's environmental and infrastructure challenges
with the urgency they demand.
At the same time, the EPA will continue to advance its ongoing programmatic work. From responding
to natural disasters and cleaning up contaminated sites to setting policies and regulations, the agency
has a rich history of delivering results. For example, the combined emissions of the six common
pollutants that are regulated through the National Ambient Air Quality Standards have dropped by 74
percent since 1970 and our Nation's waters are dramatically cleaner than they were 50 years ago. This
did not happen by accident; it is thanks to the EPA's scientists and environmental professionals who,
in collaboration with states and tribes, meticulously developed the regulatory and permitting
framework that delivered these results and, when necessary, held violators accountable through
enforcement actions. During my time as the agency's Administrator, I am committed to building on
these historic accomplishments while ensuring that the communities that had previously been left
behind to bear the brunt of the public heal th impacts of pollution get the attention and justice they
deserve.
As laid out in the EPA's new FY 2022-2026 Strategic Plan published earlier this year, the agency will
employ the full array of policy and legal tools at our disposal to incorporate environmental and climate
justice considerations in all our activities and actions. We will do so while maintaining a steadfast
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commitment to scientific integrity as the underpinning of all EPA decisions and rulemakings. We are
dramatically stepping up the pace on efforts to modernize the country's drinking and wastewater
systems; safeguard communities and ecological systems from perfluoroalkyl and polyfluoroalkyl
substances contamination; clean up and revitalize contaminated sites; and strengthen energy security
while confronting the climate crisis. At the same time, these investments provide economic
opportunities and create good jobs across the country.
I am proud to work alongside the agency's dedicated staff during this exciting time at the EPA. As we
take advantage of these transformational opportunities to more fully protect human health and the
environment for all Americans, I am inspired by the talented and committed public servants at the
agency and our partners in the states and tribes across this beautiful country. I have great confidence
that we will accomplish these ambitious goals together.
Respectfully,
Michael S. Regan
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Section I
Management's
Discussion and Analysis
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ABOUT EPA
History and Purpose
Since its establishment in 1970, the EPA has worked for over five decades to identify, evaluate, and
execute sustainable solutions to existing and emerging environmental and public health concerns. The
negative impact and hazards of environmental pollution warrant continued EPA involvement. The
American people deserve a clean, healthy, and safe environment where they live, work, and play.
The EPA incorporates environmental research, monitoring, standard-setting, and enforcement
functions under the guidance of a single, independent agency. As a result, the agency ensures
environmental protection remains an integral part of all U.S. policies, whether related to economic
growth, climate change, environmental justice, natural resource use, energy, transportation,
agriculture, or human health.
The EPA has made and continues to make great strides in providing a cleaner, safer, and healthier
environment for all Americans and future generations. Focused cleanup efforts have helped remedy
the practices of the past, and the EPA continuously works to monitor and regulate pollutants, evaluate
new chemicals, and inspire better decision-making to safeguard our environmental future.
The EPA is committed to collaboration. Identifying and addressing the complex environmental issues
affecting the nation and the world requires consistent, efficient cooperation and communication
among a diverse group of partnerships, ranging from state, tribal, and local governments to foreign
governments and international organizations throughout the world.
Mission
The mission of the EPA is to protect human health and the
environment
To accomplish this mission, the EPA works to ensure that
Americans have clean air, land, and water for present and future
generations. This includes the EPA's commitment to take brave
steps and align its actions to respond to the climate crisis and
continue engaging the global community. Also, the EPA will take
critical actions to advance environmental justice and enforce civil
rights laws that impact underserved and overburdened
communities. The EPA relies on accurate scientific information to
identify human health and environmental matters that affect
policy decisions and enforcement actions. The EPA works to
ensure all communities, individuals, businesses, and state, local
and tribal governments have access to accurate sufficient
information to effectively participate in delivering a cleaner, safer,
and healthier environment. The EPA is committed to effectively
and efficiently serving the American people and conducting
business with transparency in a manner worthy of the public's
trust and confidence.
What EPA Does
¦S Enforce environmental laws
¦S Responds to the release of
hazardous substances
¦S Gives grants to states, local
communities, and tribes
¦S Studies environmental issues
¦S Sponsors partnerships
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Organization
The EPA's headquarters is located in Washington, D.C. Together, the EPA's headquarters offices, 10 regional
offices, and more than a dozen laboratories and field offices across the country employ a diverse, highly
educated, and technically trained workforce of roughly 14,000 people.
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Regional Map
« •
EPA Offices and Facilites
ERA National Headquarters ^ EPA Regional Headquarters • EPA Regional and Program Laboratories and Facilities
Collaborating with Partners and Stakeholders
The EPA's partnerships with states, tribes, local governments, and the global community are central
to the success of protecting human health and the environment. For five decades, this collaboration
has strengthened federal environmental protection laws that are implemented within state, tribal,
and local jurisdictions. The EPA recognizes that improvements to protecting human health and the
environment can be achieved when the states, tribes, and EPA, in conjunction with affected
communities, work together in a spirit of trust, collaboration, and partnership. This foundation
involves active platforms for public participation, including building the capacity for the most
vulnerable community stakeholders to provide input and has improved the EPA's ability to fulfill its
mission locally and internationally.
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FY 2022 PROGRAM PERFORMANCE
Detailed FY 2022 performance results will be presented in the EPA's FY2022 Annual Performance
Report. The EPA will include its FY2022 APR with its FY2024 Annual Performance Plan and Budget.
These reports, along with FY 2022 performance results will be posted at
http: //www.epa.gov/planandbudget concurrent with the publication of the FY2024 President's
Budget.
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FINANCIAL ANALYSIS AND STEWARDSHIP
INFORMATION
Sound Financial Management: Good for the Environment, Good for the Nation
The financial management overview below highlights some of the EPA's most significant financial
achievements carried out during the agency's efforts to execute its mission to protect human health
and the environment during FY 2022:
• Agency Financial Statements. For the 23rd consecutive year, the EPA's OIG issued a "clean",
unmodified, audit opinion for the agency's financial statements. This accomplishment underlines
EPA's consistency in timely, reliable, and accurate financial information that is reported in all
material aspects.
• Water Infrastructure Finance and Innovation Act (WIFIA). In FY 2022, the EPA announced the
availability of approximately $6.5 billion in WIFIA loans to help finance over $13 billion in water
infrastructure investments, while creating more than 40,000 jobs. The EPA is prioritizing increasing
investment in economically stressed communities, making rapid progress on lead service line
replacement, addressing PFAS and emerging contaminants, and supporting one water innovation and
resilience for the FY 2022 selection round. To date, the EPA's 89 WIFIA loans are providing over
$15 billion in credit assistance to help finance nearly $32 billion for water infrastructure, while
creating approximately 100,000 jobs and saving taxpayers over $5 billion.
• OCFO Technical Training Conference. In June 2022, the Office of the Chief Financial Officer held
its annual Technical Training Conference for the EPA employees both virtually and in person. The
event continued to push forward best practices for budget, planning, and financial management to an
audience of roughly 700 participants. The OCFO offered a range of 40+ professional development
and Continuing Learning Credit courses. These courses offered agency employees the opportunity to
learn various financial tools and processes, which expanded their financial skills.
• Working Capital Fund Financial Statements. The EPA's Working Capital Fund provides common
administrative services to the EPA and other federal agencies, where the costs of goods and services
provided are charged to users on a fee-for-service basis. In FY 2022, the WCF began its 26th year of
operation. The WCF is not mandated to be audited by a third-party; however, the EPA's WCF has
contracted with an external Certified Public Accounting firm to conduct an annual audit. For the 19th
consecutive year, the EPA's WCF received a clean opinion, indicating its financial statements were
presented fairly, in all material respects, in accordance with U.S. Generally Accepted Accounting
Principles.
• Invoice Processing Platform. The EPA continues to make great strides in providing a shared
services approach to our financial tools and processes. In October 2019, the agency launched the
Invoice Processing Platform as an electronic invoicing system for all invoices that are currently
processed through the agency's Contract Payment System. IPP is a web- based system used to
efficiently manage government invoicing from contract award through payment notification. The IPP
system provides a secure online platform that vendors use to submit invoices, while centralizing all
invoice transaction data and documents in one place. During FY 2022, the EPA continued to increase
IPP use, paying over 25,000 vendor invoices (approximately $1 billion) through IPP. This represents
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approximately 85% of all agency contract invoices. The EPA continues to work with vendors to
ensure their use of the IPP system and is planning to process simplified acquisitions payments in IPP
in early FY 2023.
• Compass Consolidated Upgrade: This initiative consolidated key projects into a single effort
helping to reduce resource demands, while ensuring these tightly coupled efforts were successful. The
activities included the Compass Version Enhancement 3, which consisted of the upgrade of the
agency financial system, Compass, from version 7.7 to 7.9; Unique Entity Identifier, which replaced
the Data Universal Numbering System with the federally-mandated Unique Entity Identifier ; Invoice
Processing Platform, which included the previously completed e-Invoicing effort and moves us to
Full IPP, resulting in the decommissioning of Contract Payment System and Small Purchase Invoice
Tracking System; and G-Invoicing which will allow the federal government to streamline its Inter-
Agency agreement process. The first phase of this effort, CVE3/UEI, was deployed successfully in
February 2022 and the team returned systems to normal operations 7 days early with no major
impacts post go-live. This initial phase deployed the acquisition module which is the foundation for
the remaining portions of the consolidated project.
• Program Integrity over Supplemental Infrastructure Funding: In FY2022, the EPA was a part of
the Infrastructure Investment and Jobs Act. This bipartisan infrastructure deal will expand access to
clean drinking water, provide electric school buses to school districts across America, tackle the
climate crisis, advance environmental justice, and invest in communities that have too often been left
behind. The EPA received roughly $60B (to be distributed over the next 5 years) in supplementary
funding to move out on supporting actions to these objectives. To ensure the proper stewardship of
the funding, the OCFO established an extensive program integrity framework which would aid the
agency in assessing the risks, implementing internal controls, and preparing for oversight
engagements. The goal of the program is to push the planning and control needed to protect the
funding early in the life-cycle process. As the program moves into its second year in FY2023, it is an
opportunity for the agency to further safeguard its public resources against fraud, waste, and abuse.
• Budget Load Efficiencies. Making funds available to the agency when an appropriations bill is
passed is extremely time sensitive. The EPA loads upwards of seven budgets annually into the
financial system. The Office of Budget utilizes the Budget Formulation System to develop and create
each of these budget files that need to be loaded into Compass, which then allows the agency to spend
funding against the approved budget. Loading a budget has traditionally involved numerous hours of
staff resources to ensure that the agency budget reflects what congress appropriated and OMB
apportioned. In FY 2022 the OCFO leveraged robotic process automation technology to automate the
strenuous task of using Compass to upload and verify budget files. Prior to the implementation of
RPA, the budget load process was a transaction intensive task that required very little analytical
decision making but countless processing steps. The use of RPA helped to save valuable staff time
allowing the team to focus on more important analytical tasks. The Budget Load RPA was used to
load six budgets in FY 2022 and significantly reduced processing time.
• Publication of the FY 2022-2026 EPA Strategic Plan. The EPA's Strategic Plan is a public
expression of our values, goals, and path forward for the important work the agency will accomplish
to help create a healthier, more just environment for everyone. The Plan renews the EPA's
commitment to the three foundational principles that have guided agency work since they were first
articulated by former Administrator William Ruckelshaus—follow the science, follow the law, and be
transparent. It also adds, for the first time, a fourth foundational principle: advance justice and equity.
These principles shape the EPA's strategic goals, which include a new goal focused exclusively on
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tackling the climate crisis and an unprecedented strategic goal to advance environmental justice and
civil rights. These priorities are integrated throughout the plan's programmatic goals and cross-
agency strategies — the bedrock of which is ensuring scientific integrity and science-based decision
making. To hold the agency accountable, the Plan includes measurable outcomes of success under
each strategic objective and cross-agency strategy. Also, for the first time, the EPA's Strategic Plan
includes a Learning Agenda and Capacity Assessment, to advance a culture of evidence-building,
continuous learning, and evaluation in agency operations and decisions. The agency has already taken
key actions to deliver on these commitments, such as issuing the most protective national greenhouse
gas emissions standards for passenger cars and light trucks ever, developing program and regional
climate adaptation plans, and putting in place targeted plans to implement EPA's scientific integrity
policy.
• CARES Act. In FY 2022, the agency continued to use funds received under the Coronavirus Aid,
Relief, and Economic Security Act, to support Environmental Program Management, Science and
Technology, Building and Facilities, and Superfund program efforts in response to the COVID-19
pandemic. This includes cleaning and disinfecting equipment and facilities, as well as maintaining
the operational continuity of the EPA programs and related activities.
• Inflation Reduction Act. In FY 2022, the agency received an additional $40 billion that will be used
to deliver unparalleled progress for people and the planet. The agency will direct resources toward
cleaning up harmful air pollution in places where people live, work, play, and go to school;
accelerating our work on environmental justice and empowering community-driven solutions in
overburdened neighborhoods; and aggressively reducing harmful climate pollution while supporting
our transition to cleaner technologies and materials.
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Financial Condition and Results
Financial statements are formal financial records that document the EPA's activities at the transaction level,
where a "financial event" occurs. A financial event is any occurrence having financial consequences to the
federal government related to the receipt of appropriations or other financial resources; acquisition of
goods or services; payments or collections; recognition of guarantees, benefits to be provided, and other
potential liabilities; or other reportable financial activities.
The EPA prepares four consolidated statements (a
balance sheet, a statement of net cost, a statement of
changes in net position, and a statement of custodial
activity) and one combined statement, the
Statement of Budgetary Resources. Together, these
statements with their accompanying notes provide
the complete picture of the EPA's financial situation.
The complete statements with accompanying notes,
as well as the auditors' opinion, are available in
Section II of this report
The balance sheet displays assets, liabilities, and net
position as of September 30, 2022, and September
30, 2021. The statement of net cost shows the EPA's
gross cost to operate, minus exchange revenue
earned from its activities. Together, these two
statements provide information about key
components of the EPA's financial condition—
assets, liabilities, net position, and net cost of
operations. The balance sheet trend chart depicts
the agency's financial activity levels since FY 2020.
Key Terms
Assets: What the EPA owns and manages.
Liabilities: Amounts the EPA owes because
of past transactions or events.
Net position: The difference between the
EPA's assets and liabilities.
Net cost of operations: The difference between
the costs incurred by the EPA's programs and
the EPA's revenues.
Balance Sheet Trend
(dollars in billions)
Assets Liabilities Net Position Net Cost of
Operations
H2020 ¦ 2021 ¦ 2022
$100.00
$80.00
$60.00
$40.00
$20.00
$-
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EPA Resources and Spending
The figure below depicts the EPA's aggregate budgetary resources (congressional appropriations and
some agency collections), obligations (authorized commitment of funds), and total outlays (cash
payments) for each of the last five fiscal years. The Statement of Budgetary Resources in Section II
provides more information on the makeup of the agency's resources.
2018 2019 2020 2021 2022
Budgetary Resources Obligations A Total Outlays
EPA Financial Trends
(dollars in billions)
Assets—What EPA Owns and Manages
The EPA's assets totaled $77 billion atthe end of FY 2022, an increase of $57 billion from the FY 2021
level. In FY 2022, approximately 98 percent of the EPA's assets fall into two categories: fund balance
with the Department of the Treasury and investments. All of the EPA's investments are backed by U.S.
government securities. The graph below compares the agency's FY 2022 and FY 2021 assets by major
categories.
FY 2021 COMPOSITION OF ASSETS FY 2022 COMPOSITION OF ASSETS
Fund Balance
with Treasury
59%
Accounts Receivable (Net) 3%
Property, Plant,
and
(Net)
3%
Fund Balance
with Treasury
84%
Property, Plant,
and
(Net)
1%
Advances and
Prepayments
0%
Accounts Receivable (Net) 1%
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Liabilities—What EPA Owes
The EPA's liabilities were $6,64 billion at the end of FY 2022, an increase of $940 million from the FY
2021 level. In FY 2022, the EPA's largest liability (58 percent) was advances from others and deferred
revenue. Additional categories include accounts payable, federal employee benefits, and debt The
graphs compare FY 2022 and FY 2021 liabilities by major categories.
FY 2022 COMPOSITION OF LIABILITIES
Other Accounts Payable
FY 2022 COMPOSITION OF LIABILITIES
Other _
Debt _
24o/o
Advances from Others
and Deferred Revenue
Debt _
24%
Accounts Payable
1%
Advances from Others
and Deferred Revenue
58%
Net Cost of Operations—How EPA Used Its Funds
The graph that follows show how the EPA's funds are expended among five expenditure accounts in
FY 2022 and FY 2021.
FY 2021 NET COST BY PROGRAM
FY 2022 NET COST BY PROGRAM
Stale and Tribal
Assistance Agreements,
44%
Environmental
Programs &
Management, 33%
State and Tribal Assistance
Agreements
45% "\
A
Environmental
Programs &
Management
33%
Leaking Underground
Storage Tanks, 1%
Superfund
13%
icjence & Technology,
V.
Superfund, 12%
_ Leaking Underground
Storage Tanks
Science & Technology
9%
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Stewardship Funds
The EPA serves as a steward on behalf of the American people. The chart below presents four
categories of stewardship: land, research and development, infrastructure, and human capital. In FY
2022, the EPA devoted a total of $4.69 billion to its stewardship activities.
FY 2021 STEWARDSHIP FY 2022 STEWARDSHIP
Per the Federal Accounting Standards Advisory Board, stewardship investments consist of
expenditures made by the agency for the long-term benefit of the nation that do not result in the
federal government acquiring tangible assets.
Some of the largest infrastructure programs within the agency are the Clean Water State
Revolving Fund and Drinking Water State Revolving Fund programs that provide grant funds
to states for water infrastructure projects, such as the construction of wastewater and drinking
water treatment facilities. States lend the majority of these funds to localities or utilities to fund
the construction and or upgrade of facilities (some may also be used for loan forgiveness or
given as grants). Loan repayments then revolve at the state level to fund future water
infrastructure projects. The EPA's budget included nearly $6.41 billion in FY 2022
appropriated funds for the SRFs for states' use. In addition, states lent billions of dollars from
funds they received as repayments from previous State Revolving Fund loans. These funds
provide assistance to public drinking water and wastewater systems for the enhancement of
water infrastructure, allowing for cleaner water bodies and crucial access to safer drinking
water for millions of people.
Research and development activities enable the EPA to identify and assess important risks to
human health and the environment. This critical research investment provides the basis for the
EPA's regulatory work, including regulations to protect children's health and at-risk
communities, drinking water, and the nation's ecosystems.
Land includes contaminated sites to which the EPA acquires title under the Superfund
authority. This land needs remediation and cleanup because its quality is well below any usable
and manageable standards. To gain access to contaminated sites, the EPA may acquire
easements that are in good and usable condition. These easements may also serve to isolate the
site and restrict usage while the cleanup is taking place.
The agency's investment in human capital through training public awareness, and research
fellowships are components of many of the agency's programs and effective in achieving the
agency's mission of protecting public health and the environment.
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Financial Management for the Future
During times of environmental challenges, sound stewardship of the EPA's financial resources
continues to be critical to the agency's ability to protect the environment and human health. Reliable,
accurate, and timely financial information is essential to ensure cost-effective decisions for addressing
land, water, air and ecosystem issues. To strengthen the EPA's financial stewardship capabilities, the
agency focuses on the fundamental elements of financial management: people and systems.
People: The EPA leverages every available tool to recruit the best people with the necessary skills to
meet tomorrow's financial challenges. Staff members are trained in financial analysis and forecasting
to understand financial data and what it means.
Systems: The EPA is integrating financial information into everyday decision-making so that it
maximizes the use of its resources. The EPA's core financial system, Compass, is based on a
commercial-off-the-shelf software solution. Compass has improved the EPA's financial stewardship by
strengthening accountability, data integrity and internal controls within the following business areas:
• General ledger
• Accounts payable
• Accounts receivable
• Property
• Project cost
• Intra-governmental transactions
• Budget execution
Compass provides core budget execution and accounting functions while facilitating more efficient
transaction processing. The system posts updates to ledgers and tables as transactions are processed
and generates source data for the preparation of financial statements and budgetary reports. During
the next year, the agency plans to look at opportunities to review all remaining payment tracking
systems and seek to move them into the financial system, where applicable.
The OMB has outlined several planned solutions to assist agencies with modernizing and maximizing
information technology while retiring aging administrative systems. The implementation of shared
solutions will allow the EPA to continue efforts already begun to streamline and enhance the delivery
of financial management information and services. As part of the Compass Consolidated Upgrade
project, the EPA implemented a version upgrade with the Unique Entity Identifier in February 2022. In
addition, the EPA is implementing G-Invoicing (for federal interagency agreements) and the IPP (for
contracts and simplified acquisitions). The latter two initiatives will be guided by the Treasury. This
upgrade effort will require significant investment in updating and preparing existing systems for new
interfaces, as well as changing business processes and migrating data.
Limitations of the Principal Financial Statements
The EPA prepared the principal financial statements to report the financial position and results of its
operations, pursuant to the requirements of 31 U.S.C. 3515 (b). The EPAhas prepared the statements
from the books and records of the entity in accordance with federal generally accepted accounting
principles and the formats prescribed by OMB. Reports used to monitor and control budgetary
resources are prepared from the same books and records. The financial statements should be read
with the realization that they are for a component of the final U.S. Government financial statements.
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IMPROVING MANAGEMENT AND RESULTS
Office of Inspector General Audits, Evaluations, and Investigations
The OIG contributes to the EPA's mission to protect human health and the environment by assessing
the efficiency and effectiveness of the agency's program management and results. The OIG ensures that
agency resources are used as intended, develops recommendations for improvements and cost
savings, and provides oversight and advisory assistance in helping the EPA carry out its objectives.
The OIG detects and prevents fraud, waste, and abuse to help the agency protect human health and the
environment more efficiently and cost effectively. The OIG performs its mission through independent
oversight of the programs and operations of the EPA. The OIG also contributes to the oversight
integrity of, and public confidence in the agency's programs and to the security of its resources by
preventing and detecting possible fraud, waste, and abuse and pursuing judicial and administrative
remedies.
In FY 2022, the OIG identified key management challenges and internal control weaknesses and
the audits, evaluations, and investigations resulted in:
• 94 recommendations accounting for over $55 million in potential savings and recoveries;
• 81 actions taken by the Agency for improvement from OIG recommendations; and
• 89 criminal, civil, or administrative enforcement actions.
Grants Management
The EPA has two major grants management metrics, one for grant competition, the other for grants
closeout For FY 2022, the agency exceeded the grant competition metric by 6%, and met the 90% and
99% targets for grant closeouts.
Grants Management Performance Measures for EPA
Performance Measure
Target
Progress in FY 2022
Progress in FY 2021
Percentage of grants
closed out
90%*
91.7% closure of grants that
expired in 2021
89% closure of grants that
expired in 2020
99%**
99.3% closure of grants
that expired in 2020 and
earlier
99.3% closure of grants
that expired in 2019 and
earlier
Percentage of new grants
subject to the
competition policy that
are competed***
90%
96%
94%
*Percentage of open grants that expired in 2021 that were closed in performance year.
**Percentage of open grants that expired in 2020 and earlier that were closed in performance year.
***The Environmental Protection Agency Policy for Competition of Assistance Agreements establishes requirements for the
competition of assistance agreements (grants, cooperative agreements, and fellowships) to the maximum extent practicable.
19
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ACCOUNTABILITY: SYSTEMS, CONTROLS,
AND LEGAL COMPLIANCE
Federal Managers' Financial Integrity Act
FMFIA requires federal agencies to conduct ongoing evaluations of their internal controls over
program operations and financial activities and report the results to the President and Congress.
Additionally, agencies are required to assess and report on whether financial management systems
comply with federal standards.
The EPA evaluated its internal controls in accordance with OMB Circular A-12 3, Management's
Responsibility for Enterprise Risk Management and Internal Control. The agency operates a
comprehensive internal control program, which ensures compliance with the requirements of FMFIA
and other laws and regulations. The EPA's national programs and regional offices conduct risk and
internal control assessments and submit annual assurance letters attesting to the soundness of the
internal controls within their organizations. These assurance letters provide the basis for the
Administrator's statement of assurance on the overall effectiveness of the EPA's internal controls
designed for operations and financial management systems.
In FY 2022, the EPA did not identify any new material weaknesses related to effectiveness and
efficiency of operations. The EPA continues to emphasize the importance of maintaining effective
internal controls in order to comply with FMFIA and other applicable laws and regulations.
Internal Controls Over Financial Reporting
The agency has evaluated the key internal controls spanning its financial processes. Based on this
evaluation, the EPA did not identify any new material weaknesses. Subsequent to the agency's review,
The EPA's OIG identified no new material weaknesses during the FY 2022 financial statement audit
Internal Controls Over Financial Management Systems
The FMFIA requires agencies to ensure that financial management systems consistently provide
reliable data that comply with government-wide principles, standards, and requirements. Based on the
agency's evaluation of its financial management systems, no material weaknesses were identified. The
assessment included a review of the agency's core financial system, Compass, as well as those
considered as financially related or mixed systems that support or interface with the core financial
system. The EPA has determined that its financial management systems substantially comply with
FMFIA requirements and federal standards.
Based on the results of the agency and the OIG's FY 2022 evaluations, the Administrator provides
reasonable assurance on the adequacy and effectiveness of the EPA's internal controls over financial
management systems.
The Digital Accountability and Transparency Act
The DATA Act of 2014 was designed to increase the standardization and transparency of federal
spending. It requires agencies to report data, consistent with data standards established by OMB and
the Treasury, for publication on USASpending.gov.
20
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The EPA has continually complied with OMB guidance and provided reasonable assurance that
internal controls support the reliability and validity of account-level and award-level data reported on
USASpending.gov. This level of assurance in the internal controls has been enabled through three
elements of the EPA DATA Act submission process: 1) establishment of the DATA Act Evaluation and
Approval Repository Tool; 2) multi-level approval process; and 3) documentation of all associated
warnings in its statement of assurance.
The DEAR Tool was designed to transform data to meet the data standards, pre-validate all of the
warnings and edits that would be triggered when submitting the information to the DATA Act broker,
and to standardize and fully document the multi-level approval process, culminating in the Senior
Accountable Official approval.
The multi-level approval process within the DATA Act submission process allowed all parties of the
approval process to be informed of the issues present and documented within the files. The approval
process consists of three independent reviews of the DATA Act files: appropriations and
programs/BOC (Files A and B), contract awards (File C and Dl), and grant awards (File C and D2). The
case manager for each review ensures that all warnings and edits have been resolved or adequately
justified and that the files are ready for certification. Next, the Office Director is provided a
memorandum which includes an explanation as to why particular warnings could not be fully resolved.
By signing the memorandum, the Office Directors are confirming that the information submitted is
valid and can be certified for publishing to USA Spending. The final briefing gives the appropriate
assurance to the Senior Accountable Official and addresses any questions or concerns prior to official
certification that the files fully comply with the law.
The Statement of Assurance is the central piece of information for the agency to document its data
issues that triggered the DATA Act warnings but remain unresolved. The EPA's approach was to
address all data issues that could easily be resolved with changes to the host financial system or the
DEAR, but for what could not be addressed timely, to fully document the cause of the warnings within
the Statement of Assurance. Therefore, the EPA used the Statement of Assurance as the document to
illustrate that even though our data had flaws, the agency understood and thought about the issues in
the larger context of the DATA Act submission.
In FY 2022, the agency continued to provide accurate and timely data for the DATA Act. The agency has
continually worked to resolve data issues as they have arisen during submissions or in the form of
warnings. Moving into FY 2023, the agency aims to continue to focus on improving data quality and
streamlining the review processes to ensure that it continues to maintain exemplary transparency to
the public on spending.
Federal Financial Management Improvement Act (FFMIA)
FFMIA requires that agencies implement and maintain financial management systems that comply
with the following:
federal financial management system requirements,
applicable federal accounting standards, and
U.S. Standard General Ledger at the transaction level.
The agency evaluated its financial management systems and has determined they comply with FFMIA
requirements. Additionally, FFMIA requires independent auditors to report on agency compliance with
the three requirements as part of financial statement audit reports.
21
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Fiscal Year 2022 Annual Assurance Statement
The U.S. Environmental Protection Agency's management is responsible for managing risk and
maintaining effective internal control to meet the objectives of the Federal Managers' Financial
Integrity Act.
In accordance with Section 2 of FMFIA and the Office of Management and Budget's Circular A-12 3,
"Management's Responsibility for Enterprise Risk Management and Internal Control," the EPA
identified and evaluated risks and assessed the effectiveness of its internal control to support the
effectiveness and efficiency of operations, reliable financial reporting and compliance with applicable
laws and regulations. Section 4 of FMFIA and the Federal Financial Management Improvement Act of
1996 requires management to ensure financial management systems provide reliable, consistent
disclosure of financial data. In accordance with Appendix D of OMB's Circular A-12 3, the agency
evaluated whether financial management systems substantially comply with the FFMIA
requirements.
The EPA did not identify any new material weaknesses during FY 2022. The one previously identified
weakness related to the financial statement preparation process was downgraded to a significant
deficiency after the completion of the FY 2020 financial statement audit. Therefore, the agency should
have had a beginning balance of zero material weaknesses atthe end of FY 2021.
Although no new material weaknesses were identified, the EPA will continue to monitor its
programmatic, financial and administrative controls to ensure compliance with laws and regulations.
Based on the results of the agency's assessments and recent program improvements, I can provide
reasonable assurance that the agency's internal control over operations is effective and the EPA's
financial management systems conform to governmentwide standards as of September 30, 2022. The
agency's internal controls over financial reporting are operating effectively as well.
NOV 1 5 2022
Michael S. Regan
Administrator
Date
22
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Section II
Financial Section
k«D«r„
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Message from the Chief Financial Officer
November 15, 2022
On behalf of the Office of the Chief Financi al Officer, I am pleased
to present the U.S. Environmental Protection Agency's Fiscal Year
2022 Agency Financial Report. In this ever-changing environment of
hybrid work, the EPA and its financial stewards have remained
steadfast in the pursuit of excellence in financial management. This
report summarizes the agency's financial results and presents the
EPA's Assurance Statement and Financial Statement Audit Report.
This report also highlights some of our most notable achievements in
FY 2022, including the innovations and improvements undertaken to
ensure the agency has effectively managed the resources entrusted to
us by the American people to finance and fulfill our mission to
protect human health and the environment.
FY 2022 brought unprecedented challenges and ensuing opportunities for the EPA to further its
mission. On November 15, 2021, President Biden signed the Bipartisan Infrastructure Law that
dedicates over $60 billion to the agency over the next five years. More than $50 billion towards
clean water projects - the single largest investment in water infrastructure in United States
history - will make a profound, wide-ranging impact on the health and wellness of our current
and future generations, whether it is by eliminating drinking water contamination, allowing for
safe swimming, fishing, and play in our waters, or protecting our national water treasures.
Another $5 billion is included to clean up longstanding pollution at Superfund and brown field
sites that will provide necessary environmental justice and exciting economic opportunities to
communities that have long suffered in unsafe environments and depressed areas. In addition,
$5 billion for decarbonizing our nation's school bus fleet will reduce greenhouse gas emissions
and protect our children from damage to their developing lungs.
Additionally, President Biden signed the Inflation Reduction Act into law on August 16, 2022.
The legislation directs an additional $40 billion to the EPA that will be used to deliver
unparalleled progress for people and the planet. We will use these unprecedented resources to
reduce harmful air pollution in places where people live, work, play, and go to school, and
aggressively combat damaging climate pollution while supporting the creation of good jobs and
lowering energy costs for families. While implementing these projects, the agency will continue
to maintain its focus on environmental justice, moving the nation towards a healthy and
sustainable environment for all, regardless of race, color, national origin, or income.
The EPA further strengthened its commitment to improving water infrastructure in FY 2022,
providing more than $8 billion in total water infrastructure funding, which will create nearly
80,000 jobs. In addition, the Water Infrastructure Finance and Innovation Act program, which
offers innovative and flexible financing for water system improvements, continued to make a
tremendous impact. Through the WIFIA program and its state equivalent, SWIFIA, the agency
provided up to $6.5 billion in total funding in FY 2022 to support $13 billion in water
infrastructure projects while creating more than 40,000 jobs across the nation.
24
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Throughout the OCFO, our mission has been to establish and implement a framework to ensure
that every BIL dollar is used with the proper care and control it deserves. With extraordinary
opportunities comes unparalleled responsibility, and the OCFO has instilled this sentiment into
the EPA's core rubric when managing the BIL and IRA funds. The agency's staff has always
been committed to conducting the EPA's business with the utmost financial integrity and
transparency. These historic investments have strengthened our resolve and have reaffirmed our
commitment to maintaining the public's trust.
In this past fiscal year, the agency achieved an unmodified "clean" audit opinion on its FY 2022
financial statements from the Office of Inspector General, marking the 23rd consecutive year in
which the EPA has accomplished this impressive feat. The agency is proud to be among only a
small number of federal agencies to have achieved this milestone, and we view it as a testament
to our staffs dedication to maintaining the highest standards of financial integrity. In addition,
FY 2022 represented the 26th year of the EPA's Working Capital Fund. The WCF provides
various administrative services to the EPA and other federal agencies on a fee-for-service basis.
Although there is no requirement for the WCF to be audited by a third party, the agency elects to
use an external certified public accounting firm to audit the financial management of these funds.
In FY 2022, for the 19th consecutive year, the EPA's WCF received a "clean" opinion indicating
the WCF financial statements were presented fairly, in all material respects, in accordance with
United States Generally Accepted Accounting Principles.
In March 2022, the agency published its final FY 2022-2026 EPA Strategic Plan. This Strategic
Plan affirms the EPA's commitment to protect human health and the environment for all people
while placing an emphasis on historically overburdened and underserved communities. The
ambitious Plan is backed by four guiding principles: follow the science, follow the law, be
transparent, and advance justice and equity. The OCFO will play a crucial role in the success of
the Plan, particularly regarding "Cross-Agency Strategy 3: Advance EPA's Organizational
Excellence and Workforce Equity" and "Cross-Agency Strategy 4: Strengthen Tribal, State, and
Local Partnerships and Enhance Engagement." In service of these strategies, the OCFO
continues to modernize information technology financial management systems and tools, to
implement efficient and effective processes across the agency, and to advance our shared
governance model with states and tribes through the E-Enterprise for the Environment program.
These are just a few examples of the profoundly important work that the OCFO is doing to
support the agency's mission to protect human health and the environment. Our team remains
fully committed to serving our many stakeholders, both internal and external, through providing
quality products, tools, and services. We will continue to seek greater efficiency and make the
necessary improvements to agency operations in this thrilling time at the EPA.
Sincerely,
Faisal Amin
Chief Financial Officer
25
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EPA'S FISCAL YEARS 2022 AND 2021
CONSOLIDATED FINANCIAL STATEMENTS
(WITH RESTATEMENT)
26
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Table of Contents
Contents
Principal Financial Statements 30
Notes to Fianncial Statements 31
Note 1. Summary of Significant Accounting Policies 37
Note 2. Fund Balance With Treasury (FBWT) 44
Note 3. Cash and Other Monetary Assets 45
Note 4. Investments, Net 45
Note 6. Inventory and Related Property 46
Note 7. Loans Receivable, Net 46
Note 8. Accounts Payable 50
Note 9. General Property, Plant and Equipment, Net 51
Note 10. Debt 53
Note 11. Stewardship Property, Plant and Equipment 53
Note 12. Liability to the General Fund for Custodial Assets 54
Note 13. Other Liabilities 55
Note 14. Leases 56
Note 15. Deferred Revenue 57
Note 16. Commitments and Contingencies 57
Note 17. Funds from Dedicated Collections 60
Note 18. Environmental and Disposal Liabilities 65
Note 19. State Credits 66
Note 20. Preauthorized Mixed Funding Agreements 66
Note 21. Custodial Revenues and Accounts Receivable 66
Note 22. Reconciliation of President's Budget to the Statement of Budgetary Resources 67
Note 23. Recoveries and Resources Not Available, Statement of Budgetary Resources 67
Note 24. Unobligated Balances Available 68
Note 25. Undelivered Orders at the End of the Period 68
Note 26. Offsetting Receipts 68
Note 27. Transfers-In and Out, Statement of Changes in Net Position 69
Note 28. Imputed Financing 70
Note 29. Federal Employee and Veteran Benefits Payable 70
Note 30. Other Adjustments, Statement of Changes in Net Position 71
Note 31. Non-Exchange Revenue, Statement of Changes in Net Position 71
Note 32. Reconciliation of Net Cost of Operations to Net Outlays 72
Note 33. Amounts Held by Treasury 75
Note 34. COYID-19 Activity 78
Note 35. Reclassified Financial Statement for Government-wide Reporting 79
Required Supplementary Information (Unaudited) 80
Deferred Maintenance 80
Supplemental Combining Statement of Budgetary Resources 83
27
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Principal Financial Statements
United States Environmental Protection Agency
Consolidated Balance Sheet
As of September 30,2022 and 2021
(Dollars in Thousands)
2022
2021
ASSETS:
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments, Net (Note 4)
Accounts Receivable, Net (Note 5)
Advances and Prepayments
Total Intragovernmental
Other Than Intragovernmental:
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net (Note 7)
Inventory and Related Property, Net (Note 6)
General Property, Plant and Equipment, Net (Note 9)
Advances and Prepayments
Total Other Than Intragovernmental
Total Assets
Stewardship Property Plant and Equipment (Note 11)
LIABILITIES:
Intragovernmental:
Accounts Payable (Note 8)
Debt (Note 10)
Advances from Others and Deferred Revenue
Other Liabilities
Liability to the General Fund for Custodial Assets (Note 12)
Other (Note 13)
Total Intragovernmental
Other Than Intragovernmental:
Accounts Payable (Note 8)
Federal Employee and Veteran Benefits Payable (Note 29)
Environmental and Disposal Liabilities (Note 18)
Advances from Others and Deferred Revenue
Other Liabilities
Deferred Revenue (Note 15)
Other (Note 13)
Total Other Than Intragovernmental
Total Liabilities
Commitments and Contingencies (Note 16)
NET POSITION:
Unexpended Appropriations - Funds from Dedicated Collections (Note 17)
Unexpended Appropriations - Funds from Other than Dedicated Collections
Total Unexpended Appropriations
Cumulative Results of Operations - Funds from Dedicated Collections (Note 17)
Cumulative Results of Operations - Funds from Other than Dedicated Collections
Total Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
64,103,829
10,297,779
5,717
261.776
74.669.101
10
548,525
1,291,508
531
730,992
10.536
2.582.102
77.251.203
163
1,557,180
183,791
106,560
199.697
2.047.391
65,817
223,785
32,156
125,105
3,541,093
597.993
4.585.949
6.633340
178
62.618.529
62,618,707
7,717,484
281.672
7.999.156
70.617.863
77.251.203
11,778,430
6,155,838
7,602
245.934
18.187.804
10
580,736
586,138
428
670,637
7.298
1.845.247
20.033.051
3,367
746,839
154,235
51,241
206.237
1.161.919
56,319
235,144
25,723
125,526
3,476,737
618.483
4.537.932
5.699.851
187
10.400.345
10,400,532
3,551,640
381.028
3.932.668
14.333.200
20.033.051
28
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United States Environmental Protection Agency
Consolidated Statement of Net Cost
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
COSTS
Gross Costs
Less: Earned Revenue
NET COST OF OPERATIONS (Note 32)
2022 2021
$ 10,142,639 $
9,138,699
400.059
555.481
S 9.742.580 S
8.583.218
29
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Costs:
Gross Costs
WCF Elimination
Total Costs
United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Years Ending September 30,2022
(Dollars in Thousands)
Environmental
Programs &
Leaking
Underground
Science &
State &
Tribal
Assistance
Management Storage Tanks Technology Superfund Agreements
$ 3,161,870 $ 92,373 $ 784,144 $ 1,350,585 $4,254,533
3.161.870
92.373
784.144 1.350.585 4.254.533
Other
> 821,116
(321.9821
499.134
Totals
10,464,621
(321.9821
10.142.639
Less:
Earned Revenue
WCF Elimination
Total Earned Revenue
NET COST OF
OPERATIONS
35,036
35,036
3.126.834
6,328
6,328
202,969
202,969
477,708
(321.9821
155,726
92.373 $ 777.816 $1.147.616 $ 4.254.533 $ 343.408
722,041
(321.9821
400,059
9.742.580
Costs:
Gross Costs
WCF Elimination
Total Costs
United States Environmental Protection Agency
Statement of Net Cost by Major Program
For the Fiscal Years Ending September 30,2021
(Dollars in Thousands)
Environmental
Programs &
Management
2,820,994
Leaking
Underground Science &
State &
Tribal
Assistance
Storage Tanks Technology Superfund Agreements Other
$ 2,820,994 $
86,157 $ 765,510 $ 1,364,410 $3,710,627
86,157
765,510
1,364,410
3,710,627
698,694
(307.6931
391,001
Totals
9,446,392
(307.6931
9,138,699
Less:
Earned Revenue
WCF Elimination
Total Earned Revenue
NET COST OF
OPERATIONS
79,315
79.315
2-741.679
86.157
5,001
5.001
295,471
295.471
483,387
(307.6931
175.694
760-509 S 1-068-939 S 3.710.627 S 215.307
863,174
(307.6931
555.481
8.583.218
30
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United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position
For the Fiscal Years Ending September 30, 2022
(Dollars in Thousands)
Funds from
Funds from Other Than
Dedicated
Dedicated
Consolidated
Collections
Collections
Totals
UNEXPENDED APPROPRIATIONS:
(Note 17)
Beginning Balance
$ 187
$ 10,400,345
$
10,400,532
Appropriations Received
-
65,051,983
65,051,983
Other Adjustments (Note 30)
-
(20,398)
(20,398)
Appropriations Used
(9)
(12.813.401)
(12.813.410)
Change in Unexpended Appropriations
(9)
52,218,184
52,218,175
Total Unexpended Appropriations
S 178
S 62.618.529
$
62.618.707
CUMULATIVE RESULTS OF OPERATIONS:
Beginning Balance
$ 3,551,640
$ 381,028
$
3,932,668
Appropriations Used
9
12,813,401
12,813,410
Non-Exchange Revenue (Note 31)
752,635
-
752,635
Transfers-In/(Out) Without Reimbursements
4,584,789
(4,610,710)
(25,921)
Imputed Financing (Note 28)
26,687
242,257
268,944
Other
48.268
(48.268)
-
Net Cost of Operations
(1.246.544)
(8.496.036)
(9.742.580)
Net Change in Cumulative Results of Operations
4,165,844
(99,356)
4,066,488
Total Cumulative Results of Operations
7,717,484
281,672
7,999,156
Net Position
S 7.717.662
S 62.900.201
$
70.617.863
31
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United States Environmental Protection Agency
Consolidated Statement of Changes in Net Position
For the Fiscal Years Ending September 30, 2021
(Dollars in Thousands)
Funds from
Funds from Other Than
Dedicated
Collections
Dedicated
Collections
Consolidated
Totals
Unexpended Appropriations:
Beginning Balance
(Note 17)
$ (189)
$
9,600,037
$
9,599,848
Appropriations Received
Other Adjustments (Note 30)
Appropriations Used
Change in Unexpended Appropriations
376
376
9,200,494
(49,123)
(8.351.063)
800,308
9,200,494
(49,123)
(8.350.687)
800,684
Total Unexpended Appropriations
S 187
$
o
k
o
o
in
$
10.400.532
Cumulative Results of Operations:
Beginning Balance
$ 3,307,079
$
410,430
$
3,717,509
Appropriations Used
Non-Exchange Revenue (Note 31)
Transfers-In/(Out) Without Reimbursements
Imputed Financing (Note 28)
Other
(376)
276,988
1,081,150
26,006
769
8,351,063
(1,082,591)
146,137
(769)
8,350,687
276,988
(1,441)
172,143
Net Cost of Operations
Net Change in Cumulative Results of Operations
(1.139.976)
244,561
(7.443.242)
(29,402)
(8.583.218)
215,159
Total Cumulative Results of Operations
3,551,640
381,028
3,932,668
Net Position
S 3.551.827
$
10.781.373
$
14.333.200
32
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United States Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
2022
2021
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget
Authority, Net (discretionary and mandatory)
(Note 23)
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority from offsetting collections
(discretionary and mandatory)
Total Budgetary Resources
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward adjustments (total)
Unobligated Balance, End of Year:
Apportioned, Unexpired Accounts
Unapportioned, Unexpired accounts
Expired Unobligated Balance, End of Year
Unobligated Balance, End of Year (total): (Note 24)
Total Budgetary Resources
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
Budgetary
Non-
Budgetary
Credit Reform
Financing
Account
$ 5,674,107 $
70,271,764
542.709
3,693,794
181.898
$ 5,951,313 $
10,832,321
463.239
615,240
4,726,214
141.081
X 76.488.580 X 3.875.692 X 17.246.873 X 5.482.535
$ 19,513,330 $ 3,875,692 $ 11,874,288 $ 5,482,535
56,844,168
24,464
106.618
56,975,250
5,279,575
1,996
91.014
5,372,585
X 76.488.580 X 3.875.692 X 17.246.873 X 5.482.535
OUTLAYS, NET AND DISBURSEMENTS, NET
Outlays, Net (total) (discretionary and mandatory) $ 14,318,219 $ 9,852,094
Distributed Offsetting Receipts (-) (Note 26) (5.038.820') (1.481.411)
Agency Outlays, Net (discretionary and mandatory) $ 9.279.399 $ 8.370.683
Disbursements, Net (total) (mandatory) $ 840.409 $ 494.357
33
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United States Environmental Protection Agency
Statement of Custodial Activity
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
2022
2021
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
$ 56,390 $
41,035
Other
(3.810)
22.085
Total Cash Collections
52,580
63,120
Accrual Adjustment
5.935
(20.623)
Total Custodial Revenue (Note 21)
S 58.515 S
42.497
Disposition of Collections:
Transferred to Others (General Fund)
$ 52,761 $
21,273
Increases/Decreases in Amounts to be Transferred
5.754
21.224
Total Disposition of Collections
S 58.515 S
42.497
Net Custodial Revenue Activity
$ - $
-
34
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Reporting Entities
The EPA was created in 1970 by executive reorganization from various components of other federal agencies to better
marshal and coordinate federal pollution control efforts. The Agency is generally organized around the media and
substances it regulates: air, water, waste, pesticides, and toxic substances.
The FY 2022 financial statements are presented on a consolidated basis for the Balance Sheet, Statement of Net Cost,
Statement of Net Costs by Major Program, and Statement of Changes in Net Position. The Statement of Custodial
Activity and the Statement of Budgetary Resources are presented on a combined basis. The financial statements
include the accounts of all funds described in this note by their respective Treasury fund group.
B. Basis of Presentation
The accompanying financial statements have been prepared to report the financial position and results of operations of
the U. S. Environmental Protection Agency (the EPA or Agency) as required by the Chief Financial Officers Act of
1990 and the Government Management Reform Act of 1994. The reports have been prepared from the financial
system and records of the Agency in accordance with Office of Management and Budget (OMB) Circular No. A-13 6,
Financial Reporting Requirements, and the EPA accounting policies, which are summarized in this note.
C. Budgets and Budgetary Accounting
I. General Funds
Congress enacts an annual appropriation for State and Tribal Assistance Grants (STAG), Buildings and Facilities
(B&F), and for payments to the Hazardous Substance Superfund to be available until expended. Annual
appropriations for the Science and Technology (S&T), Environmental Programs and Management (EPM) and for the
Office of Inspector General (OIG) are available for two fiscal years. When the appropriations for the General Funds
are enacted, Treasury issues a warrant for the respective appropriations. As the Agency disburses obligated amounts,
the balance of funds available in the appropriation is reduced at the U.S. Treasury (Treasury).
The EPA has three-year appropriation accounts and a no-year revolving fund account to provide funds to carry out
section 3024 of the Solid Waste Disposal Act, including the development, operation, maintenance, and upgrading of
the hazardous waste electronic manifest system. The Agency is authorized to establish and collect user fees for the
Hazardous Waste Electronic Manifest System Fund (e-Manifest) to recover the full cost of providing the hazardous
waste electronic manifest fund system related services.
The EPA receives two-year appropriated funds to carry out the Frank R. Lautenberg Chemical Safety for the 21st
Century Act. Under the Act, the Agency is authorized to collect user fees (up to $25 million annually) from chemical
manufacturers and processors. Fees collected will defray costs for new chemical reviews and a range of Toxic
Substances Control Act Service Fee Fund (TSCA) implementation activities for existing chemicals.
The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) established a federal credit program
administered by the EPA for eligible water and wastewater infrastructure projects. The program is financed from
appropriations to cover the estimated long-term cost of the loan. The long-term cost of the loans is defined as the net
present value of the estimated cash flows associated with the loans. A permanent indefinite appropriation is available
to finance the costs of reestimated loans that occur in subsequent years after the loans are disbursed. The Agency
received two-year appropriations in fiscal years 2022 and 2021 to finance the administrative portion of the program.
EPA reestimates the risk on each individual loan annually. Proceeds issued by EPA cannot exceed forty-nine percent
of eligible project costs. Project costs must exceed a minimum of $20 million for large communities and $5 million for
communities with populations of 25,000 or less. After substantial completion of a project, the borrower may defer up
to five years to start loan repayment and cannot exceed thirty-five years for the final loan maturity date.
35
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Funds transferred from other federal agencies are processed as non-expenditure transfers. Clearing accounts and
receipt accounts receive no appropriated funds. Amounts are recorded to the clearing accounts pending further
disposition. Amounts recorded to the receipt accounts capture amounts collected for or payable to the Treasury
General Fund.
On November 15, 2021, the Infrastructure Investment and Jobs Act (Public Law 117-58) was signed into law,
appropriating approximately $60 billion to the Agency over fiscal years 2022 through 2026; some funds have five year
availability but most are available until expended. The Inflation Reduction Act (IRA), signed in August 2022,
appropriated the Agency an additional $41.5 billion, available for a minimum of two and a maximum of ten fiscal
years.
II. Revolving Funds
Funding of the Reregistration and Expedited Processing Fund (FIFRA) and Hazardous Waste Electronic Manifest
System Fund (e-Manifest) is provided by fees collected from industry to offset costs incurred by the Agency in
carrying out these programs. Each year, the Agency submits an apportionment request to OMB based on the
anticipated collections of industry fees.
Funding of the Working Capital Fund (WCF) is provided by fees collected from other Agency appropriations and
other federal agencies to offset costs incurred for providing the Agency administrative support for computer and
telecommunication services, financial system services, employee relocation services, background investigations,
continuity of operations, and postage.
The EPA Damage Assessment and Restoration Revolving Fund was established through the U.S. Department of the
Treasury and OMB for funds received for critical damage assessments and restoration of natural resources injured as a
result of the Deepwater Horizon oil spill.
III. Special Funds
The Environmental Services Receipts Account Fund obtains fees associated with environmental programs. The
Pesticide Registration Improvement Act Fund (PRIA) collects pesticide registration service fees for specified
registration and amended registration and associated tolerance actions which set maximum residue levels for food and
feed. The Toxic Substances Control Act Fund (TSCA) collects user fees to defray costs for new chemical reviews and
range of implementation activities for existing chemicals.
IV. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit accounts pending further
disposition. Until a determination is made, these are not the EPA's funds. The amounts are reported to the U.S.
Treasury through the Government-Wide Treasury Account Symbol Adjusted Trial Balance System (GTAS).
V. Trust Funds
Congress enacts an annual appropriation for the Hazardous Substance Superfund, Leaking Underground Storage Tank
(LUST) and the Inland Oil Spill Programs accounts to remain available until expended. Transfer accounts for the
Superfund and LUST Trust Funds have been established to record appropriations moving from the Trust Fund to
allocation accounts for purposes of carrying out the program activities. As the Agency disburses obligated amounts
from the expenditure account, the Agency draws down monies from the Superfund and LUST Trust Funds held at
Treasury to cover the amounts being disbursed. The Agency draws down all the appropriated monies from the
Principal Fund of the Oil Spill Liability Trust Fund when Congress enacts the Inland Oil Spill Programs appropriation
amount to the EPA's Inland Oil Spill Programs account.
36
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
In 2015, the EPA established a receipt account for Superfund special account collections. Special accounts are
comprised of reimbursements from other federal agencies, state cost share payments under Superfund State Contracts
(SSCs), and settlement proceeds from Potentially Responsible Parties (PRPs) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) Section 122(b)(3). This allows the Agency to
invest the funds until drawdowns are needed for special accounts disbursements.
VI. Classified Activities
Accounting standards require all reporting entities to disclose that accounting standards allow certain presentations
and disclosures to be modified, if needed, to prevent the disclosure of classified information.
VII. Allocation Transfers
The EPA is a party to allocation transfers with other Federal agencies as both a transferring (parent) entity and a
receiving (child) entity. Allocation transfers are legal delegations from one entity of its authority to obligate budget
authority and outlay funds to another entity. A separate fund account (allocation account) is created in the U.S.
Treasury as a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of
balances are credited to this account, and subsequent obligations and outlays incurred by the child entity are charged
to this allocation account as they execute the delegated activity on behalf of the parent entity. Generally, all financial
activity related to allocation transfers (e.g., budget authority, obligations, outlays) is reported in the financial
statements of the parent entity from which the underlying legislative authority, appropriations and budget
apportionments are derived. The EPA allocates funds, as the parent, to the Center for Disease Control. The
EPA receives allocation transfers, as the child, from the Bureau of Land Management.
D. Basis of Accounting
Generally Accepted Accounting Principles (GAAP) for federal entities is the standard prescribed by the Federal
Accounting Standards Advisory Board (FASAB), which is the official standard-setting body for the Federal
Government, and the American Institute of Certified Public Accountants (AICPA). The financial statements are
prepared in accordance with GAAP for federal entities.
Transactions are recorded on an accrual accounting basis and a budgetary basis. Under the accrual method, revenues
are recognized when earned and expenses are recognized when liabilities are incurred, without regard to receipt or
payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of
federal funds posted in accordance with OMB directives and the U.S. Treasury regulations.
EPA uses a modified matching principle since federal entities recognize unfunded liabilities (without budgetary
resources) in accordance FASAB Statement of Federal Financial Accounting Standards (SFFAS) No. 5 Accounting
for Liabilities of the Federal Government.
E. Revenues and Other Financing Sources
The following EPA policies and procedures to account for inflow of revenue and other financing sources are in
accordance with SFFAS No. 7, Accounting for Revenues and Other Financing Sources.
I. Superfund
The Superfund program receives most of its funding through appropriations that may be used within specific statutory
limits for operations and capital expenditures (primarily equipment). Additional financing for the Superfund program
is obtained through reimbursements from other federal agencies, state cost share payments under Superfund State
Contracts (SSCs), and settlement proceeds from PRPs under CERCLA Section 122(b)(3) which are placed into
special accounts. Special accounts and corresponding interest are classified as mandatory appropriations due to the
'retain and use' authority under CERCLA 122(b) (3). Cost recovery settlements that are not placed in special accounts
are deposited in the Superfund Trust Fund.
37
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
II. Other Funds
Funds under the Federal Credit Reform Act of 1990 receive program guidance and funding needed to support loan
programs through appropriations which may be used within statutory limits for operations and capital expenditures.
The WIFIA program receives additional funding to support awarding, servicing and collecting loans through
application fees collected in the program fund. WIFIA authorizes the EPA to charge fees to recover all or a portion of
the Agency's cost of providing credit assistance and the costs of retaining expert firms, including financial,
engineering, and legal services, to assist in the underwriting and servicing of federal credit instruments. The fees are
to cover costs to the extent not covered by congressional appropriations.
The FIFRA and PRIA funds receive funding through fees collected for services provided and interest on invested
funds and can obligate collections up to the amount of anticipated collections within the fiscal year on the approved
letter of apportionment. The Hazardous Waste Electronic Manifest System Fund receives funding through fees
collected for use of the Hazardous Waste Electronic Manifest System and can obligate collections up to the amount of
anticipated collections on the approved letter of apportionment. The Toxic Substances Control Act Fund (TSCA)
collects user fees to defray costs for new chemical reviews and a range of implementation activities for existing
chemicals and can obligate collections up to the amount of anticipated collections on the approved letter of
apportionment. The WCF receives revenue through fees collected from the Agency program offices for services
provided. Such revenue is eliminated with related Agency program expenses upon consolidation of the Agency's
financial statements.
Appropriated funds are recognized as other financing sources expended when goods and services have been rendered
without regard to payment of cash. Other revenues are recognized when earned (i.e., when services have been
rendered).
F. Funds with the Treasury (See Note 2)
The Agency does not maintain cash in commercial bank accounts; cash receipts and disbursements are handled by
Treasury. The major funds maintained with Treasury are General Funds, Revolving Funds, Trust Funds, Special
Funds, Deposit Funds, and Clearing Accounts. These funds have balances available to pay current liabilities and
finance authorized obligations, as applicable.
G. Investments in U.S. Government Securities (See Note 4)
Investments in U.S. Government securities are maintained by Treasury and are reported at amortized cost net of
unamortized discounts or premiums. Discounts or premiums are amortized over the term of the investments and
reported as interest income. No provision is made for unrealized gains or losses on these securities because they
generally are held to maturity.
H. Marketable Securities (See Note 4)
The Agency records marketable securities at cost as of the date of receipt. Marketable securities are held by Treasury
and reported at their cost value in the financial statements until sold.
I. Accounts Receivable and Interest Receivable (See Note 5)
Superfund accounts receivable represent recovery of costs from PRPs as provided under CERCLA as amended by the
Superfund Amendments and Reauthorization Act of 1986 (SARA). Since there is no assurance that these funds will be
recovered, cost recovery expenditures are expensed when incurred (see Note 5). The Agency also records allocations
receivable from the Superfund Trust Fund, which are eliminated in the consolidated totals.
38
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
The Agency records accounts receivable from PRPs for Superfund site response costs when a consent decree,
judgment, administrative order, or settlement is entered. These agreements are generally negotiated after at least some,
but not necessarily all, of the site response costs have been incurred. It is the Agency's position that until a consent
decree or other form of settlement is obtained, the amount recoverable should not be recorded.
The Agency also records accounts receivable from states for a percentage of Superfund site remedial action costs
incurred by the Agency within those states. As agreed to under SSCs, cost sharing arrangements may vary according
to whether a site was privately or publicly operated at the time of hazardous substance disposal and whether the
Agency response action was removal or remedial. SSC agreements are usually for 10 percent or 50 percent of site
remedial action costs, depending on who has the primary responsibility for the site (i.e., publicly or privately owned).
States may pay the full amount of their share in advance or incrementally throughout the remedial action process.
Most remaining receivables for non-Superfund funds represent penalties and interest receivable for general fund
receipt accounts, unbilled intragovernmental reimbursements receivable, and refunds receivable for the STAG
appropriation.
J. Advances and Prepayments
Advances and prepayments represent funds paid to other entities both internal and external to the Agency for which a
budgetary expenditure has not yet occurred.
K. Loans Receivable (See Note 7)
Loans are accounted for as receivables after funds have been disbursed. Loans receivable resulting from loans
obligated on or after October 1, 1991, are reduced by an allowance equal to the present value of the subsidy costs
associated with these loans. The subsidy cost is calculated based on the interest rate differential between the loans and
Treasury borrowing, the estimated delinquencies and defaults net of recoveries offset by fees collected, and other
estimated cash flows associated with these loans. Loan proceeds are disbursed pursuant to the terms of the loan
agreement. Interest is calculated semi-annually on a per loan basis. Repayments are made pursuant to the terms of the
loan agreement with the option to repay loan amounts early.
L. Appropriated Amounts Held by Treasury (See Note 33)
Cash available to the Agency that is not needed immediately for current disbursements of the Superfund and LUST
Trust Funds and amounts appropriated from the Superfund Trust Fund to the OIG and Science and Technology
appropriations, remains in the respective Trust Funds managed by Treasury.
M. Property, Plant, and Equipment (See Note 9)
The EPA accounts for its personal and real property accounting records in accordance with SFFAS No. 6, Accounting
for Property, Plant and Equipment as amended. For EPA-held property, the Fixed Assets Subsystem (FAS) maintains
the official records and automatically generates depreciation entries monthly based on in-service dates.
A purchase of EPA-held or contractor-held personal property is capitalized if it is valued at $25 thousand or more and
has an estimated useful life of at least two years. For contractor-held property, depreciation is taken on a modified
straight-line basis over a period of six years depreciating 10 percent the first and sixth year, and 20 percent in years
two through five. For contractor-held property, detailed records are maintained and accounted for in contractor
systems, not in EPA's FAS. Acquisitions of EPA-held personal property are depreciated using the straight-line method
over the specific asset's useful life, ranging from two to fifteen years.
Personal property includes capital leases. To be defined as a capital lease, a lease, at its inception, must have a lease
term of two or more years and the lower of the fair value or present value of the projected minimum lease payments
must be $75 thousand or more. Capital leases containing real property (therefore considered in the real property
category as well), have a $150 thousand capitalization threshold. In addition, the lease must meet one of the following
39
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
criteria: transfers ownership at the end of the lease to the EPA; contains a bargain purchase option; the lease term is
equal to 75 percent or more of the estimated economic service life; or the present value of the projected cash flows of
the lease and other minimum lease payments is equal to or exceeds 90 percent of the fair value.
Superfund contract property used as part of the remedy for a site-specific response action is capitalized in accordance
with the Agency's capitalization threshold. This property is part of the remedy at the site and eventually becomes part
of the site itself. Once the response action has been completed and the remedy implemented, the EPA retains control
of the property (i.e., pump and treat facility) for 10 years or less, and transfers its interest in the facility to the
respective state for mandatory operation and maintenance - usually 20 years or more. Consistent with the EPA's 10-
year retention period, depreciation for this property is based on a 10-year useful life. However, if any property is
transferred to a state in a year or less, this property is charged to expense. If any property is sold prior to the EPA
relinquishing interest, the proceeds from the sale of that property shall be applied against contract payments or
refunded as required by the Federal Acquisition Regulations. An exception to the accounting of contract property
includes equipment purchased by the WCF. This property is retained in EPA's FAS and depreciated utilizing the
straight-line method based upon the asset's in-service date and useful life.
Real property consists of land, buildings, capital and leasehold improvements and capital leases. In FY 2017, the EPA
increased the capitalization threshold for real property, other than land, to $150 thousand from $85 thousand for
buildings and improvements and $25 thousand for plumbing, heating, and sanitation projects. The new threshold was
applied prospectively. Land is capitalized regardless of cost. Buildings are valued at an estimated original cost basis,
and land is valued at fair market value, if purchased prior to FY 1997. Real property purchased after FY 1996 is
valued at actual cost. Depreciation for real property is calculated using the straight-line method over the specific
asset's useful life, ranging from 10 to 50 years. Leasehold improvements are amortized over the lesser of their useful
life or the unexpired lease term. Additions to property and improvements not meeting the capitalization criteria,
expenditures for minor alterations, and repairs and maintenance are expensed when incurred.
Internal use software includes purchased commercial off-the-shelf software, contractor-developed software, and
software that was internally developed by Agency employees. In FY 2017, the EPA reviewed its capitalization
threshold levels for PP&E. The Agency performed an analysis of the values of software assets, reviewed capitalization
of other federal entities, and evaluated the materiality of software account balances. Based on the review, the Agency
increased the capitalization threshold from $250 thousand to $5 million to better align with major software acquisition
investments. The $5 million threshold was applied prospectively to software acquisitions and
modifications/enhancements placed into service after September 30, 2016. Software assets placed into service prior to
October 1, 2016 were capitalized at the $250 thousand threshold. Internal use software is capitalized at full cost
(direct and indirect) and amortized using the straight-line method over its useful life, not exceeding five years.
Internal use software purchased or developed for the working capital fund is capitalized at $250 thousand and is
amortized using the straight-line method over its useful life, not exceeding five years.
N. Liabilities (See Notes 8 & 13)
Liabilities represent the amount of monies or other resources that are more likely than not to be paid by the Agency as
the result of an Agency transaction or event that has already occurred and can be reasonably estimated. However, no
liability can be paid by the Agency without an appropriation or other collections authorized for retention. Liabilities
for which an appropriation has not been enacted are classified as unfunded liabilities and there is no certainty that the
appropriations will be enacted. Liabilities of the Agency arising from other than contracts can be abrogated by the
Government acting in its sovereign capacity.
O. Debt (See Note 10)
Debt payable to Treasury results from loans from Treasury to fund the non-subsidy portion of the WIFIA direct loans.
The Agency borrows the funds from Treasury when the loan disbursements agreed upon in the loan agreement are
made. Principal payments are made to Treasury periodically based on the collection of loan receivables.
40
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
P. Accrued Unfunded Annual Leave (See Note 29)
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 "Federal Employee and Veteran Benefits Payable." Sick leave earned but not taken is not accrued
as a liability; it is expensed as it is used.
Q. Retirement Plan (See Note 29)
There are two primary retirement systems for federal employees. Employees hired prior to January 1, 1987, may
participate in the Civil Service Retirement System (CSRS). On January 1, 1987, the Federal Employees Retirement
System (FERS) went into effect pursuant to Public Law 99-335. Most employees hired after December 31, 1986, are
automatically covered by FERS and Social Security. Employees hired prior to January 1, 1987, elected to either join
FERS and Social Security or to remain in CSRS. A primary feature of FERS is that it offers a savings plan to which
the Agency automatically contributes one percent of pay and matches any employee contributions up to an additional
four percent of pay. The Agency also contributes the employer's matching share for Social Security.
With the issuance of SFFAS No. 5, Accounting for Liabilities of the Federal Government, accounting and reporting
standards were established for liabilities relating to the federal employee benefit programs (Retirement, Health
Benefits, and Life Insurance). SFFAS No. 5 requires that the employing agencies recognize the cost of pensions and
other retirement benefits during their employees' active years of service. SFFAS No. 5 requires that the Office of
Personnel Management (OPM), as administrator of the CSRS and FERS, the Federal Employees Health Benefits
Program, and the Federal Employees Group Life Insurance Program, provide federal agencies with the actuarial cost
factors to compute the liability for each program.
R. Prior Period Adjustments and Restatements
Prior period adjustments, if any, are made in accordance with SFFAS No. 21, Reporting Corrections of Errors and
Changes in Accounting Principles. Specifically, prior period adjustments will only be made for material prior period
errors to: (1) the current period financial statements, and (2) the prior period financial statements presented for
comparison. Adjustments related to changes in accounting principles will only be made to the current period financial
statements, but not to prior period financial statements presented for comparison.
S. Deepwater Horizon Oil Spill
The April 20, 2010 Deepwater Horizon (DWH) oil spill was the largest oil spill in U.S. history. In the wake of the
spill, the National Contingency Plan regulation was revised to reflect the EPA's designation as a DWH Natural
Resource Trustee. The DWH Natural Resources Damage Assessment is a legal process pursuant to the Oil Pollution
Act and the April 4, 2016 Consent Decree between the U.S., the five Gulf states, and British Petroleum (BP) entered
by a federal court in New Orleans. Under the Consent Decree, a payment schedule was set forth for BP to pay $7.1
billion in natural resource damages. The Natural Resource Damage Assessments (NRDA) trustees are then jointly
responsible to use those funds in the manner set forth in Appendix 2 of the Consent Decree to restore natural
resources injured by the DWH oil spill. In FY 2016, the EPA received an advance of $184 thousand from BP and $2
million from the U.S. Coast Guard, to participate in addressing injured natural resources and service resulting from the
Deepwater Horizon Oil Spill. As additional projects are identified, the EPA may continue to receive funding through
the 2016 Consent Decree to implement its DWH NRDA Trustee responsibilities in the Agency's Damage Assessment
and Restoration Revolving Trust Fund.
T. Use of Estimates
The preparation of financial statements requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, including environmental and grant liabilities, and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
41
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
U. Reclassifications and Comparative Figures
Certain reclassifications have been made to the prior year's financial statements to enhance comparability with the
current year's financial statements and footnotes in accordance with Office of Management and Budget (OMB)
Circular No. A-13 6, Financial Reporting Requirements revised June 3, 2022. As a result, the form and content of the
Balance Sheet, Statement of Changes in Net Position and footnotes have changed to conform with OMB Circular No.
A-136.
Note 2. Fund Balance With Treasury (FBWT)
Fund Balance with Treasury as September 30, 2022 and 2021 consists of the following:
2022 2021
Entity
Non-Entity
Entity
Non-Entity
Assets
Assets
Total
Assets
Assets
Total
Trust Funds:
Superfund
$ 244,972
$
$ 244,972
$ 138,254
$
-
$ 138,254
LUST
24,166
-
24,166
43,540
-
43,540
Oil Spill & Misc.
18,919
-
18,919
27,351
-
27,351
Revolving Funds:
FIFRA/T olerance
31,338
-
31,338
38,362
-
38,362
Working Capital
112,992
-
112,992
109,800
-
109,800
E-Manifest
32,240
-
32,240
19,312
-
19,312
NRDA
2,123
-
2,123
2,161
-
2,161
WIFIA
769
-
769
30,837
-
30,837
Appropriated
63,039,162
-
63,039,162
10,798,706
-
10,798,706
Other Fund Types
592.723
4.425
597.148
566.449
3.658
570.107
Total
S 64.099.404
S 4.425
S 64.103.829
S 11.774.772
$
3.658
S 11.778.430
Entity fund balances, except for special fund receipt accounts, are available to pay current liabilities and to finance
authorized purchase commitments (see Status of Fund Balances below). Entity Assets for Other Fund Types consist of
special purpose funds and special fund receipt accounts, such as the Pesticide Registration funds and the
Environmental Services receipt account. The Non-Entity Assets for Other Fund Types consist of clearing accounts
and deposit funds, which are either awaiting documentation for the determination of proper disposition or being held
by the EPA for other entities.
Status of Fund Balances:
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund (Note 33)
Obligated Balance not yet Disbursed
Non-Budgetary FBWT
Total
2022
2021
$ 56,789,464 $ 5,278,005
188,011
(8,748,354)
117,500
15,179,725
577,483
97,541
(5,055,979)
29,603
10,876,050
553,210
S 64.103.829 X 11.778.430
42
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
The funds available for obligation may be apportioned by OMB for new obligations at the beginning of the following
fiscal year. Funds unavailable for obligation are generally balances in expired funds, which are available only for
adjustments of existing obligations. For September 30, 2022 and 2021, no differences existed between Treasury's
accounts and the EPA's statements for fund balances with Treasury. See Note 1 paragraph F for additional
information.
Note 3. Cash and Other Monetary Assets
As of September 30, 2022 and 2021, the balance in the imprest fund was $10 thousand.
Note 4. Investments, Net
As of September 30, 2022 and 2021, investments consist of the following:
Amortized
(Premium) Interest Investments, Market
Cost Discount Receivable Net Value
Intragovernmental Securities:
Non-Marketable FY 2022 $ 10,610,897 317,928 4,810 10,297,779 $ 10,297,779
Non-Marketable FY 2021 $ 6,084,927 (64,613) 6,298 6,155,838 $ 6,155,838
CERCLA, as amended by SARA, authorizes the EPA to recover monies to clean up Superfund sites from responsible
parties (RPs). Some RPs file for bankruptcy under Title 11 of the U.S. Code. In bankruptcy settlements, the EPA is an
unsecured creditor and is entitled to receive a percentage of the assets remaining after secured creditors have been
satisfied. Some RPs satisfy their debts by issuing securities of the reorganized company. The Agency does not intend
to exercise ownership rights to these securities and instead will convert them to cash as soon as practicable. All
investments in Treasury securities are funds from dedicated collections (see Note 17).
The Federal Government does not set aside assets to pay future benefits or other expenditures associated with funds
from dedicated collections. The cash receipts collected from sources other than intragovernmental for dedicated
collection funds are deposited in the U.S. Treasury, which uses the cash for general Government purposes. Treasury
securities are issued to the EPA as evidence of its receipts. Treasury securities are an asset to the EPA and a liability
to the U.S. Treasury. Because the EPA and the U.S. Treasury are both parts of the Government, these assets and
liabilities offset each other from the standpoint of the Government as a whole. For this reason, they do not represent
an asset or liability in the U.S. Government-wide financial statements.
Treasury securities provide the EPA with authority to draw upon the U.S. Treasury to make future benefit payments or
other expenditures. When the EPA requires redemption of these securities to make expenditures, the Government
finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from
the public or repaying less debt, or by curtailing other expenditures. This is the same way that the Government
finances all other expenditures. See Note 1 paragraphs G and H for additional information.
43
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 5. Accounts Receivable, Net
Accounts Receivable as of September 30, 2022 and 2021, consist of the following:
Intragovernmental:
Accounts & Interest Receivable
Less: Allowance for Uncollectible Accounts
Total
Other Than Intragovernmental:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance for Uncollectible Accounts
Total
2022
2021
$ 6,579 $ 10,775
(862) (3.173)
S 5.717 S 7.602
2022
2021
$ 130,572
2,625,563
(2.207.610)
S 548.525
$ 131,461
2,664,810
(2.215.535)
S 580.736
The Allowance for Uncollectible Accounts is determined both on a specific identification basis, as a result of a case-
by-case review of receivables, and on a percentage basis for receivables not specifically identified. See Note 1
paragraph I for additional information.
Note 6. Inventory and Related Property
Inventory and related property as September 30, 2022 and 2021, consist of the following:
2022 2021
Inventory Purchased for Resale $ 531 $ 428
Total $ 531 $ 428
Note 7. Loans Receivable, Net
Direct loans receivable disbursed from obligations made after FY 1991 are governed by the Federal Credit Reform
Act, which mandates that the present value of the subsidy costs (i.e., interest rate differentials, interest subsidies,
anticipated delinquencies, and defaults) associated with direct loans be recognized as a cost in the year the loan is
disbursed. The net loan present value is the gross loan receivable less the subsidy present value. EPA does not have
any loans obligated prior to 1992.
EPA administers the WIFIA Direct Loans program. In fiscal years 2022 and 2021, the Agency received borrowing
authority of $6.0 billion and $6.0 billion respectively for the non-subsidy portion of loan proceeds disbursed. For the
fiscal year ended September 30, 2022 and 2021, the Agency closed $6.2 billion and $5.7 billion in WIFIA loans,
respectively.
Interest on the loans is accrued based on the terms of the loan agreement. For the fiscal years ended September 30,
2022 and 2021, the WIFIA program has incurred $256.3 million and $38.2 million in administrative expenses,
respectively.
44
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Obligated after FY 1991
Direct Loan Program
2022 Loans
Receivable,
Gross
Interest and
Fees
Receivable
Foreclosed
Property/
Allowance
for
Loan Losses
Allowance for
Subsidy
Cost
Value of Assets
Related to
Direct
Loans, Net
WIFIA
1,681,958
1,998
(392,448) $
1,291,508
Direct Loan Program
2021 Loans
Receivable,
Gross
Interest
Receivable
Foreclosed
Property/
Allowance
for
Loan Losses
Allowance for
Subsidy
Cost
Value of Assets
Related to
Direct
Loans, Net
WIFIA
734,357
566
(148,785) $
586,138
Total Amount of Direct Loans Disbursed (Post-1991)
Direct Loan Program 2022 2021
WIFIA $ 955,452 $ 545,668
Subsidy Expense for Direct Loans by Program and Component
Subsidy Expense for New Direct Loans Disbursed
2022 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA $ - - - (5,015) $ (5,015)
Direct Loan Program
WIFIA $
Modifications and Reestimates
2021 Interest
Differential
Direct Loan Program
2022
Total
Modifications
Defaults
Interest
Rate
Reestimates
Fees and Other
Collections
Technical
Reestimates
Other Subsidy
Costs
Total
(2,577) $
(2,577)
FAI
Reestimates
Total
Reestimates
WIFIA
$
22,769
208,342
7,536 $
238,647
2021 Interest
Total Rate Technical FAI Total
Direct Loan Program Modifications Reestimates Reestimates Reestimates Reestimates
45
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
WIFIA $ - 7,226 114,482 - $ 121,708
46
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Total Direct Loans Subsidy Expense
Direct Loan Program 2022 2021
WIFIA $ 5,015 $ 26,448
Budget Subsidy Rates for Direct Loans for the Current Year Cohort
2022 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA 0.02% 0.47% 0% 0% 0.49%
2021 Interest Fees and Other Other Subsidy
Direct Loan Program Differential Defaults Collections Costs Total
WIFIA -.03% 0.83% 0% 0% 0.80%
The subsidy rates disclosed pertain to the current year's cohort. The rates cannot be applied to the direct loans
disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported
in the current year could result from disbursement of loans from both current year cohorts and prior year cohorts. The
subsidy expense reported in the current year also includes modifications and reestimates.
Schedule for Reconciling Subsidy Cost Allowance Balances
Beginning Balance, Changes and Ending Balance
Beginning Balance of the Subsidy Allowance
$
Add: Subsidy Expense for Direct Loans Disbursed During the Reporting Years
by Component
Other Subsidy Costs
Total of the Above Subsidy Expense Components $
Adjustments
Add or Subtract Subsidy Reestimates by Component
Interest Rate Reestimates
Technical/Default Reestimates
FAI Adjustment
Total of the Above Reestimate Components $_
Ending Balance of the Subsidy Cost Allowance $=
2022
(148,785) $
(5.015)
(5,015) $
(22,769)
(208,343)
(7.536)
2021
(24,500)
("2.577)
(2,577)
(7,226)
(114,482)
(238.648) $ (121.708)
(392.448) $ (148.785)
47
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
The economic assumptions of the WIFIA upward and downward adjustments were a reassessment of risk levels as
well as estimated changes in future cash flows on loans. Actual interest rates used for FY 2022 loan disbursements
were higher than the interest rate assumptions used during the budget formulation process at loan origination. See
Note 1 paragraph K for additional information.
2022
Beginning balance of loans receivable, net $ 586,138
Add loan disbursements 955,452
Less principal and interest payments received (28,498)
Add interest accruals 21,745
Add fees accrued 334
Add upward reestimates (164,438)
Less downward reestimates 48,268
Allowance for loan and interest loss adjustments (127.493)
Ending balance of loans receivable, net $ 1.291.508
Note 8. Accounts Payable
The Accounts Payable are current liabilities and consist of the following amounts as of September 30, 2022 and 2021:
Covered by Budgetary
Resources
2022 2021
Intragovernmental:
Accounts Payable $ 163 $ 3,367
Accrued Liabilities
Liabilities for Allocation - -
Total S 163 S 3.367
2022 2021
Other Than Intragovernmental:
Accounts Payable $ 39,579 $ 56,306
Advances Payable 26,223 (2)
Interest Payable 15 15
Total X 65.817 S 56.319
48
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 9. General Property, Plant and Equipment, Net
General property, plant, and equipment (PP&E) consist of software, real property, EPA-held and contractor-held
personal property, and capital leases. See Note 1 paragraph M for additional information.
As of September 30, 2022, General PP&E Cost consisted of the following:
2022
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (Production) (Development) Equipment Buildings Leases Total
Balance,
Beginning of
Year $ 330,579 $ 440,896 $ 55,537 $ 31,618 $ 828,716 $ 24,485 $ 1,711,831
Additions 12,239 - 38,844 - 52,018 - 103,101
Dispositions (10,623) - - - (6,986) - (17,609)
Revaluations - - 2.259 7.908 (10.973) - (806)
Balance,
September S 332.195 S 440.896 S 96.640 S 39.526 S 862.775 S 24.485 S 1.796.517
30,2022
As of September 30, 2022, General PP&E Accumulated Depreciation consisted of the following:
2022
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (Production) (Development) Equipment Buildings Leases Total
433,822 $ - $ 19,851 $ 339,775 $ 21,764 $ 1,041,194
(9,799)
(8,667) - 1 (8,967)
4,685 - - 17,849 815 43,097
Balance,
Beginning of
Year
$ 225,982
Dispositions
(9,799)
Revaluations
(301)
Depreciation
Expense
19.748
Balance,
September
S 235.630
30,2022
S 11-184 S 357.624 S 22.580 S 1.065.525
49
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
As of September 30, 2022, General PP&E, Net consisted of the following:
2022
EPA-
Contractor
Land
Held
Software
Software
Held
and
Capital
Equipment
(Production)
(Development)
Equipment
Buildings
Leases
Total
Balance,
September
S 96.565
S 2.389
S 96.640
S 28.342
S 505.151
S 1.905
S 730.992
30,2022
As of September 30, 2021, General PP&E Cost consisted of the following:
2021
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (Production) (Development) Equipment Buildings Leases Total
Balance,
Beginning of
Year $ 321,002 $ 439,787 $ 45,865 $ 33,895 $ 802,321 $ 24,485 $ 1,667,355
Additions 23,898 1,109 11,959 12,010 30,623 - 79,599
Dispositions (14,389) - (2,262) (14,287) (4,228) - (35,166)
Revaluations 68 - (25) - - - 43
Balance,
September S 330.579 S 440.896 S 55.537 X 31.618 S 828.716 S 24.485 S 1.711.831
30,2021
As of September 30, 2021, General PP&E Accumulated Depreciation consisted of the following:
2021
EPA- Contractor Land
Held Software Software Held and Capital
Equipment (Production) (Development) Equipment Buildings Leases Total
Balance,
Beginning of
Year $ 217,928 $ 420,502 $ - $ 26,484 $ 321,799 $ 20,948 $ 1,007,661
Additions (14,481) (63) - ... (14,544)
Dispositions 1,518 63 - (3,742) - - (2,161)
Revaluations 68 - - ... 68
Depreciation
Expense 20.949 13.320 - (2.891) 17.976 816 50.170
Balance,
September S 225.982 S 433.822 S S 19.851 S 339.775 S 21.764 S 1.041.194
30,2021
50
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
As of September 30, 2021, General PP&E, Net consisted of the following:
2021
EPA-
Contractor
Land
Held
Software
Software
Held
and
Capital
Equipment
(Production)
(Development)
Eauioment
Buildings
Leases
Total
Balance
September
S 104.597
S 7.074
S 55.537
S 11.767
S 488.941
S 2.721
S 670.637
30,2021
Note 10. Debt
All debt is classified as not covered by budgetary resources, except for direct loan and guaranteed loan financing
account debt to Treasury and that portion of other debt covered by budgetary resources at the Balance Sheet date.
EPA borrows funds from the Bureau of Public Debt right before funds are disbursed to the borrower for the non-
subsidy portion of WIFIA loans. As of September 30, 2022 and 2021, the EPA had debt due to Treasury consisting
entirely of funds borrowed to finance the non-subsidy portion of the WIFIA Direct Loan Program:
2021 2022
Beginning Net Ending Net Ending
Balance Borrowing Balance Borrowing Balance
Debt to the
Treasury $ 221.652 $ 525.187 S 746.839 $ 810.341 X 1.557.180
See Note 1 paragraph O for additional information.
Note 11. Stewardship Property, Plant and Equipment
The Agency acquires title to certain property and property rights under the authorities provided in Section 104(j)
CERCLA related to remedial clean-up sites. The property rights are in the form of fee interests (ownership) and
easements to allow access to clean-up sites or to restrict usage of remediated sites. The Agency takes title to the land
during remediation and transfers it to state or local governments upon the completion of clean-up. A site with "land
acquired" may have more than one acquisition property. Sites are not counted as a withdrawal until all acquired
properties have been transferred under the terms of 104(j).
51
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
As of September 30, 2022 and 2021, the Agency possessed the following land and land rights:
2022 2021
Superfund Sites with Easements:
Beginning Balance 45 43
Additions 2 2
Ending Balance 47 45
S jperfund Sites with Land Acquired:
Beginning Balance 32 32
Additions 1 1
Withdrawals - (1)
Ending Balance 33 32
Note 12. Liability to the General Fund for Custodial Assets
Liability to the General Fund for Custodial Assets represents the amount of net accounts receivable that, when
collected, will be deposited to the Treasury General Fund. Included in the custodial liability are amounts for fines and
penalties, interest assessments, repayments of loans, and miscellaneous other accounts receivable. As of September
30, 2022 and 2021, custodial liability is approximately $106,560 and $51,241 thousand, respectively.
52
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2022:
Covered by Not Covered by
Budgetary Budgetary
Resources Resources Total
Other Liabilities - Intragovernmental:
Current
Employer Contributions & Payroll Taxes
$ 16,126 $
$
16,126
Other Accrued Liabilities
152,350
-
152,350
Loan Reestimates
-
769
769
Liability for Deposit Funds
-
(2)
(2)
Non-Current
Unfunded FECA Liability
-
8,447
8,447
Unfunded Unemployment Liability
-
7
7
Payable to Treasury Judgement Fund
-
22.000
22.000
Total Intragovernmental
S 168.476 S
31.221 S
199.697
Other Liabilities - Other Than Intragovernmental:
Current
Liability for Deposit Funds, Other Than
Intragovernmental
Commitment and Contingencies
Other Accrued Liabilities
Grant Liabilities
Accrued Funded Payroll and Benefits
Capital Lease Liabilities
Direct Loans Subsidy Liability
Total Other Than Intragovernmental
5,128 $
126,411
360,811
103,166
1,476
1,770
_CZ69)
596.992 $=
1.001 $=
5,128
1,770
126,411
360,811
103,166
1,476
(769)
597.993
53
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Other Liabilities consist of the following as of September 30, 2021:
Covered by
Budgetary
Resources
Not Covered by
Budgetary
Resources
Total
Current
Employer Contributions & Payroll Taxes
Other Accrued Liabilities
Loan Reestimates
Liability for Deposit Funds
Non-Current
Unfunded FECA Liability
Unfunded Unemployment Liability
Payable to Treasury Judgement Fund
Total Intragovernmental
29,503 $
144,640
770
(2)
9,018
308
22,000
174.143 $=
32.094 $=
29,503
144,640
770
(2)
9,018
308
22.000
206.237
Other Liabilities - Other Than Intragovernmental
Current
Liability for Deposit Funds, Other Than
Intragovernmental
Other Accrued Liabilities
Grant Liabilities
Accrued Funded Payroll and Benefits
Capital Lease Liabilities
Total Other Than Intragovernmental:
5,626 $
147,393
369,003
94,136
2,325
618.483 $_
5,626
147,393
369,003
94,136
2.325
618.483
Liabilities not covered by budgetary resources require future congressional action whereas liabilities covered by
budgetary resources reflect prior congressional action. Regardless of when the congressional action occurs, when the
liabilities are liquidated, Treasury will finance the liquidation in the same way that it finances all other disbursements,
using some combination of receipts, other inflows, and borrowing from the public (if there is a budget deficit).
Other Accrued Liabilities are mostly comprised of contractor accruals.
See Note 1 paragraph N for additional information.
Note 14. Leases
The value of assets held under Capital Leases as of September 30, 2022 and 2021, are as follows:
Capital Leases:
2022 2021
Summary of Assets Under Capital Lease:
Real Property $ 24.485 $ 24.485
Total 24,485 24,485
Accumulated Amortization $ 22.581 $ 21.764
54
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
The EPA has one capital lease for land and buildings housing scientific laboratories. This lease includes a base rental
charge and escalation clauses based upon either rising operating costs and/or real estate taxes. The base operating
costs are adjusted annually according to escalators in the Consumer Price Indices published by the Bureau of Labor
Statistics, U.S. Department of Labor. The EPA's lease will terminate in FY 2025.
Future Payments Due
Fiscal Year Capital Leases
2023 $ 931
2024 962
2025 325
Total Future Minimum Lease Payments 2,218
Less: Imputed Interest ("742)
Net Capital Lease Liability 1.476
Liabilities not Covered by Budgetary Resources $ 1.476
Note 15. Deferred Revenue
Deferred revenue is fully comprised of cashout advances. Cashout advances are funds received by the EPA, a state, or
another responsible party under the terms of a settlement agreement (e.g., consent decree) to finance response action
costs at a specified Superfund site. Under CERCLA Section 122(b)(3), cash-out funds received by the EPA are placed
in site-specific, interest-bearing accounts known as special accounts and are used for potential future work at such
sites in accordance with the terms of the settlement agreement. Funds placed in special accounts may be disbursed to
PRPs, to states that take responsibility for the site, or to other Federal agencies to conduct or finance response actions
in lieu of the EPA without further appropriation by Congress. As of September 30, 2022 and 2021, cash-out advances
total $3,541.1 million and $3,476.7 million, respectively.
Note 16. Commitments and Contingencies
The EPA may be a party in various administrative proceedings, actions and claims brought by or against it. These
include:
a) Various personnel actions, suits, or claims brought against the Agency by employees, and others.
b) Various contract and assistance program claims brought against the Agency by vendors, grantees, and others.
c) The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to include the collection
of fines and penalties from responsible parties.
d) Claims against recipients for improperly spent assistance funds which may be settled by a reduction of future
EPA funding to the grantee or the provision of additional grantee matching funds.
As of September 30, 2022, there were $1.77M of accrued liabilities for commitments and potential loss contingencies.
As of September 30, 2021, there were no accrued liabilities for commitments and potential loss contingencies.
55
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
A. Gold King Mine
On August 5, 2015, the EPA and its contractors were investigating under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) the Gold King Mine, an inactive mine in Colorado, when a
release of acid mine drainage occurred. While the EPA team was excavating above the mine adit, water began leaking
from the mine adit. The small leak quickly turned into a significant breach, releasing approximately three million
gallons of mine water into the North Fork of Cement Creek, a tributary of the Animas River. The plume of acid mine
water traveled from Colorado's Animas River into New Mexico's San Juan River, passed through the Navajo Nation,
and deposited into Utah's Lake Powell. As of September 30, 2022, legal claims exist for which the potential loss
could not be determined related to McDaniel et al v United States of America et al. In this case, plaintiffs are seeking
damages under the Federal Tort Claims Act for alleged property damage and personal injuries resulting from the Gold
King Mine release on August 5, 2015.
In addition, as of September 30, 2022, legal claims exist for which the potential loss could not be determined related
to Hennis v. United States. In this case, EPA built and operates an interim water treatment plant to treat ongoing
discharge of mine-impacted water from the Gold King Mine on plaintiffs property. Plaintiff alleges that the
Government's ongoing access to, occupation, and use of his property constitutes a physical taking without just
compensation.
B. Flint, Michigan
The EPA has received claims from over 9,400 individuals under the Federal Tort Claims Act for alleged injuries and
property damages caused by the EPA's alleged negligence related to the water health crisis in Flint, Michigan. There
is no estimated loss amount related to the water health crisis; they are only reasonably possible, and the final outcomes
are not probable.
C. Superfund
Under CERCLA Section 106(a), the EPA issues administrative orders that require parties to clean up contaminated
sites. CERCLA Section 106(b) allows a party that has complied with such an order to petition the EPA for
reimbursement of its reasonable costs of responding to the order plus interest. To be eligible for reimbursement, the
party must demonstrate either that it was not a liable party under CERCLA Section 107(a) for the response action
ordered or that the Agency's selection of the response action was arbitrary and capricious or otherwise not in
accordance with law. As of September 30, 2022, there is one case related to Superfund. This case is August Mack
Environmental, Inc. v. EPA for $2.7 million; it is only reasonably possible, and the outcome is not probable. August
Mack Environmental (AME) was a contractor for Vertellus, one of three PRPs (Potentially Responsible Parties) at the
Big John Salvage Site in Fairmont, WV. The site was being cleaned up pursuant to a consent decree which named
Vertellus the performing defendant; there is a Special Account at the site funded by the PRPs. Vertellus filed for
bankruptcy and AME did not recover in bankruptcy the moneys it claimed it was owed by Vertellus. AME made a
claim against the Superfund and/or the Special Account. EPA Region 3 denied the claim and AME appealed to the
Administrative Law Judge (ALJ) who also denied it. AME then filed suit in district court. The court ruled in favor of
EPA on a Motion to Dismiss and AME appealed to the 4th Circuit. The 4th Circuit ruled in AME's favor and the case
was remanded back to the ALJ.
D. Environmental Liabilities
As of September 30, 2022, there is one case pending against the EPA that is reported under Environmental Liabilities.
The case is ThermalKem a/k/a Phillip Services CERCLA Site, which is categorized under probable; $1.77 million has
been accrued. This case is a claim against several EPA regions for generator liability under CERCLA, based on waste
sent to Site from other sites being cleaned-up by EPA and/or under EPA oversight. It also includes a claim for
generator liability for waste sent to Site from EPA's labs and research facilities.
56
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
E. Other Pending Cases
As of September 30, 2022, legal claims exist for which the potential loss could not be determined. These include
cases: United Affiliates Corp., etal. v. United States, involving alleged taking of property for which plaintiff is
seeking just compensation under the 5th Amendment; and Resort Center Associates, LLC v. Wheeler, in which
plaintiff alleges that EPA violated CERCLA and failed to perform non-discretionary duties under CERCLA in
connection with designating a portion of its development property as part of the Richardson Flat Tailings Superfund
site. This matter also includes 5th Amendment taking and Federal Tort Claims Act allegations.
F. Judgement Fund
In cases that are paid by the U.S. Treasury Judgment Fund, the EPA must recognize the full cost of a claim regardless
of which entity is actually paying the claim. Until these claims are settled or a court judgment is assessed where the
Judgment Fund is determined to be the appropriate source for the payment, claims that are probable and estimable
must be recognized as an expense and liability of the Agency. For these cases, at the time of settlement or judgment,
the liability will be reduced and an imputed financing source recognized. See Interpretation of Federal Financial
Accounting Standards No. 2, Accounting for Treasury Judgment Fund Transactions. The EPA has a $22 million
liability to the Treasury Judgment Fund for a payment made by the Fund to settle a contract dispute claim. As of
September 30, 2022, there is no other case pending in the court.
G. Other Commitments
EPA has a commitment to fund the U.S. Government's payment to the Commission of the North American Agreement
on Environmental Cooperation between the Government of Canada, the Government of the United Mexican States,
and the Government of the United States of America (commonly referred to as CEC). According to the terms of the
agreement, each government pays an equal share to cover the operating costs of the CEC. EPA paid $3.6 million in
period ending September 30, 2022, and $3.6 million in period ending September 30, 2021 to the CEC.
EPA has a legal commitment under a noncancelable agreement, subject to the availability of funds, with the United
Nations Environmental Program (UNEP). This agreement enables EPA to provide funding to the Multilateral Fund for
the Implementation of the Montreal Protocol. EPA made payments totaling $8.3 million in the period ending
September 30, 2022, and $8.3 million in the period ending September 30, 2021.
57
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 17. Funds from Dedicated Collections
Eliminations
Total Funds
between
Total Funds
Other Funds
from Dedicated
Dedicated
from Dedicated
Environmental
from Dedicated
Collections
Collections
Collections
Balance Sheet for Fiscal the Year Ended 2022
Services
LUST
Superfund
Collections
Combined
Funds
Consolidated
Intragovernmental
Fund Balance with Treasury
$ 572,474 $
; 24,166
$ 551,926
$ 105,639
$ 1,254,205 !
S (306,954)
$ 947,251
Investments, Net
-
1,218,255
9,079,524
-
10,297,779
-
10,297,779
Accounts Receivable, Net
-
92,713
8,657,245
287,177
9,037,135
(8,748,509)
288,626
Advances and Prepayments
-
88
20.272
1.007
21.367
-
21.367
Total Intragovernmental Assets
572,474
1,335,222
18,308,967
393,823
20,610,486
(9,055,463)
11,555,023
Other Than Intragovernmental
Accounts Receivable, Net
-
-
460,932
4,541
465,473
-
465,473
Loans Receivable, Net
-
-
-
1,291,124
1,291,124
-
1,291,124
General Property, Plant, and Equipment, Net
-
59
32,357
20,593
53,009
-
53,009
Advances and Prepayments
-
-
772
-
772
-
772
Total Other Than Intragovernmental
_
59
494.061
1.316.258
1.810.378
_
1.810.378
Total Assets
S 572.474 S
i 1.335.281
S 18.803.028
S 1.710.081
S 22.420.864 !
« C9.055.463~*
S 13.365.401
Intragovernmental
Accounts Payable
$ - $
92,715 !
S 8,688,339
$
$ 8,781,054 !
S (8,748,489)
$ 8,781,054
Debt
_
-
-
1,557,180
1,557,180
-
1,557,180
Advances from Others and Deferred Revenue
_
-
164,486
4,789
169,275
-
169,275
Liability to the General Fund for Custodial Assets
-
-
22,362
-
22,362
-
22,362
Other Liabilities
-
485
41.337
51.621
93.443
-
93.443
Total Intragovernmental Liabilities
_
93.200
8.916.524
1.613.590
10.623.314
(8.748.489)
10.623.314
Other Than Intragovernmental
Accounts Payable
-
49
33,685
984
34,718
-
34,718
Federal Employee Benefits Payable
-
36
10,135
261
10,432
-
10,432
Advances from Others and Deferred Revenue
-
-
44,970
45,988
90,958
-
90,958
Deferred Revenue
-
-
3,541,093
-
3,541,093
-
3,541,093
Other Liabilities
-
6.358
84.736
4.619
95.713
-
95.713
Total Other Than Intragovernmental Liabilities
_
6.443
3.714.619
51.852
3.772.914
_
3.772.914
Total Liabilities
$ - $
99.643
$ 12.631.143
$ 1.665.442
$ 14.396.228 5
6 (8.748.489)
$ 5.647.739
Unexpended Appropriations
$ - $
$
; (113)
$ 291 :
$ 178 $
!
S 178
Cumulative Results of Operations
572.474
1.235.638
6.171.998
44.348
8.024.458
(306.974)
7.717.484
Total Liabilities and Net Position
S 572.474 S
1.335.281 :
S 18.803.028
S 1.710.081
S 22.420.864 !
K C9.055.463~>
S 13.365.401
58
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Eliminations
Total Funds
between
Total Funds
Other Funds
from Dedicated
Dedicated
from Dedicated
Statement of Net Cost for the Fiscal Year Ended
Environmental
from Dedicated
Collections
Collections
Collections
2022
Services
LUST
Superfund
Collections
Combined
Funds
Consolidated
Gross Program Costs
$ - $
92,373 !
S 1,350,585
$ 138,211
$ 1,581,169 !
S
$ 1,581,169
Less: Earned Revenues
(513)
-
506.923
132.169
638.579
(303.954)
334.625
Net Costs of Operations
S 513 S
92.373 :
S 843.662
S 6.042
S 942.590 !
S 303.954
S 1.246.544
Statement of Changes in Net Position for the Fiscal
Year Ended 2022
Unexpended Appropriations
Beginning Balance
$ - $
<
B (104)
$ 291
t"-
00
s
$ 187
Appropriations Used
-
-
(9)
-
(9)
-
(9)
Total Unexpended Appropriations
$ - $
<
$ (113)
$ 291
$ 178 :
s
$ 178
Cumulative Results of Operations
Beginning Balance
$ 546,001 $
1,072,946 !
£ 1,899,380
$ 33,333
$ 3,551,660 :
S (20)
$ 3,551,640
Appropriations Used
-
-
9
-
9
-
9
Excise tax & customs
-
245,048
413,002
-
658,050
-
658,050
Misc. taxes & receipts
26,986
9,716
60,652
230
97,584
(3,000)
94,584
Total Other Than Intragovernmental Non-Exchange
Revenue
26,986
254,764
473,654
230
755,634
(3,000)
752,634
Transfers-In/(Out) Without Reimbursement
-
-
4,616,482
(31,693)
4,584,789
-
4,584,789
Imputed Financing
-
301
26,135
251
26,687
-
26,687
Other Financing Sources
-
-
-
48,269
48,269
-
48,269
Net Cost of Operations
(513)
(92,373)
(843,662)
(6,042)
(942,590)
(303,954)
(1,246,544)
Net Change in Cumulative Results of Operations
26.473
162.692
4.272.618
11.015
4.472.798
(306.954)
4.165.844
Cumulative Results of Operations: Ending
572,474
1,235,638
6,171,998
44,348
8,024,458
(306,974)
7,717,484
Net Position, End of Period
S 572.474 S
1.235.638 <
K 6.171.885
S 44.639
S 8.024.636 !
S (306.974)
S 7.717.662
59
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Eliminations
Total Funds
between
Total Funds
Other Funds
from Dedicated
Dedicated
from Dedicated
Environmental
from Dedicated
Collections
Collections
Collections
Balance Sheet for Fiscal the Year Ended 2021
Services
LUST
Superfund
Collections
Combined
Funds
Consolidated
Intragovernmental
Fund Balance with Treasury
$ 546,001 $
; 43,540
$ 389,847
$ 135,505
$ 1,114,893 !
S (251,593)
$ 863,300
Investments, Net
-
1,037,121
5,118,717
-
6,155,838
-
6,155,838
Accounts Receivable, Net
-
85,921
4,971,593
122,479
5,179,993
(5,055,995)
123,998
Advances and Prepayments
-
155
17.047
493
17.695
-
17.695
Total Intragovernmental Assets
546,001
1,166,737
10,497,204
258,477
12,468,419
(5,307,588)
7,160,831
Other Than Intragovernmental
Accounts Receivable, Net
-
-
490,569
7,114
497,683
-
497,683
Loans Receivable, Net
-
-
-
586,087
586,087
-
586,087
General Property, Plant, and Equipment, Net
-
73
24,516
3,407
27,996
-
27,996
Advances and Prepayments
_
-
775
-
775
-
775
Total Other Than Intragovernmental
_
73
515,860
596.608
1.112.541
_
1.112.541
Total Assets
S 546.001
S 8.273372
Intragovernmental
Accounts Payable
$ - $
86,187 !
S 5,002,107
$
$ 5,088,294 !
S (5,056,121)
$ 5,088,294
Debt
_
-
-
746,839
746,839
-
746,839
Advances from Others and Deferred Revenue
_
-
125,956
13,873
139,829
-
139,829
Liability to the General Fund for Custodial Assets
-
-
22,362
-
22,362
-
22,362
Other Liabilities
_
597
61.026
2.085
63.708
-
63.708
Total Intragovernmental Liabilities
_
86.784
5.211.451
762.797
6.061.032
(5.056.121)
6.061.032
Other Than Intragovernmental
Accounts Payable
-
3
31,903
1,220
33,126
-
33,126
Federal Employee Benefits Payable
-
32
10,858
192
11,082
-
11,082
Advances from Others and Deferred Revenue
-
-
40,518
51,730
92,248
-
92,248
Deferred Revenue
-
-
3,476,732
-
3,476,732
-
3,476,732
Other Liabilities
_
7.045
90.879
5.522
103.446
-
103.446
Total Other Than Intragovernmental Liabilities
_
7.080
3.650.890
58.664
3.716.634
_
3.716.634
Total Liabilities
$ - $
93.864
$ 8,862,341
$ 821.461
$ 9.777.666 5
6 (5.056.121)
$ 4.721.545
Unexpended Appropriations
$ - $
$
; (104)
$ 291 :
$ 187 $
:
S 187
Cumulative Results of Operations
546.001
1.072.946
2.150.827
33.333
3.803.107
(251.467)
3.551.640
Total Liabilities and Net Position
S 546.001 S
1.166.810 :
« 11.013.064
S 855.085
S 13.580.960 <
S C5.307.588~*
S 8.273.372
60
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Statement of Net Cost for the Fiscal Year Ended
2021
Environmental
Services
LUST
Superfund
Other Funds
from Dedicated
Collections
Total Funds
from Dedicated
Collections
Combined
Eliminations
between
Dedicated
Collections
Funds
Total Funds
from Dedicated
Collections
Consolidated
Gross Program Costs $
$
86,157 $
1,364,410 $
137,107 $
1,587,674 $
$
1,587,674
Less: Earned Revenues
13
-
545.408
152.214
697.635
(249.937)
447.698
Net Costs of Operations $
n3~> s
86.157 S
819.002 S
f1 5.107^1 s
890.039 S
249.937 S
1.139.976
Statement of Changes in Net Position for the Fiscal
Year Ended 2021
Unexpended Appropriations
Beginning Balance $
$
$
(89) $
(100) $
(189) $
$
(189)
Appropriations Used
.
-
(15)
391
376
-
376
Total Unexpended Appropriations $
$
$
(104) $
291 $
187 $
$
187
Cumulative Results of Operations
Beginning Balance $
518,165 $
916,564 $
1,828,018 $
22,511 $
3,285,258 $
21,628 $
3,306,886
Appropriations Used
-
-
15
(391)
(376)
-
(376)
Excise tax & customs
-
241,786
-
-
241,786
-
241,786
Misc. taxes & receipts
27,823
476
4,901
3,855
37,055
(1,656)
35,399
Total Other Than Intragovernmental Non-Exchange
Revenue
27,823
242,262
4,901
3,855
278,841
(1,656)
277,185
Transfers-In/(Out) Without Reimbursement
-
-
1,111,423
(8,774)
1,102,649
(21,502)
1,081,147
Imputed Financing
-
277
25,472
256
26,005
-
26,005
Other Financing Sources
-
-
-
769
769
-
769
Net Cost of Operations
13
(86,157)
(819,002)
15,107
(890,039)
(249,937)
(1,139,976)
Net Change in Cumulative Results of Operations
27.836
156.382
322.809
10.822
796.690
(273.095)
523.595
Cumulative Results of Operations: Ending
546,001
1,072,946
2,150,827
33,333
4,081,948
(251,467)
3,830,481
Net Position, End of Period $
546.001 S
1.072.946 S
2.150.723 S
33.625 S
3.803.295 S
C251.467> S
3.551.828
61
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
A. Funds from Dedicated Collections
i. Environmental Services Receipt Account:
The Environmental Services Receipt Account, authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-
549)," was established for the deposit of fee receipts associated with environmental programs, including radon
measurement proficiency ratings and training, motor vehicle engine certifications, and water pollution permits.
Receipts in this special fund can only be appropriated to the S&T and EPM appropriations to meet the expenses of the
programs that generate the receipts if authorized by Congress in the Agency's appropriations bill.
ii. Leaking Underground Storage Tank (LUST) Trust Fund:
The LUST Trust Fund was authorized by the SARA as amended by the Omnibus Budget Reconciliation Act of 1990.
The LUST appropriation provides funding to prevent and respond to releases from leaking underground petroleum
tanks. The Agency oversees cleanup and enforcement programs which are implemented by the states. Funds are
allocated to the states through cooperative agreements and prevention grants to inspect and clean up those sites posing
the greatest threat to human health and the environment. Funds are used for grants to non-state entities including
Indian tribes under Section 8001 of the Resource Conservation and Recovery Act.
Hi. Superfund Trust Fund:
In 1980, the Superfund Trust Fund was established by CERCLA to provide resources to respond to and clean up
hazardous substance emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund
financing is shared by federal and state governments as well as industry. The EPA allocates funds from its
appropriation to the Department of Justice to carry out CERCLA. Risks to public health and the environment at
uncontrolled hazardous waste sites qualifying for the Agency's National Priorities List (NPL) are reduced and
addressed through a process involving site assessment and analysis and the design and implementation of cleanup
remedies. NPL cleanups and removals are conducted and financed by the EPA, private parties, or other Federal
agencies. The Superfund Trust Fund includes Treasury's collections, special account receipts from settlement
agreements, and investment activity.
B. Other Funds from Dedicated Collections
I Inland Oil Spill Programs Account:
The Inland Oil Spill Programs Account was authorized by the Oil Pollution Act of 1990 (OPA). Monies are
appropriated from the Oil Spill Liability Trust Fund to the EPA's Inland Oil Spill Programs Account each year. The
Agency is responsible for directing, monitoring and providing technical assistance for major inland oil spill response
activities. This involves setting oil prevention and response standards, initiating enforcement actions for compliance
with OPA and Spill Prevention Control and Countermeasure requirements, and directing response actions when
appropriate. The Agency carries out research to improve response actions to oil spills including research on the use of
remediation techniques such as dispersants and bioremediation. Funding for specific oil spill cleanup actions is
provided through the U.S. Coast Guard from the Oil Spill Liability Trust Fund through reimbursable Pollution
Removal Funding Agreements (PRFAs) and other inter-agency agreements.
ii. Pesticide Registration Fund:
The Pesticide Registration Fund was authorized by a 2004 Act, "Consolidated Appropriations Act (P.L. 108-199),"
and reauthorized until September 30, 2023, for the expedited processing of certain registration petitions and the
associated establishment of tolerances for pesticides to be used in or on food and animal feed. Fees covering these
activities, as authorized under the FIFRA Amendments of 1988, are to be paid by industry and deposited into this fund
group.
62
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
in. Reregistration and Expedited Processing Fund:
The Revolving Fund was authorized by the FIFRA of 1972, as amended by the FIFRA Amendments of 1988 and as
amended by the Food Quality Protection Act of 1996. Pesticide maintenance fees are paid by industry to offset the
costs of pesticide re-registration and the reassessment of tolerances for pesticides used in or on food and animal feed,
as required by law.
iv. Tolerance Revolving Fund:
The Tolerance Revolving Fund was authorized in 1963 for the deposit of tolerance fees. Fees were paid by industry
for Federal services to set pesticide chemical residue limits in or on food and animal feed. Fees collected prior to
January 2, 1997 were accounted for under this fund. Presently, collection of these fees is prohibited by statute enacted
in the Consolidated Appropriations Act, 2004 (P.L. 108-199).
v. Hazardous Waste Electronic Manifest System
The Hazardous Waste Electronic Manifest System Fund, authorized in 2014, receives funding through fees collected
for use of the Hazardous Waste Electronic Manifest System.
Note 18. Environmental and Disposal Liabilities
Annually, the EPA is required to disclose its audited estimated future costs associated with:
a) Cleanup of hazardous waste and restoration of the facility when it is closed, and
b) Costs to remediate known environmental contamination resulting from the Agency's operations.
The EPA has 25 sites for which it is responsible for clean-up costs incurred under federal, state, and/or local
regulations to remove, contain, or dispose of hazardous material found at these facilities.
The EPA is also required to report the estimated costs related to:
a) Clean-up from federal operations resulting in hazardous waste
b) Accidental damage to nonfederal property caused by federal operations, and
c) Other damage to federal property caused by federal operations or natural forces.
The key to distinguishing between future clean-up costs versus an environmental liability is to determine whether the
event (accident, damage, etc.) has already occurred and whether we can reasonably estimate the cost to remediate the
site.
The EPA has elected to recognize the estimated total clean-up cost as a liability and record changes to the estimate in
subsequent years.
As of September 30, 2022, the EPA has one site that requires clean up stemming from its activities. The claimants'
chances of success are characterized as probable with costs amounting to $1.77 million that may be paid out of the
Treasury Judgment Fund.
The EPA has 25 sites for which it is required to fund the environmental cleanup. As of September 30, 2022, the
estimated costs for site clean-up were $32.2 million unfunded, and no amount funded, respectively. In 2021 the
estimated costs for site clean-up were $25.7 million unfunded, and $971 thousand funded, respectively. Since the
clean-up costs associated with permanent closure were not primarily recovered through user fees, the EPA has elected
to recognize the estimated total clean-up cost as a liability and record changes to the estimate in subsequent years.
63
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
In FY 2022, the estimate for unfunded clean-up cost increased by $6.5 million from the FY 2021 estimate. This is
primarily due to decreased estimates of future lab cleanup actions.
Note 19. State Credits
Authorizing statutory language for Superfund and related Federal regulations requires states to enter into Superfund
State Contracts (SSC) when the EPA assumes the lead for a remedial action in their state. The SSC defines the state's
role in the remedial action and obtains the state's assurance that it will share in the cost of the remedial action. Under
Superfund's authorizing statutory language, states will provide the EPA with a 10 percent cost share for remedial
action costs incurred at privately owned or operated sites, and at least 50 percent of all response activities (i.e.,
removal, remedial planning, remedial action, and enforcement) at publicly operated sites. In some cases, states may
use EPA-approved credits to reduce all or part of their cost share requirement that would otherwise be borne by the
states. The credit is limited to state site-specific expenses the EPA has determined to be reasonable, documented,
direct out-of-pocket expenditures with the public funds for remedial action.
Once the EPA has reviewed and approved a state's claim for credit, the state must first apply the credit at the site
where it was earned. The state may apply any excess/remaining credit to another site when approved by the EPA. As
of September 30, 2022 and 2021, the total remaining state credits have been estimated at $17.9 million, and $17.9
million, respectively.
Note 20. Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response actions at their sites with
the understanding that the EPA will reimburse them a certain percentage of their total response action costs. The
EPA's authority to enter into mixed funding agreements is provided under CERCLA Section 111(a) (2). Under
CERCLA Section 122(b)(1), as amended by SARA, PRPs may assert a claim against the Superfund Trust Fund for a
portion of the costs they incurred while conducting a preauthorized response action agreed to under a mixed funding
agreement. As of September 30, 2022, the EPA had three outstanding preauthorized mixed funding agreements with
obligations totaling $7.3 million. As of September 30, 2021, the EPA had three outstanding preauthorized mixed
funding agreements with obligations totaling $10.2 million. A liability is not recognized for these amounts until all
work has been performed by the PRP and has been approved by the EPA for payment. Further, the EPA will not
disburse any funds under these agreements until the PRP's application, claim and claims adjustment processes have
been reviewed and approved by the EPA.
Note 21. Custodial Revenues and Accounts Receivable
The EPA uses the accrual basis of accounting for the collection of fines, penalties and miscellaneous receipts.
Collectability by the EPA of the fines and penalties is based on the respondents' willingness and ability to pay. As of
September 30, 2022 and 2021 Custodial Revenues and Accounts Receivable are:
2022 2021
Fines, Penalties and Other Miscellaneous Receipts
$
58.515 $
42.497
Accounts Receivable for Fines, Penalties and Other Miscellaneous
Receipts:
Accounts Receivable
$
236,617 $
174,590
Less: Allowance for Uncollectible Accounts
(152.300)
(144.142)
Total
$
84.317 $
30.448
64
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 22. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited FY 2021 Statement of Budgetary
Resources, will be reconciled to the amounts included in the FY 2021 Budget of the United States Government when
they become available. The Budget of the United States Government with actual numbers for FY 2022 has not yet
been published. We expect it will be published by early 2023, and it will be available on the Office of Management
and Budget website at https://www.whitehouse. gov/
The actual amounts published for the year ended September 30, 2021 are listed immediately below (dollars in
millions):
FY 2021 Budgetary Offsetting
Resources Obligations Receipts Net Outlays
Statement of Budgetary Resources $ 22.730 $ 17.357 $ 1.481 $ 10.346
Reported in the Budget of the U.S. Government $ 22.620 $ 17.256 $ 1.481 $ 10.286
Note 23. Recoveries and Resources Not Available, Statement of Budgetary Resources
Recoveries of Prior Year Obligations, Temporarily Not Available, and Permanently Not Available on the Statement of
Budgetary Resources consist of the following amounts as of September 30, 2022 and 2021:
2022
2021
Unobligated Balance Brought Forward, Oct 1.
S 5.372.585
$
5.640.267
Adjustments to Budgetary Resources Made During the Current Year
Downward Adjustments of Prior Year Undelivered Orders
310,599
335,603
Downward Adjustments of Prior Year Delivered Orders
11,898
19,061
Permanent Reduction Prior Year Balances
-
(27,991)
Other Adjustments
(20.975)
(15.627)
Total
301,522
311,046
Unobligated Balance from Prior Year Budget Authority, Net
(discretionary and mandatory)
S 5.674.107
$
5.951.313
Temporarily Not Available - Rescinded Authority
$ (6.563)
$
(6.428)
Permanently Not Available:
Rescinded Authority
$
$
6,428
Cancelled Authority
21.065
27.991
Total Permanently Not Available
S 21.065
$
34.419
65
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 24. Unobligated Balances Available
Unobligated balances are a combination of two lines on the Statement of Budgetary Resources: Apportioned,
Unobligated Balances and Unobligated Balances Not Available. Unexpired unobligated balances are available to be
apportioned by the OMB for new obligations at the beginning of the following fiscal year. The expired unobligated
balances are only available for upward adjustments of existing obligations.
The unobligated balances available consist of the following as of September 30, 2022 and 2021:
2022 2021
Unexpired Unobligated Balance $ 56,868,632 $ 5,281,571
Expired Unobligated Balance 106.618 91.014
Total X 56.975.250 S 5.372.585
Note 25. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders as of September 30, 2022 and 2021:
2022 2021
Intragovernmental:
Unpaid Undelivered Orders $ 1,309,147 $ 617,433
Paid Undelivered Orders 330,617 300,357
Other Than Intragovernmental:
Unpaid Undelivered Orders 27,441,476 20,650,862
Paid Undelivered Orders 3.736 297.852
Total S 29.084.976 S 21.866.504
Note 26. Offsetting Receipts
Distributed offsetting receipts are amounts that an agency collects from the public or from other Government agencies
that are used to offset or reduce an agency's budget outlays. Agency outlays are measured on both a gross and net
basis, with net outlays being reduced by offsetting receipts (and other amounts). As of September 30, 2022 and 2021,
the following receipts were generated from these activities:
2022 2021
Trust Fund Recoveries $ 303,954 $ 249,937
Special Fund Services 29,368 76,466
Trust Fund Appropriation 4,675,799 1,153,462
Miscellaneous Receipt and Clearing Accounts 29.699 1.546
Total S 5.038.820 X 1.481.411
66
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 27. Transfers-In and Out, Statement of Changes in Net Position
A. Appropriations Transfers, In/Out:
As of September 30, 2022 and 2021, the Appropriation Transfers under Budgetary Financing Sources on the
Statement of Changes in Net Position are comprised of non-expenditure transfers that affect Unexpended
Appropriations for non-invested appropriations. These amounts are included in the Budget Authority, Net Transfers
and Prior Year Unobligated Balance, and Net Transfers lines on the Statement of Budgetary Resources. Details of the
Appropriation Transfers on the Statement of Changes in Net Position and reconciliation with the Statement of
Budgetary Resources follow for September 30, 2022 and 2021:
$
5,041,849
$
1,525,315
85,500
-
6.055
29.854
$
5.133.404
$
1.555.169
2022 2021
Net Transfers from Invested Funds
Transfer to the Department of Transportation
Transfers to Another Agency
Total of Net Transfers on the Statement of Budgetary Resources
B. Transfers In/Out Without Reimbursement, Budgetary:
For September 30, 2022 and 2021, Transfers In/Out under Budgetary Financing Sources on the Statement of Changes
in Net Position consist of transfers between EPA funds. These transfers affect Cumulative Results of Operations.
Details of the transfers-in and transfers-out, expenditure and non-expenditure, follow for September 30, 2022 and
2021:
2022 2021
Funds From Funds From
Dedicated Dedicated
Type of Transfer/Funds: Collections Other Funds Collections Other Funds
Transfers-in (out) nonexpenditure, Science and
Technology and Environmental Program
Management funds $ - $ 5,661 $ - $ 28,624
Transfers-in (out) nonexpenditure, Oil Spill 20,262 - 20,098
WIFIA (48,268)
Transfers-in (out), TSCA (5,045) - (28,624)
PRIA 346 - (708)
National Resource Damage Assessment 1.010 - 1.229 -
Total Transfer in (out) without Reimbursement,
Budgetary X (31.6951 X 5.661 X (8.005) X 28.624
67
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 28. Imputed Financing
In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, Federal agencies must
recognize the portion of employees' pensions and other retirement benefits to be paid by the OPM trust funds. These
amounts are recorded as imputed costs and imputed financing for each Agency. Each year the OPM provides Federal
agencies with cost factors to calculate these imputed costs and financing that apply to the current year. These cost
factors are multiplied by the current year's salaries or number of employees, as applicable, to provide an estimate of
the imputed financing that the OPM trust funds will provide for each Agency. The estimates for FY 2022 were $132.0
million. For FY 2021, the estimates were $128.5 million.
SFFAS No. 4, Managerial Cost Accounting Standards and Concepts and SFFAS No. 30, Inter-Entity
Cost Implementation, requires Federal agencies to recognize the costs of goods and services received from other
Federal entities that are not fully reimbursed, if material. The EPA estimates imputed costs for inter-entity
transactions that are not at full cost and records imputed costs and financing for these unreimbursed costs subject to
materiality. The EPA applies its Headquarters General and Administrative indirect cost rate to expenses incurred for
inter-entity transactions for which other Federal agencies did not include indirect costs to estimate the amount of
unreimbursed (i.e., imputed) costs. For FY 2022 total imputed costs were $39.1 million.
In addition to the pension and retirement benefits described above, the EPA also records imputed costs and financing
for Treasury Judgment Fund payments made on behalf of the Agency. Entries are made in accordance with the
Interpretation of Federal Financial Accounting Standards No. 2, Accounting for Treasury Judgment Fund
Transactions. For FY 2022, entries for Judgment Fund payments totaled $97.8 million. For FY 2021, entries for
Judgment Fund payments totaled $11 million.
Note 29. Federal Employee and Veteran Benefits Payable
Payroll and benefits payable to the EPA employees for the fiscal years ending September 30, 2022 and 2021, consist
of the following:
Covered by
Not Covered
Budgetary
by Budgetary
Resources
Resources
Total
FY 2022 Payroll and Benefits Payable
Employer Contributions Payable - Thrift Savings Plan
$ 2,813
$
$
2,813
Actuarial FECA Liability
-
45,758
45,758
Accrued Unfunded Annual Leave
-
175.214
175.214
Total - Current
S 2.813
S 220.972
$
223.785
Covered by
Not Covered
Budgetary
by Budgetary
Resources
Resources
Total
FY 2021 Payroll and Benefits Payable
Employer Contributions Payable - Thrift Savings Plan
$ 2,509
$
$
2,509
Actuarial FECA Liability
-
51,143
51,143
Accrued Unfunded Annual Leave
-
181.492
181.492
Total - Current
$ 2.509
$ 232.635
$
235.144
68
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
FECA provides income and medical cost protection to covered Federal civilian employees injured on the job,
employees who have incurred a work-related occupational disease, and beneficiaries of employees whose death is
attributable to a job-related injury or occupational disease. Annually, the EPA allocates the portion of the long-term
FECA actuarial liability attributable to the entity. The liability is calculated to estimate the expected liability for death,
disability, medical and miscellaneous costs for approved compensation cases. The liability amounts and the
calculation methodologies are provided by the Department of Labor. The FY 2022 present value of these estimated
outflows is calculated using a discount rate of 2.119 percent in the first year, and 2.119 percent in the years thereafter.
The estimated future costs are recorded as an unfunded liability.
See Note 1 paragraph P for additional information.
Note 30. Other Adjustments, Statement of Changes in Net Position
The Other Adjustments under Budgetary Financing Sources on the Statement of Changes in Net Position consist of
rescissions to appropriated funds and cancellation of funds that expired 7 years earlier. These amounts affect
Unexpended Appropriations. Other Adjustments, Statement of Changes in Net Position for the years ended September
30, 2022 and 2021, consist of the following:
Other Other
Funds Funds
2022 2021
Cancelled General Authority $ 20.398 $ 49.123
Total Other Adjustments S 20.398 S 49.123
Note 31. Non-Exchange Revenue, Statement of Changes in Net Position
Non-Exchange Revenue on the Statement of Changes in Net Position for the fiscal years ended September 30, 2022
and 2021:
Interest on Trust Fund
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue
2022
Funds from
Dedicated All Other
Collections Funds
$ 66,012 $
658,050
1,587
26.986 -
S 752.635 S
2021
Funds from
Dedicated All Other
Collections Funds
$ 6,421 $
241,786
(2,740)
31.521 -
S 276.988 S
69
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 32. Reconciliation of Net Cost of Operations to Net Outlays
For the Fiscal Year Ended September 30, 2022:
Intra-
governmental
NET COST
Components of Net Cost That Are Not Part of Net Outlays:
Property, Plant and Equipment Depreciation
Property, Plant and Equipment Disposal & Revaluation
Applied Overhead/Cost Capitalization Offset
Gains/Losses on All Other Investments
Increase/(Decrease) in Assets:
Accounts Receivable
Loans Receivable
Investments
Other Assets
Other Than
Intra-
governmental Total 2022
$ 1,840,316 $ 7,902,264 $ 9,742,580
(1,941)
1,432
(44,891)
15,839
(43,097)
(952)
109,348
32
(32,154)
947,601
3,238
(43,097)
(952)
109,348
32
(34,095)
949,033
(44,891)
19,077
(Increase)/Decrease in Liabilities:
Accounts Payable and Accrued Liabilities
Loans Guarantee Liability (Non-FCRA)/Loans Payable
Environmental and Disposal Liabilities
Payroll and Benefits Payable
Other Liabilities
Other Financing Sources:
Other Imputed Financing
Total Components of Net Cost That Are Not Part of Net
Outlays
Components of Net Outlays That Are Not Part of Net Cost:
Acquisition of Inventory
Acquisition of Investments
Other Financing Sources:
Transfer Out (In) Without Reimbursement
Total Components of Budget Outlays That Are Not Part of
Net Operating Cost
Miscellaneous Items
Distributed Offsetting Receipts
Custodial/Non-Exchange Revenue
Appropriated Receipts for Trust Fund/Special Funds
Other Temporary Timing Differences
NET OUTLAYS
70
39,769
(810,341)
(29,058)
(268,943)
742,182
(17,397)
(17.397)
(5,038,820)
45
(9,498)
(6,433)
11,359
(73,967)
309
4,186,832
30,271
(810,341)
(6,433)
11,359
(103,025)
(268,943)
8.807.741 9.549.923
309
4,186,832
(17,397)
4.187.141 4.169.744
(5,038,820)
306,387 306,432
23.554 23.554
268,566 268,566
S (4.313.990) S 13.593.389 S 9.279.399
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
For the Fiscal Year Ended September 30,2021:
NET COST
Components of Net Cost That Are Not Part of Net Outlays:
Property, Plant and Equipment Depreciation
Property, Plant and Equipment Disposal & Revaluation
Applied Overhead/Cost Capitalization Offset
Increase/(Decrease) in Assets:
Accounts Receivable
Loans Receivable
Investments
Other Assets
(Increase)/Decrease in Liabilities:
Accounts Payable and Accrued Liabilities
Loans Guarantee Liability (Non-FCRA)/Loans Payable
Environmental and Disposal Liabilities
Payroll and Benefits Payable
Other Liabilities
Other Financing Sources:
Other Imputed Financing
Total Components of Net Cost That Are Not Part of Net
Outlays
Components of Net Outlays That Are Not Part of Net Cost:
Acquisition of Inventory
Other Financing Sources:
Transfer Out (In) Without Reimbursement
Total Components of Budget Outlays That Are Not Part of
Net Operating Cost
Miscellaneous Items
Custodial/Non-Exchange Revenue
Appropriated Receipts for Trust Fund/Special Funds
Other Temporary Timing Differences
NET OUTLAYS
Other Than
Intra- Intra-
governmental governmental Total 2021
$ 1,500,235 $ 7,082,983 $ 8,583,218
(20,495)
50
(70,576)
47,670
29,710
525,187
56,867
(172,143)
1,896,505
(25,286)
(25.286)
23
57,687
4,186
(72,607)
77,112
513,387
(624)
3,623
(12,660)
(2,595)
56,111
7,706,603
375
375
22,106
20,028
57,687
4,186
(72,607)
56,617
513,437
(70,576)
47,046
33,333
525,187
(12,660)
(2,595)
112,978
(172,143)
375
(25,286)
(24.911)
22,129
20,028
231,740 231,740
S 1.871.242 S 7.980.852 S 9.852.094
71
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Budgetary and financial accounting information differ. Budgetary accounting is used for planning and control
purposes and relates to both the receipt and use of cash, as well as reporting the federal deficit. Financial accounting is
intended to provide a picture of the government's financial operations and financial position, so it presents
information on an accrual basis. The accrual basis includes information about costs arising from the consumption of
assets and the incurrence of liabilities. The reconciliation of net outlays, presented on a budgetary basis, and the net
cost, presented on an accrual basis, provides an explanation of the relationship between budgetary and financial
accounting information.
The reconciliation serves not only to identify costs paid for in the past and those that will be paid in the future, but
also to assure integrity between budgetary and financial accounting. The reconciliation explains the relationship
between the net cost of operations and net outlays by presenting components of net cost that are not part of net outlays
(e.g., depreciation and amortization expenses of assets previously capitalized, change in asset/liabilities), components
of net outlays that are not 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.
72
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 33. Amounts Held by Treasury
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by Treasury in the
Superfund and LUST Trust Funds.
A. Superfund
Superfund is supported by general revenues, cost recoveries of funds spent to clean up hazardous waste sites, interest
income, and fines and penalties.
The following reflects the Superfund Trust Fund maintained by Treasury as of September 30, 2022 and 2021. The
amounts contained in these notes have been provided by Treasury. As indicated, a portion of the outlays represents
amounts received by the EPA's Superfund Trust Fund; such funds are eliminated on consolidation with the Superfund
Trust Fund maintained by Treasury.
SUPERFUND FY 2022
EPA
Treasury
Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$
103.683
$
103.683
Total Undistributed Balance
-
103,683
103,683
Interest Receivable
-
4,694
4,694
Investments, Net
8.655.640
419.190
9.074.830
Total - Assets
$
8.655.640
$
527.567
$
9.183.207
Liabilities and Equity
Equity
$
8.655.640
$
527.567
$
9.183.207
Total Liabilities and Equity
$
8.655.640
$
527.567
$
9.183.207
Receipts
Corporate Environmental
$
-
$
413,002
$
413,002
Cost Recoveries
-
303,954
303,954
Fines and Penalties
-
3.000
3.000
Total Revenue
-
719,956
719,956
Appropriations Received
-
4,675,799
4,675,799
Interest Income
-
56.135
56.135
Total Receipts
$
-
$
5.451.890
$
5.451.890
Outlays
Transfers to/from EPA, Net
$
5.076.897
$
(5.076.897)
$
-
Total Outlays
$
5.076.897
$
Os
00
o
$
-
Net Income
$
5.076.897
$
374.993
$
5.451.890
73
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
In FY 2022, the EPA received an appropriation of $4.7 billion for Superfund. Treasury's Bureau of the Fiscal Service
(BFS), the manager of the Superfund Trust Fund assets, records a liability to the EPA for the amount of the
appropriation. BFS does this to indicate those trust fund assets that have been assigned for use and therefore are not
available for appropriation. As of September 30, 2022 and 2021, the Treasury Trust Fund has a liability to the EPA for
previously appropriated funds and special accounts of $8.7 billion and $5.2 billion, respectively.
SUPERFUND FY 2021 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$
3.917
$
3.917
Total Undistributed Balance
-
3,917
3,917
Interest Receivable
-
6,298
6,298
Investments, Net
4.970.058
142.361
5.112.419
Total - Assets
$
4.970.058
$
152.576
$
5.122.634
Liabilities and Equity
Equity
$
4.970.058
$
152.576
$
5.122.634
Total Liabilities and Equity
$
4.970.058
$
152.576
$
5.122.634
Receipts
Cost Recoveries
$
-
$
249,937
$
249,937
Fines and Penalties
-
1.656
1.656
Total Revenue
-
251,593
251,593
Appropriations Received
-
1,153,462
1,153,462
Interest Income
-
5.927
5.927
Total Receipts
$
-
$
1.410.982
$
1.410.982
Outlays
Transfers to/from EPA, Net
$
1.475.171
$
(1.475.171)
$
-
Total Outlays
$
1.475.171
$
H.475.171)
$
-
Net Income
$
1.475.171
$
00
$
1.410.982
74
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
B. LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FY 2022 and 2021, there
were no fund receipts from cost recoveries. The amounts contained in these notes are provided by Treasury. Outlays
represent appropriations received by the EPA's LUST Trust Fund; such funds are eliminated on consolidation with
the LUST Trust Fund maintained by Treasury.
LUST FY 2022 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance
$
-
$
13.817
$
13.817
Total Undistributed Balance
-
13,817
13,817
Interest Receivable
-
116
116
Investments, Net
92.714
1.125.426
1.218.140
Total - Assets
$
92.714
$
1.139.359
$
1.232.073
Liabilities and Equity
Equity
$
92.714
$
1.139.359
$
1.232.073
Total Liabilities and Equity
$
92.714
$
1.139.359
$
1.232.073
Receipts
Highway TF Tax
$
-
$
234,170
$
234,170
Airport TF Tax
-
7,607
7,607
Inland TF Tax
-
3.270
3.270
Total Revenue
-
245,047
245,047
Interest Income
-
9.716
9.716
Total Receipts
$
-
$
254.763
$
254.763
Outlays
Transfers to/from EPA, Net
$
92.293
$
(92.293)
$
-
Total Outlays
$
92.293
$
(92.293)
$
-
Net Income
$
92.293
$
162.470
$
254.763
75
-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
LUST FY 2021
EPA
Treasury
Combined
Undistributed Balances
Uninvested Fund Balance
$
$
25.686
$
25.686
Total Undistributed Balance
-
25,686
25,686
Investments, Net
85.921
951.201
1.037.122
Total - Assets
$
85.921 S
976.887
$
1.062.808
Liabilities and Equity
Equity
$
85.921 $
976.887
$
1.062.808
Total Liabilities and Equity
$
85.921 $
976.887
$
1.062.808
Receipts
Highway TF Tax
$
$
214,252
$
214,252
Airport TF Tax
-
28,268
28,268
Inland TF Tax
-
(734)
(734)
Total Revenue
-
241,786
241,786
Interest Income
-
476
476
Total Receipts
$
$
242.262
$
242.262
Outlays
Transfers to/from EPA, Net
$
92.203 $
(92.203)
$
-
Total Outlays
$
92.203 S
(92.203)
$
-
Net Income
$
92.203 $
150.059
$
242.262
Note 34. COVID-19 Activity
On March 27, 2020, President Donald Trump signed into law The Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in response to the economic fallout of the COVID-19 pandemic in the United States. The EPA
received a supplemental appropriation of $7.2 million to support Environmental Program Management, Science and
Technology, Building and Facilities, and Superfund program efforts related to the virus. As of September 30, 2022
$62.2 thousand has been obligated and the remaining budgetary resources have been used.
On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act (American Rescue Plan) also
called the COVID-19 Stimulus Package, to speed up the United States' recovery from the economic and health effects
of the COVID-19 pandemic and the ongoing recession. The EPA received a supplemental appropriation of $100
million to support Environmental Program Management and State and Tribal Assistance Grants program efforts
related to recovery from the virus. As of September 30, 2022, $33.0 million remains available for obligation, $67.0
million has been obligated and the remaining budgetary resources have been used.
Additional COVID-19 activities are discussed in Section I, Management's Discussion and Analysis, Financial
Analysis and Stewardship Information.
76
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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Ending September 30,2022 and 2021
(Dollars in Thousands)
Note 35. Reclassified Financial Statement for Government-wide Reporting
To prepare the Financial Report of the U.S. Government (Financial Report), the Department of the Treasury requires
agencies to submit an adjusted trial balance, which is a listing of amounts by U.S. Standard General Ledger account
that appear in the financial statements. Treasury uses the trial balance information reported in the Government-wide
Treasury Account Symbol Adjusted Trial Balance System (GTAS) to develop a Reclassified Statement of Net Cost.
Treasury eliminates intragovernmental balances from the reclassified statements and aggregates lines with the same
title to develop the Financial Report statements. This note shows the agency's financial statements and reclassified
statements prior to elimination of intragovernmental balances and prior to aggregation of repeated Financial Report
line items. A copy of the 2021 Financial Report can be found here: Bureau of the Fiscal Service -Reports. Statements
& Publications (treasurv.gov) and a copy of the 2022 Financial Report will be posted to this site as soon as it is
released.
The term "intragovernmental" is used in this note to refer to amounts that result from other components of the Federal
Government.
The term "Non-Federal" is used in this note to refer to Federal Government amounts that result from transactions with
non-Federal entities. These include transactions with individuals, businesses, non-profit entities, and State, local, and
foreign governments.
Reclassification of Statement of Net Cost to Line Items Used for the Government-wide Statement of Net Cost for
For the Year Ended September 30, 2022
FY 2022 EPA SNC
Line Items Used to Prepare the FY 2022 Government-wide SNC
Financial Statement Line
Amounts
Dedicated
Collections
Combined
Dedicated
Collections
Eliminations
All Other
Amounts
(with
Eliminations)
Eliminations
Between
Dedicated
and Other
Total
Reclassified Statement
Line
Gross Costs
$ 10,142,639
Other Than
Intragovernmental Costs
1,190,190
7,149,534
8,339,724
Other Than
Intragovernmental Gross
Costs
_
1,190,190
_
7,149,534
_
8,339,724
Total Other Than
Intragovernmental Costs
Intragovernmental Costs
-
94,343
-
369,334
-
463,677
Benefits Program Costs
-
26,687
-
3,432
-
30,119
Imputed Costs
-
216,442
-
800,798
-
1,017,240
Buy/Sell Costs
-
-
-
89
-
89
Purchase of Assets
_
53,588
_
_
_
53,588
Borrowing and Other
Interest Expense
_
_
_
(6,278)
_
(6,278)
Other Expenses (w/o
Reciprocals)
_
391,060
_
1,167,375
_
1,558,435
Total Intragovernmental
Costs
Total Gross Costs
$ 10,142,639
$ 1,581,250
$
$ 8,316,909
$
$ 9,898,159
Total Reclassified Gross
Costs
Earned Revenue
$ 400,059
$ 617,780
$ (303,954)
$ (27,791)
$
$ 286,035
Non-Federal Earned
Revenue
Intragovernmental
Revenue
-
20,799
-
47,829
-
68,628
Buy/Sell Revenue
-
-
-
89
-
89
Purchase of Assets Offset
_
20,799
_
47,918
_
68,717
Total Intragovernmental
Earned Revenue
Total Earned Revenue
$ 400,059
$ 638,579
$ (303,954)
$ 20,127
$
$ 354,752
Total Reclassified Earned
Revenue
NET COST
$ 9,742,580
$ 942,671
$ 303,954
$ 8,296,782
$
$ 9,543,407
NET COST
77
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Required Supplementary Information (Unaudited)
United States Environmental Protection Agency
For the Fiscal Years Ending September 30, 2022 and 2021
(Dollars in Thousands)
Deferred Maintenance
Deferred maintenance is maintenance that was not performed when it should have been, that was scheduled and not
performed, or that was delayed for a future period. Maintenance is the act of keeping property, plant, and equipment
(PP&E) in acceptable operating condition and includes preventive maintenance, normal repairs, replacement of parts
and structural components, and other activities needed to preserve the asset so that it can deliver acceptable
performance and achieve its expected life. Maintenance excludes activities aimed at expanding the capacity of an
asset or otherwise upgrading it to serve needs different from or significantly greater than those originally intended.
Deferred Maintenance is described as the act of keeping fixed assets in acceptable condition.
Such activities include preventive maintenance, replacement of parts, systems, or components, and other activities
needed to preserve or maintain the asset.
The deferred maintenance as of September 30, 2022 and 2021:
2022 2021
Asset Category
Buildings
$
142.324
$
119.869
Total Deferred Maintenance
$
142.324
$
119.869
78
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Required Supplementary Information (Unaudited) Cont.
In Fiscal Year 2022, in accordance with SFFAS No. 42, Deferred Maintenance and Repairs: Amending Statements of
Federal Financial Accounting Standards 6, 14, 29 and 32, the EPA presents Deferred Maintenance and Repairs
(DM&R) information by asset category as follows:
buildings:
Policy
Explanation
Maintenance and repairs policies and how they are
applied.
The maintenance and repair policies are to maintain facilities
and real property installed equipment to fully meet mission
needs at each site. Systems are maintained to function
efficiently at full capacity and to meet or exceed life
expectancy of buildings and building systems.
How we rank and prioritize maintenance and repair
activities among other activities.
Building and facility program projects are scored and ranked
individually based on seven weighted factors to determine
priority needs. High scoring projects are prioritized above
lower scoring projects. The seven factors considered are:
health and safety, energy conservation, environmental
compliance, program requirements, repair and upkeep, space
alteration, and operational urgency. Repair and Improvement
(R&I) projects are identified and prioritized on a local basis.
Factors considered in determining acceptable
condition standards.
The nine building systems must function at a level that fully
meet mission needs. The nine building systems are: structure,
roof, exterior components and finish, interior finish, HVAC,
electrical, plumbing, conveyance, and specialized program
support equipment. Each system is rated from 0 to 5 during
facility assessments. Ratings are used to determine facility
condition index and estimated deferred maintenance.
State whether DM&R relate solely to capitalized
general PP&E and stewardship PP&E or also to
non-capitalized or fully depreciated general PP&E.
Facilities assessments and the resulting DM&R estimates are
applied to capitalize PP&E only. Full facility assessments
using the NASA parametric model are used to determine
facilities and systems indices and deferred maintenance
estimates.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
Buildings are not excluded from DM&R estimates.
Explain significant changes from the prior year.
No significant changes.
79
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Required Supplementary Information (Unaudited) Cont.
CPA Held Equipment:
Policy
Explanation
Maintenance and repairs policies and how they are
applied.
Managers of the equipment consider manufacturers
recommendations in determining maintenance requirements.
How we rank and prioritize maintenance and repair
activities among other activities.
Equipment is maintained based on manufacture's
recommendations.
Factors considered in determining acceptable
condition standards.
Manufacturer recommendations.
State whether DM&R relate solely to capitalized
general PP&E and stewardship PP&E or also to
non-capitalized or fully depreciated general PP&E.
DM&R relates to all EPA Held Equipment as determined by
individual site managers.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
Individual site managers determine the need to measure and/or
report DM&R based on mission needs.
Explain significant changes from the prior year.
Individual site equipment managers decide on a case-by-case
basis the need to maintain equipment.
Vehicles:
Policy
Explanation
Maintenance and repairs policies and how they are
applied.
Vehicle managers maintain vehicles owned by the EPA in
accordance with the recommendations of the manufacturer.
How we rank and prioritize maintenance and repair
activities among other activities.
The goal is to maintain the vehicle as built and as
recommended by the manufacturer. Repairs and maintenance
are also described as system critical or minor. System critical
repairs and maintenance are high priority and are immediately
taken care of. Minor repairs are lower priority and may be
taken care of at a later date (time/scheduling permitting).
These are not critical to in-field functionality, but the repairs
are needed to maintain the vehicle as built.
Factors considered in determining acceptable
condition standards.
The vehicle is inspected to ensure that it (the vehicle) and
related specialized equipment are in good working order. The
criteria being that the vehicle is being maintained as built and
as recommended by the manufacturer.
State whether DM&R relate solely to capitalized
general PP&E and stewardship PP&E or also to
non-capitalized or fully depreciated general PP&E.
All vehicles are capitalized.
PP&E for which management does not measure
and/or report DM&R and the rationale for the
exclusion of other than non-capitalized or fully
depreciated general PP&E.
None.
Explain significant changes from the prior year.
No significant changes.
Beginning in FY 2015, requirements for recognizing and reporting significant and expected-to-be-permanent
impairment of general PP&E (except Internal Use Software) remaining in use are in SFFAS No. 44, Accounting for
Impairment of General Property, Plant, and Equipment (G-PP&E) Remaining in Use.
This statement establishes accounting and financial reporting standards for impairment of general property, plant, and
equipment remaining in use, except for internal use software. G-PP&E is considered impaired when there is a
significant and permanent decline in the service utility of G-PP&E or expected service utility for construction work in
progress. A decline is permanent when management has no reasonable expectation that the lost service utility will be
replaced or restored.
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Required Supplementary Information (Unaudited) Cont.
This statement does not anticipate that entities will have to establish additional or separate procedures beyond those
that may already exist, such as those related to deferred maintenance and repairs, to search for impairments.
Impairments can be identified and brought to management's attention in a variety of ways. Although a presumption
exists that there are existing processes and internal controls in place to reasonably assure identification and
communication of potential material impairments, this statement does not require entities to conduct an annual or
other periodic survey solely for the purpose of applying these standards.
Management may determine that existing processes and internal controls are not sufficient to reasonably assure
identification of potential material impairments and impairments and implement appropriate additional processes and
internal controls.
Below details the predominant use of Land in Property, Plant and Equipment on the balance sheet by acreage.
Land:
Estimated Acreage by Predominant Use
Conservation
and
Commercial Preservation
Total Estimated
Operational Acreage
End of FY 2021/Start of FY 2022
End of FY 2022
576
576
576
576
81
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Supplemental Combining Statement of Budgetary Resources (Unaudited)
United States Environmental Protection Agency
For the Fiscal Years Ending September 30,2022
(Dollars in Thousands)
Leaking
Environmental Underground
Programs & Storage Science &
State Tribal
Assistance
BUDGETARY RESOURCES
Unobligated Balance From Prior Year Budget Authority, Net
Appropriations (discretionary and mandatory)
Borrowing Authority (discretionary and mandatory)
Spending Authority From Offsetting Collection
Total Budgetary Resources
Management Tanks Technology Superfund Agreements
Other
Totals
$
494,871 $ 11,629 $ 149,483 $ 3,698,435 $ 962,007 $ 357,682 $ 5,674,107
6,546,366
44.457
85,500
6.793
750,174
38.030
5,077,704 11,338,047
26.340
46,473,974
3,693,794
608.985
70,271,765
3,693,794
724.605
$ 7.085.694 $ 103.922 $ 937.687 $ 8.802.479 $12.300.054 $51.134.435 $ 80.364.271
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total)
Unobligated Balance, End of Year:
Apportioned, Unexpired Accounts
Unapportioned, Unexpired Accounts
Expired Unobligated Balance, End of Year
Unobligated Balance, End of Year (total):
Total Status of Budgetary Resources
$ 3,281,512 $ 84,446 $ 780,771 $ 2,586,267 $ 4,258,742 $12,397,284 $ 23,389,022
3,717,612
86.570
3.804.182
19,458
18
19.476
140,761
16.155
156.916
6,215,552 8,041,312 38,709,473
24,445
660
3.233
6.216.212 8.041.312 38.737.151
56,844,168
24,463
106.618
56.975.249
$ 7.085.694 $ 103.922 $ 937.687 $ 8.802.479 $12.300.054 $51.134.435 $ 80.364.271
OUTLAYS, NET
Outlays, Net (total) (discretionary and mandatory)
Distributed Offsetting Receipts (-) (Note 26)
Agency Outlays, Net (discretionary and mandatory)
Disbursements, Net (total) (mandatory)
$ 2,901,448 $ 93,005 $ 748,632 $ 1,384,363 $4,268,037 $ 4,922,734 $ 14,318,219
- - - r4.979.7531 - C59.0671 r5.038.8201
$ 2.901.448 $_
93.005 $ 748.632 $ C3.595.3901 $4.268.037 $ 4.863.667 $ 9.279.399
$ 840.409 $ 840.409
82
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AUDIT OF EPA'S FISCAL YEARS 2022 AND
2021 CONSOLIDATED FINANCIAL
STATEMENTS
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CUSTOMER SERVICE * INTEGRITY ~ ACCOUNTABILITY
Operating efficiently and effectively
The EPA's Fiscal Years 2022
and 2021 Consolidated
Financial Statements
Report No. 23-F-0002
November 15, 2022
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Abbreviations:
EPA
FFMIA
FY
OCFO
OIG
OMB
PRISM
U.S.C.
WIFIA
U.S. Environmental Protection Agency
Federal Financial Management Improvement Act
of 1996
Fiscal Year
Office of the Chief Financial Officer
Office of Inspector General
Office of Management and Budget
Pesticide Registration Information System
United States Code
Water Infrastructure Finance and Innovation Act
of 2014
Are you aware of fraud, waste, or abuse in an
EPA program?
EPA Inspector General Hotline
1200 Pennsylvania Avenue, NW(2431T)
Washington, D.C. 20460
(888) 546-8740
(202) 566-2599 (fax)
OIG Hotline@epa.gov
Learn more about our OIG Hotline.
EPA Office of Inspector General
1200 Pennsylvania Avenue, NW (2410T)
Washington, D.C. 20460
(202) 566-2391
www.epa.gov/oiq
Subscribe to our Email Updates.
Follow us on Twitter @EPAoig.
Send us your Project Suggestions.
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Office of Inspector General
U.S. Environmental Protection Agency
At a Glance
23-F-0002
November 15, 2022
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act of
1994, which requires the
U.S. Environmental Protection
Agency Office of Inspector
General to audit the financial
statements prepared by the
Agency each year. Our primary
objectives were to determine
whether:
• The EPA's consolidated
financial statements were
fairly stated in all material
respects.
• The EPA's internal controls
over financial reporting were
in place.
• EPA management complied
with applicable laws,
regulations, contracts, and
grant agreements.
This requirement for audited
financial statements was enacted
to help bring about improvements
in agencies' financial
management practices, systems,
and control so that timely,
reliable information is available
for managing federal programs.
This report addresses the
following:
• Operating efficiently and
effectively.
This audit addresses a top EPA
management challenge:
• Managing infrastructure funding
and business operations.
The EPA's Fiscal Years 2022 and 2021
Consolidated Financial Statements
The EPA Receives an Unmodified Opinion for Fiscal Years 2022
and 2021
We found the EPA's
financial statements to be
fairly presented and free of
material misstatement.
We rendered an unmodified opinion on the
EPA's consolidated financial statements for
fiscal years 2022 and 2021, meaning that they
were fairly presented and free of material
misstatement.
Significant Deficiencies Noted
We noted the following significant deficiencies:
• The EPA improperly recorded Water Infrastructure Finance and Innovation
Act of 2014 fee fund revenue.
• The unearned advances account had an abnormal balance.
• Unneeded funds were not deobligated timely.
• Capitalized software-in-development costs were inaccurately recorded.
• The EPA processed standard vouchers without adequate procedures.
Compliance with Laws, Regulations, Contracts, and Grant
Agreements
We did not note any significant noncompliance with laws, regulations, contracts,
and grant agreements.
Recommendations and Planned Agency Corrective Actions
The EPA agreed with all eight recommendations and has either completed
corrective actions or provided an estimated time frame for completion.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.
List of OIG reports.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 15, 2022
MEMORANDUM
SUBJECT: The EPA's Fiscal Years 2022 and 2021 Consolidated Financial Statements
Report No. 23-F-0002
FROM: Damon Jackson, Director
Financial Directorate
Office of Audit
Dojkok M. (Jac&son
TO:
Faisal Amin, Chief Financial Officer
Daniel Blackman, Regional Administrator
Region 4
This is our report on the subject audit conducted by the U.S. Environmental Protection Agency Office of
Inspector General. The project number for this audit was OA-FY22-Q121. This report contains findings
that describe the problems the OIG has identified and the corrective actions the OIG recommends. Final
determination on matters in this report will be made by EPA managers in accordance with established
audit resolution procedures.
The Office of the Chief Financial Officer and Region 4 have primary responsibility for the issues discussed
in the report.
In accordance with EPA Manual 2750, your offices completed corrective actions for Recommendations 1
and 2. Your offices also provided acceptable planned corrective actions and estimated milestone dates in
response to Recommendations 3, 4, 5, 6, 7, and 8. These recommendations are resolved, and no final
response to this draft is required. If you submit a response, however, it will be posted on the OIG's website,
along with our memorandum commenting on your response. Your response should be provided as an
Adobe PDF file that complies with accessibility requirements of section 508 of the Rehabilitation Act of
1973, as amended. The final response should not contain data that you do not want to be released to the
public; if your response contains such data, you should identify the data for redaction or removal along
with corresponding justification.
We will post this report to our website at www.epa.gov/oig.
Attachments:
1. Significant Deficiencies.
2. Status of Prior Audit Report Recommendations.
3. Status of Recommendations and Potential Monetary Benefits.
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The EPA's Fiscal Years 2022 and 2021 23-F-0002
Consolidated Financial Statements
Table of C
Inspector General's Report on the EPA's Fiscal Years
2022 and 2021 Consolidated Financial Statements
Report on the Audit of the Financial Statements 1
Required Supplementary Information 2
Report on Internal Control over Financial Reporting 3
Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements 5
Other Governmental Reporting Requirements 7
Prior Audit Coverage 7
Attachments
1. Significant Deficiencies 8
The EPA Improperly Recorded WIFIA Fee Fund Revenue 9
Unearned Advances Account Had an Abnormal Balance 11
Unneeded Funds Not Deobligated Timely 12
Capitalized Software-ln-Development Costs Inaccurately Recorded 14
The EPA Processed Standard Vouchers Without Adequate Procedures 16
2. Status of Prior Audit Report Recommendations 18
3. Status of Recommendations and Potential Monetary Benefits 20
Appendixes
I. EPA's Fiscal Year 2022 and 2021 Consolidated Finanial Statements 21
II. Agency Response to Draft Report 77
III. Distribution 81
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Inspector General's Report on the Fiscal Years 2022
and 2021 Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of the U.S. Environmental Protection Agency,
which comprise the consolidated balance sheets, as of September 30, 2022 and 2021, and the related
consolidated statement of net cost, net cost by major program, changes in net position, and custodial
activity; the combined statement of budgetary resources for the years then ended; and the related
notes to the financial statements.
In our opinion, the consolidated financial statements, including the accompanying notes, present fairly,
in all material respects, the consolidated assets, liabilities, net position, net cost, net cost by major
program, changes in net position, custodial activity, and combined budgetary resources of the EPA as of
and for the years ended September 30, 2022 and 2021, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America, known as generally accepted auditing standards. Our responsibilities under those standards
are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section
of our report. We are required to be independent of the EPA and to meet our ethical responsibilities, in
accordance with the relevant ethical requirements relating to our audits. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America
and for 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.1
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
1 Management, as used throughout this report, refers to the EPA's management.
23-F-0002
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assurance and therefore is not a guarantee that an audit conducted in accordance with generally
accepted auditing standards will always detect a material misstatement when it exists. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control. Misstatements are considered material if there is a substantial likelihood that,
individually or in the aggregate, they would influence the judgment made by a reasonable user based on
the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, and design and perform audit procedures responsive to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the EPA's internal control. Accordingly, no such opinion is
expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control-related
matters that we identified during the audit.
The financial statements include expenses of grantees, contractors, and other federal agencies. Our
audit work pertaining to these expenses included testing only within the EPA. The U.S. Department of
the Treasury collects and accounts for excise taxes that are deposited into the Leaking Underground
Storage Tank Trust Fund. Treasury is also responsible for investing amounts not needed for current
disbursements and transferring funds to the EPA as authorized in legislation. Since Treasury, and not the
EPA, is responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General is not independent with respect to amounts pertaining to OIG
operations that are presented in the financial statements. The amounts included for the OIG are not
material to the EPA's financial statements. The OIG is organizationally independent with respect to all
other aspects of the Agency's activities.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the information in
the Required Supplementary Information, Supplemental Information, and Management's Discussion and
Analysis sections be presented to supplement the EPA's financial statements. Such information is the
responsibility of management and, although not a part of the basic consolidated financial statements, is
required by the Office of Management and Budget and the Federal Accounting Standards Advisory
23-F-0002
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Board, which consider it to be an essential part of the financial reporting that places the basic
consolidated financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the Required Supplementary Information, Supplemental
Information, and Management's Discussion and Analysis, in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of management about
the methods of preparing the information and comparing it for consistency with management's
responses to our inquiries, the basic consolidated financial statements, and other knowledge we
obtained during the audit of the basic consolidated financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Report on Internal Control over Financial Reporting
Results of Our Consideration of Internal Control over Financial Reporting
Our consideration of the internal control was for the limited purpose of expressing an opinion on the
EPA's financial statements and was not designed to identify all deficiencies in internal control that might
be material weaknesses or significant deficiencies; therefore, such deficiencies in internal control may
exist that were not identified during the course of our audit. A deficiency in internal control over
financial reporting exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect and
correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of the entity's financial statements will not be prevented or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in
internal control over financial reporting that is less severe than a material weakness yet important
enough to merit attention by those charged with governance.
Basis for Results of Our Consideration of Internal Control over Financial
Reporting
We performed our procedures related to the EPA's internal control over financial reporting in
accordance with U.S. generally accepted government auditing standards.
Responsibilities of Management for Internal Control over Financial Reporting
Management is responsible for designing, implementing, and maintaining effective internal control over
financial reporting relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor's Responsibilities for Internal Control over Financial Reporting
In planning and performing our audit of the consolidated financial statements as of and for the year
ended September 30, 2022, in accordance with auditing standards generally accepted in the United
States of America, we considered the EPA's internal control over financial reporting as a basis for
designing our audit procedures that are appropriate in the circumstances for the purpose of expressing
an opinion on the financial statements and to comply with the OMB's audit guidance, but not to express
23-F-0002
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an opinion on the effectiveness of the EPA's internal control. Accordingly, we do not express an opinion
on the effectiveness of the EPA's internal control over financial reporting.
Intended Purpose of Report on Internal Control over Financial Reporting
Because of inherent limitations in internal control, misstatements, losses, or noncompliance may
nevertheless occur and not be detected. We noted a certain matter, which we discuss below, involving
the internal control and its operation that we consider to be significant deficiencies. These issues are
summarized below and detailed in Attachment 1.
Significant Deficiencies
The EPA Improperly Recorded Water Infrastructure Finance and Innovation Act of 2014
Fee Fund Revenue
We found that the EPA did not properly record approximately $7 million of Water Infrastructure Finance
and Innovation Act of 2014, known as WIFIA, fee fund exchange revenue during fiscal year 2022. Federal
accounting standards require federal entities to recognize exchange revenue when a government entity
provides goods or services to the public or another government entity at a price. This error occurred
because the EPA did not create the appropriate accounting models to properly classify WIFIA fee
revenue as exchange revenue. When the EPA misclassifies revenue, the financial statements may be
misstated.
Unearned Advances Account Had an Abnormal Balance
We found that the EPA had an abnormal balance of more than $9 million in the Unearned Advances,
Non-Federal general ledger account. The U.S. Government Accountability Office's Standards for Internal
Control in the Federal Government requires accurate and timely recording of transactions and events.
The Agency did not proactively resolve the abnormal balance. The Agency's failure to correct the
abnormal balance could result in unearned advances being misstated in the financial statements.
Unneeded Funds Not Deobligated Timely
The EPA did not timely deobligate unneeded funds, totaling $5.8 million, identified during the FY 2022
annual review of unliquidated obligations. Agency directives require that unliquidated obligations be
reviewed annually and that responsible offices review inactive unliquidated obligations and take
appropriate action to deobligate unneeded funds. While the EPA met the requirement to review
unliquidated obligations at least annually, it did not take timely actions to deobligate the unneeded
funds. As a result, the EPA has no assurance that unliquidated obligations are accurate and represent
valid and viable obligations.
Capitalized Software-ln-Development Costs Inaccurately Recorded
We found that the EPA improperly accounted for prior years' capitalized software transactions for the
Pesticide Registration Information System, known as PRISM. Federal standards for internal control
require that transactions be recorded accurately and promptly. The finance center responsible for
recording software-in-development costs was not aware of costs incurred in prior years until FY 2022. As
a result, software-in-development activity disclosed in the General Property, Plant & Equipment, Net
note is misstated. Failure to properly record property transactions in the Agency's property
23-F-0002
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management system and Compass Financials, which is the EPA's financial system, compromises the
accuracy of the EPA's property accounts and expenses, as well as the accuracy of the Agency's financial
statements.
The EPA Processed Standard Vouchers Without Adequate Procedures
We found that EPA Region 4 recorded five standard vouchers totaling $129,000 in Compass Financials
without evidence of adequate review or approval. Federal standards for internal control require
management to design policies and procedures that allow management to effectively monitor control
activities. Region 4 did not have written standard operating procedures in place for processing standard
vouchers and did not use a standard template to document reviews and approvals. Without adequate
controls and procedures over the preparation and review of vouchers increases the EPA's risk of
potential errors and inaccuracies that could materially misrepresent its financial position and calls into
question the reliability of its financial statements.
Attachment 2 contains the status of issues reported in prior years' reports on the EPA's consolidated
financial statements. The issues included in Attachment 2 should be considered among the EPA's
significant deficiencies for FY 2022. We reported less significant internal control matters to the Agency
during the course of the audit. We will not issue a separate management letter.
Comparison of the EPA's Federal Managers' Financial Integrity Act Report with
Our Evaluation of Internal Control
OMB Bulletin 22-01, Audit Requirements for the Federal Financial Statements, requires the OIG to
compare material weaknesses disclosed during the audit with those material weaknesses reported in
the Agency's Federal Managers' Financial Integrity Act report that relate to the financial statements. The
OIG is also required to identify material weaknesses disclosed by the audit that were not reported in the
Agency's Federal Managers' Financial Integrity Act report.
For financial statement audit and financial reporting purposes, OMB Bulletin 22-01 defines material
weaknesses in internal control as a deficiency or combination of deficiencies in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of the
entity's financial statements will not be prevented or detected and corrected on a timely basis.
Details concerning our finding of the significant deficiencies can be found in Attachment 1.
Report on Compliance with Laws, Regulations, Contracts, and Grant
Agreements
Results of Our Tests for Compliance with Laws, Regulations, Contracts, and
Grant Agreements
Providing an opinion on compliance with 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.
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Basis of Results of Our Tests for Compliance with Laws, Regulations, Contracts,
and Grant Agreements
As part of obtaining reasonable assurance about whether the Agency's financial statements are free of
material misstatement, we performed tests of the Agency's compliance with certain provisions of laws,
including those governing the use of budgetary authority, regulations, contracts, and grant agreements
that have a direct effect on the determination of material amounts and disclosures in the financial
statements.
Responsibilities of Management for 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.
Auditor's Responsibilities for Tests of Compliance with Laws, Regulations,
Contracts, and Grant Agreements
We also performed certain other limited procedures as described in Codification of Statements on
Auditing Standards, AU-C 250.14-16, "The Auditor's Consideration of Compliance With Laws and
Regulations." OMB Bulletin 22-01 requires that we evaluate compliance with federal financial statement
system requirements, including the requirements referred to in the Federal Financial Management
Improvement Act of 1996, or FFMIA. We limited our tests of compliance to these provisions and did not
test compliance with all laws and regulations applicable to the EPA.
Intended Purposes of Report on Compliance with Laws, Regulations, Contracts,
and Grant Agreements
The purpose of this report is solely to describe the scope of our testing of compliance with
selected provisions of applicable laws, regulations, contracts, and grant agreements, and the
results of that testing, and not to provide an opinion on compliance. This report is an integral
part of an audit performed in accordance with U.S. generally accepted government auditing
standards in considering compliance. Accordingly, this report on compliance with laws, regulations,
contracts, and grant agreements is not suitable for any other purpose.
FFMIA Noncompliance
Under FFMIA, we are required to report whether the Agency's financial management systems
substantially comply with the federal financial management systems requirements, applicable federal
accounting standards, and the United States Government Standard General Ledger at the transaction
level. To meet the FFMIA requirement, we performed tests of compliance with FFMIA section 803(a)
requirements and used OMB Memorandum M-09-06, Implementation Guidance for the Federal
Financial Management Improvement Act, dated January 9, 2009, to determine whether there was any
substantial noncompliance with FFMIA.
The results of our tests did not disclose any instances of noncompliance with FFMIA requirements,
including where the Agency's financial management systems did not substantially comply with the
applicable federal accounting standard.
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We did not identify any significant matters involving compliance with laws, regulations, contracts, or
grant agreements related to the Agency's financial management systems that came to our attention
during the course of the audit.
Other Governmental Reporting Requirements
Audit Work Required Under the Hazardous Substance Superfund Trust Fund
We also performed audit work to meet the requirements found in 42 U.S.C. § 9611(k) with respect to
the Hazardous Substance Superfund Trust Fund and the stipulation to conduct an annual audit of
payments, obligations, reimbursements, or other uses of the fund. The significant deficiencies reported
above also relate to Superfund.
During previous financial statement audits, we reported significant deficiencies, as detailed in
Attachment 2. Those deficiencies include that:
• Originating offices did not forward accounts receivable source documents in a timely manner to
the finance center.
• The EPA needs to improve its financial statement preparation process.
This report is intended solely for the information and use of the management of the EPA, the OMB, and
Congress, and it is not intended to be and should not be used by anyone other than these specified
parties.
Damon Jackson
Certified Public Accountant
Director, Financial Directorate
Office of Audit
Office of Inspector General
U.S. Environmental Protection Agency
November 8, 2022
23-F-0002 7
Prior Audit Coverage
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Attachment 1
Significant Deficiencies
Table of Contents
1. The EPA Improperly Recorded WIFIA Fee Fund Revenue 9
2. Unearned Advances Account Had an Abnormal Balance 11
3. Unneeded Funds Not Deobligated Timely 12
4. Capitalized Software-ln-Development Costs Inaccurately Recorded 14
5. The EPA Processed Standard Vouchers Without Adequate Procedures 16
23-F-0002
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1 - The EPA Improperly Recorded WIFIA
Fee Fund Revenue
We found that the EPA did not properly record approximately $7 million of WIFIA fee fund exchange
revenue during FY 2022. Federal accounting standards require federal entities to recognize exchange
revenue when a government entity provides goods or services to the public or another government
entity at a price. This error occurred because the EPA did not create the appropriate accounting models
to properly classify WIFIA fee revenue as exchange revenue. When the EPA misclassifies revenue, the
financial statements may be misstated.
Statement of Federal Financial Accounting Standards 7, Accounting for Revenue and Other Financing
Sources and Concepts for Reconciling Budgetary and Financial Accounting, states:
Exchange revenue and gains are inflows of resources to a Government entity that the
Entity has earned. They arise from exchange transactions, which occur when each
party to the transaction sacrifices value and receives value in return. That is, exchange
revenue arises when a Government entity provides something of value to the public
or another Government entity at a price.
WIFIA at 33 U.S.C. § 3909 authorizes the EPA to collect and spend fees to cover all or a portion of the
costs of servicing WIFIA loans.
In addition, the Standards for Internal Control in the Federal Government defines the five components of
internal control in government, one of which is the standard for control activities. It defines control
activities as "actions management establishes through policies and procedures to achieve objectives and
respond to risks in the internal control system." Under this standard, management should design control
activities "so that all transactions are completely and accurately recorded."
The EPA recognizes revenue when WIFIA fee fund expenses are incurred. During FY 2022, the EPA
improperly recorded approximately $7 million of WIFIA fee fund revenue as nonexchange revenue
instead of exchange revenue. This error occurred because the EPA did not create the appropriate
accounting models to properly impact exchange revenue. Furthermore, the EPA did not identify the
error during its internal review processes. When the EPA misclassifies revenue, the financial statements
may be misstated.
Recommendations
We recommend that the chief financial officer:
1. Analyze exchange and nonexchange revenue general ledger accounts and reclassify fiscal
year 2022 Water Infrastructure Finance and Innovation Act nonexchange revenue to exchange
revenue.
2. Update the Water Infrastructure Finance and Innovation Act expense accounting models to
properly impact exchange revenue.
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Agency Response and OIG Assessment
The Agency agreed with our findings and recommendations and has completed its corrective actions.
During FY 2022, the Agency reclassified the WIFIA revenue from nonexchange revenue to exchange
revenue and updated the accounting models to properly record the exchange revenue.
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2 - Unearned Advances Account Had an
Abnormal Balance
We found that the EPA had an abnormal balance of more than $9 million in the Unearned Advances,
Non-Federal general ledger account. The Standards for Internal Control in the Federal Government
requires accurate and timely recording of transactions and events. The Agency did not proactively
resolve the abnormal balance. The Agency's failure to correct the abnormal balance could result in
unearned advances being misstated in the financial statements.
The Standards for Internal Control in the Federal Government defines the five components of internal
control in government, one of which is the standard for control activities. It defines control activities as
"actions management establishes through policies and procedures to achieve objectives and respond to
risks in the internal control system." Under this standard, management should design control activities
"so that all transactions are completely and accurately recorded."
We found that the EPA general ledger had an abnormal balance of more than $9 million in the unused
Unearned Advances, Non-Federal general ledger account because the account had a debit balance
instead of a credit balance. The account has had an abnormal balance since FY 2019, when special
account collections, used for cleanup and enforcement activities, no longer impacted the Unearned
Advances, Non-Federal general ledger account.
According to the EPA, the $9 million in the unearned advances account dates back to when the regions
were responsible for recording collections. The Agency did not proactively identify and correct the
abnormal balance. An abnormal balance could result in unearned advances being misstated in the
financial statements. Furthermore, failure to identify an abnormal balance in an unused general ledger
account could indicate inadequate internal review processes.
Recommendations
We recommend that the chief financial officer:
3. Research and correct the $9 million activity in the Unearned Advances, Non-Federal general
ledger account to ensure unearned advances are properly reflected in the financial statements.
4. Identify any abnormal balances in advance general ledger accounts and make necessary
corrections to ensure debit and credit balances are properly reflected.
Agency Response and OIG Assessment
The EPA agreed with our findings and recommendations. The Agency's estimated completion date for
corrective actions is July 31, 2023.
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3 - Unneeded Funds Not Deobligated Timely
The EPA did not timely deobligate unneeded funds, totaling $5.8 million, identified during the FY 2022
annual review of unliquidated obligations. Agency directives require that unliquidated obligations be
reviewed annually and that responsible offices review inactive unliquidated obligations and take
appropriate action to deobligate unneeded funds. While the EPA met the requirement to review
unliquidated obligations at least annually, it did not take timely actions to deobligate the unneeded
funds. As a result, the EPA has no assurance that unliquidated obligations are accurate and represent
valid and viable obligations.
Resource Management Directive System Number 2520-03-P1, Responsibilities for Reviewing
Unliquidated Obligations, requires all responsible parties to review at least annually all inactive
unliquidated obligations to ensure that all recorded obligations are still valid and properly documented.
According to the directive:
• An inactive obligation is one in which there has been no activity for six months (180 days) or
more.
• A valid obligation is one "for which appropriated funds are still available for the purpose and
time period specified, and for which an actual need still exists within the life of the
appropriation."
Resource Management Directive System 2520-03-P1 requires that all unneeded funds be deobligated by
the end of the fiscal year. The directive requires that all responsible officials certify that their office or
region took the necessary actions to deobligate funds as provided in the Office of the Controller's year-
end requirements for the fiscal year.
We found that the EPA did not timely deobligate unneeded funds, totaling $5.8 million, identified during
the FY 2022 annual review of unliquidated obligations. During this review, the Agency identified
unliquidated obligations, totaling $6.8 million, which remained opened as of September 30, 2022;
however, it was determined during the review that unliquidated obligations totaling $928,000 were
valid obligations and should remain open. See Table 1-1.
Table 1-1: Funds for deobligation
1 Program offices/regions I
Amount 1
Office of Research and Development
$38,602.88
Office of Enforcement and Compliance Assurance/Office of
Criminal Enforcement, Forensics and Training
307.80
Region 1
16,402.60
Region 2
248,442.64
Region 3
1,780,681.90
Region 5
728,401.05
Region 6
3,020,732.38
Total
$5,833,571.25
Source: OIG analysis of the EPA's data. (EPA OIG table)
There are several reasons why the unliquidated obligations were not deobligated by the end of the fiscal
year. Some regions and program offices noted in their certifications that the processing of their
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identified unliquidated obligations were incomplete as of their certification dates. Others noted that the
deobligation of funds either was pending, was in process, or would occur during FY 2023.
By not taking timely and appropriate action to deobligate unneeded funds, the EPA has no assurance
that the unliquidated obligations are accurate and represent valid and viable obligations reported in the
financial statements. Furthermore, inadequate unliquidated obligation reviews could affect the financial
statements by not identifying unneeded funds that should be deobligated. The deobligation of these
funds would allow for more effective utilization of resources for other environmental purposes.
Recommendation
We recommend that the chief financial officer:
5. Reiterate to headquarters program offices and regional offices the importance of deobligating
unneeded funds identified during the annual unliquidated obligations review by the end of the
fiscal year.
Agency Response and OIG Assessment
The EPA agreed with our finding and recommendation. The Agency's estimated completion date for the
corrective action is September 1, 2023.
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4 - Capitalized Software-ln-Development Costs
Inaccurately Recorded
We found that the EPA improperly accounted for prior years' capitalized software transactions for
PRISM. Federal standards for internal control require that transactions be recorded accurately and
promptly. The finance center responsible for recording software-in-development costs was not aware of
costs incurred in prior years until FY 2022. As a result, software-in-development activity disclosed in the
General Property, Plant & Equipment, Net note is misstated. Failure to properly record property
transactions in the Agency's property management system and Compass Financials compromises the
accuracy of the EPA's property accounts and expenses, as well as the accuracy of the Agency's financial
statements.
Statement of Federal Financial Accounting Standards No. 10, Accounting for Internal Use Software,
requires entities to capitalize the costs of software that meet the criteria for general property, plant, and
equipment. The software life cycle includes three phases: planning, development, and operations.
Capitalized software costs should include the full costs (direct and indirect) incurred during the
development phase. The software-in-development general ledger account represents costs incurred in
the development phase.
The Standards for Internal Control in the Federal Government defines the five components of internal
control in government, one of which is the standard for control activities. It defines control activities as
"actions management establishes through policies and procedures to achieve objectives and respond to
risks in the internal control system." Under this standard, management should design control activities
"so that all transactions are completely and accurately recorded." In addition, it states:
[Transactions are promptly recorded to maintain their relevance and value to
management in controlling operations and making decisions. This applies to the
entire process or life cycle of a transaction or event from the initiation and
authorization through its final classification in summary records.
We found that the EPA improperly accounted for prior years' capitalized software transactions for the
PRISM project. During FY 2022, the Agency capitalized $25.4 million in PRISM software-in-development
costs; however, $20.6 million were for costs incurred from FYs 2019 through 2021. See Table 1-2.
Table 1-2: PRISM software-in-development costs
I Fiscal year I
Development expenditures I
Overhead I
Total development costs |
FY 2019
$3,576,770.58
$593,449.78
$4,170,220.36
FY 2020
6,495,693.32
1,064,989.76
7,560,683.08
FY 2021
7,445,489.14
1,385,197.99
8,830,687.13
Subtotal for prior FYs development costs:
$20,561,590.57
FY 2022 Quarter 1
$1,826,114.01
$346,520.89
$2,172,634.90
FY 2022 Quarter 2
1,209,568.34
234,563.02
1,444,131.36
FY 2022 Quarter 3
730,883.49
144,411.45
875,294.94
FY 2022 Quarter 4
315,392.82
62,726.50
378,119.32
Subtotal FY 2022 development costs: $4,870,180.52
TOTAL: $25,431,771^09
Source: OIG recalculation of the EPA's data. (EPA OIG table)
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The PRISM software project was not brought to the Research Triangle Park Finance Center staffs
attention in the appropriate year that the development costs were incurred. Stakeholders are
responsible for informing staff of new investments and changes in current software projects during the
annual software meeting with program managers, contracting officer's representatives, and others. This
project was brought to the attention of staff during the FY 2022 communication with program
managers. The decision was made to record the prior years' development costs during FY 2022 rather
than make a prior period adjustment.
As a result, software-in-development activity disclosed in the General Property, Plant & Equipment, Net
note is misstated. Failure to properly record property transactions in the Agency's property
management system and Compass Financials compromises the accuracy of the EPA's property accounts
and expenses, as well as the accuracy of the Agency's financial statements.
Recommendation
We recommend that the chief financial officer, in coordination with the assistant administrator for
Chemical Safety and Pollution Prevention:
6. Implement a plan to ensure that Pesticide Registration Information System software-in-
development costs are recorded accurately and timely.
Agency Response and OIG Assessment
The EPA agreed with our finding and recommendation. The Agency's estimated completion date for
corrective action is September 15, 2023.
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5 - The EPA Processed Standard Vouchers
Without Adequate Procedures
We found that EPA Region 4 recorded five standard vouchers totaling $129,000 in Compass Financials,
the EPA's financial system, without evidence of adequate review or approval. Federal standards for
internal control require management to design policies and procedures that allow management to
effectively monitor control activities. Region 4 did not have written standard operating procedures in
place for processing standard vouchers and did not use a standard template to document reviews and
approvals. Inadequate controls and procedures over the preparation and review of standard vouchers
increase the EPA's risk of potential errors and inaccuracies that could materially misrepresent its
financial position and call into question the reliability of its financial statements.
The Standards for Internal Control in the Federal Government states that "management is responsible
for designing the policies and procedures to fit an entity's circumstances and building them in as an
integral part of the entity's operations." It defines the five components of internal control in
government, one of which is the standard for control activities. It defines control activities as "actions
management establishes through policies and procedures to achieve objectives and respond to risks in
the internal control system." The standard for control activities requires appropriate documentation of
policies, transactions, and internal controls. It also requires that policies include "the appropriate level
of detail to allow management to effectively monitor the control activity."
Resource Management Directive System Number 2540-20, Financial Management Systems and
Interfaces, states that the EPA's financial management systems shall have common data elements,
common transaction processing, and consistent internal controls. Resource Management Directive
System Number 2530-01, Overview of Accounting Handbook, states that the Office of the Chief Financial
Officer "[ojversees the EPA's accounting and financial management operations and provides accounting
and financial management guidance to the agency." Directive 2530-01 also assigns financial
management responsibilities to EPA managers, including regional administrators. Resource
Management Directive System Number 2530-02, Processing Journal Vouchers and Standard Vouchers,
provides procedures and controls for processing standard vouchers. While this directive states that the
purpose is to provide voucher processing procedures for the Office of the Controller, it does not state
that it is applicable to the EPA regional offices. In addition, Directive 2530-02 states that "[e]ach office
documents and maintains standard operating procedures for processing and approving [standard
voucher] transactions." The OCFO uses a standard template to document the voucher details, reviews,
and approvals.
During our standard voucher testing, we found that Region 4 recorded five standard vouchers totaling
$129,000 in Compass Financials, without documented review or approval of the transactions. Standard
vouchers are transactions where the debits and credits are predefined in the financial system to record
accounting events that occur on a recurring basis. The EPA provided supporting documentation but did
not have evidence of the review or approval of the transactions. Table 1-3 includes the standard
voucher details.
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Table 1-3: Standard vouchers recorded
without documented review or approval
1 Voucher number I
Amount I
0422SV2001
$800.00
04-22SV2002
12,600.00
0422SV2003
44,300.00
0422SV2004
26,300.00
0422SV2005
45,000.00
Total
$129,000.00
Source: OIG analysis of the EPA's financial
transactions. (EPA OIG table)
The supporting documentation provided to us did not include transactional details such as the finance
object code or evidence of review or approval of the transaction. In response to our inquiries, the EPA
stated that Region 4 did not use a standard template to document reviews and approvals and did not
have written standard operating procedures in place for processing standard vouchers. Region 4 stated
that it has been recording the vouchers based on the processing method used in prior years without
written procedures.
Without policies and standard operating procedures in place, the EPA increases its risk of errors and
inaccuracies. Recording transactions without established policies or standard operating procedures that
include proper review and approval of transactions can result in unauthorized and erroneous
transactions recorded in the financial system. Failure to apply proper controls over the preparation and
review of vouchers could result in material errors in the financial system that misrepresent the Agency's
financial position and calls into question the reliability of the Agency's financial statements.
Recommendations
We recommend that the chief financial officer:
7. Incorporate in Resource Management Directive System 2530-02, Processing Journal Vouchers
and Standard Vouchers, responsibilities for all regional offices that post voucher transactions
into Compass Financials to ensure consistent accounting and financial management operations.
We recommend that the regional administrator for Region 4:
8. Establish standard operating procedures for the processing of standard vouchers that include
applicable internal control elements to ensure transactions are complete, accurate, and
effectively monitored through reviews and approvals.
Agency Response and OIG Assessment
The EPA agreed with our findings and recommendations. The Agency's estimated completion date for
Recommendation 7 is June 30, 2023. For Recommendation 8, the Agency's estimated completion date is
February 1, 2023.
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Attachment 2
Status of Prior Audit Report Recommendations
The EPA continues to strengthen its audit management practices and procedures to address audit
findings in a timely manner and to complete corrective actions expeditiously and effectively. In FY 2022,
the EPA's chief financial officer, as the agency follow-up official, continued to encourage managers to
evaluate the OIG's recommendations thoroughly, develop suitable and attainable corrective actions,
and implement the corrective actions in the agreed-upon time frame. The OCFO implemented the
following actions to strengthen its audit management procedures:
• Worked closely with Agency audit follow-up coordinators during FY 2022 to ensure adherence
to corrective action dates and submission of the required certification memorandums. The
OCFO efforts were critical and significantly helped with the EPA's responses to the Spring 2022
Semiannual Report to Congress.
• Initiated a comprehensive update to EPA Manual 2750: Audit Management Procedures, the
primary guidance document for ensuring consistent audit management and follow-up practices
agencywide. The updates included adding a narrative to the audit management section and a
resource link to the EPA OIG audit process section.
• Provided monthly reporting for the agencywide metric on the number of late audit corrective
actions. The metric measures the completion of Agency-identified corrective actions that were
not completed in a timely manner. The intended purpose of the monthly reporting is to facilitate
the implementation of Agency corrective actions to OIG audit recommendations and decrease
the number of late audit corrective actions.
• Enhanced the utility of the Enterprise Audit Management System, the Agency's audit tracking
tool, for improved tracking of OIG and Government Accountability Office audits and evaluations.
The Enterprise Audit Management System facilitates the Agency's activities and corrective
actions in response to the OIG and Government Accountability Office audits and evaluations.
• Prepared a monthly OIG and Government Accountability Office tracker intended to provide
Agency senior leadership with visibility on OIG and Government Accountability Office audits and
evaluations. The tracker includes the most recent audit and evaluation updates and is
distributed monthly to Agency senior leaders.
• Maintained the audit community intranet site, which serves as a resource for the Agency's audit
follow-up coordinators and audit liaisons. This collaborative site includes resources and
reference materials, such as standard operating procedures, response templates, frequently
asked questions, reporting links, deadlines, and other useful information.
• Established a shared intranet website for the EPA's audit follow-up coordinators and audit
liaisons to work collaboratively, share best practices, and contribute to community projects.
• Provided training during the OCFO technical training series for Agency subject matter experts
participating in OIG or Government Accountability Office projects. The training provided an
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overview of the audit process, introduced key Agency contacts, and discussed best practices for
audit participants.
• Established biweekly meetings with audit follow-up coordinators and audit liaisons agencywide
to provide regular updates, offer training, and discuss audit-related issues and concerns.
These and other efforts are a testament to the OCFO's continued commitment to improving the
Agency's audit and evaluation management practices. In addition, the EPA maintained its commitment
to engage early with the OIG on audit and evaluation findings and to develop effective corrective actions
that address OIG recommendations.
As noted in the table below, however, there are still recommendations from previous financial
statement audits that have not been fully implemented.
Table 2-1: Significant deficiency issues not fully resolved
Originating Offices Did Not Timely Forward Accounts Receivable Source Documents to the Finance Center
During our FY 2021 audit, we found that EPA regions did not timely submit supporting source documents to the
EPA's Cincinnati Finance Center for accounts receivable, which then delayed the recording and processing of
those receivables. The EPA's Resource Management Directives state that the responsible offices must forward to
the Cincinnati Finance Center source documents supporting an accounts receivable for settlements or orders
demonstrating a debt owed to the Agency within five business days. The regional program office, the Office of
Regional Counsel, and the regional legal enforcement office staff are responsible for providing these documents to
the Cincinnati Finance Center. When the Cincinnati Finance Center is unable to create receivables timely, the
debtor may not be billed appropriately, interest may not accrue, and the EPA may not collect all that it is owed.
Furthermore, the EPA's delayed recording of accounts receivable could result in a material misstatement of the
financial statements. While we have noted some improvements in the timely receipt of legal documents, we still
identified instances of untimely receipt during FYs 2015 through 2022. Therefore, the Agency's corrective actions
are not completely effective, and we will continue to evaluate whether the Agency timely receives legal source
documents going forward.
The EPA Needs to Improve Its Financial Statement Preparation Process
During our FY 2019 audit (OIG Report No. 22-F-0033), we found multiple misstatements in the Agency's financial
transactions and financial statements. We recommended that the chief financial officer evaluate and improve the
EPA's process for preparing financial statements and provide accurate and reliable supporting documentation for
adjustments and corrections to the financial statements. The EPA agreed with our findings and recommendations.
The Agency's estimated completion date for corrective actions for Recommendation 1 was originally July 31, 2020;
however, the EPA subsequently revised its estimated completion date to September 30, 2021. The EPA's
estimated completion date for Recommendation 2 was February 29, 2020.
During FY 2020, we continued to find misstatements and adjustment errors in the EPA's financial statement
preparation process. We recommended that the chief financial officer develop a plan to strengthen and improve the
preparation and management review of the financial statements and adjustments entered into the accounting
system to detect and correct errors and misstatements in a timely manner. In response to our recommendation, the
OCFO developed and implemented new review procedures for journal and standard voucher transactions. The
OCFO continues to work on finalizing review procedures for financial statement preparation.
During the FYs 2021 and 2022 audits, we continued to find various errors during our examination of the financial
statements. During our FY 2022 audit, we identified various errors in the balance sheet, statement of net cost,
footnote disclosures and in the Required Supplementary Information. Failure to 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.
Source: OIG analysis of prior year recommendations and the Agency's corrective actions. (EPA OIG table)
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Attachment 3
Status of Recommendations
and Potential Monetary Benefits
RECOMMENDATIONS
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Potential
Monetary
Benefits
(in $000s)
1
9
Analyze exchange and nonexchange revenue general
ledger accounts and reclassify fiscal year 2022 Water
Infrastructure Finance and Innovation Act nonexchange
revenue to exchange revenue.
C
Chief Financial Officer
10/25/22
$7,087
2
9
Update the Water Infrastructure Finance and Innovation Act
expense accounting models to properly impact exchange
revenue.
C
Chief Financial Officer
10/25/22
3
11
Research and correct the $9 million activity in the Unearned
Advances, Non-Federal general ledger account to ensure
unearned advances are properly reflected in the financial
statements.
R
Chief Financial Officer
7/31/23
$9,324
4
11
Identify any abnormal balances in advance general ledger
accounts and make necessary corrections to ensure debit
and credit balances are properly reflected.
R
Chief Financial Officer
7/31/23
5
13
Reiterate to headquarters program offices and regional
offices the importance of deobligating unneeded funds
identified during the annual unliquidated obligations review
by the end of the fiscal year.
R
Chief Financial Officer
9/1/23
$5,833
6
15
In coordination with the assistant administrator for Chemical
Safety and Pollution Prevention, implement a plan to ensure
that Pesticide Registration Information System software-in-
development costs are recorded accurately and timely.
R
Chief Financial Officer
9/15/23
7
17
Incorporate in Resource Management Directive System
2530-02, Processing Journal Vouchers and Standard
Vouchers, responsibilities for all regional offices that post
voucher transactions into Compass Financials to ensure
consistent accounting and financial management
operations.
R
Chief Financial Officer
6/30/23
8
17
Establish standard operating procedures for the processing
of standard vouchers that include applicable internal control
elements to ensure transactions are complete, accurate,
and effectively monitored through reviews and approvals.
R
Regional Administrator for
Region 4
2/1/23
1C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
23-F-0002
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^tDsx
i £j \
i®/
\—c
-------
No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
3
Research and correct the $9 million
activity in the Unearned Advances,
Non-Federal general ledger account
to ensure unearned advances are
properly reflected in the financial
statements.
OCFO/
OC/
ACAD
Concur. The Office of the
Controller's Accounting and
Cost Analysis Division will
research and correct the $9
million abnormal balance in
the Unearned Advances
account.
7/31/2023
4
Identify any abnormal balances in
advance general ledger accounts
and make necessary corrections to
ensure debit and credit balances are
properly reflected.
OCFO/
OC/
ACAD
Concur. The OC's ACAD
will review the advance
general ledger accounts to
identify and correct any
abnormal balances.
7/31/2023
5
Reiterate to headquarters program
offices and regional offices the
importance of deobligating
unneeded funds identified during
the annual unliquidated obligations
review by the end of the fiscal year.
OCFO/
OC/
PTAD
Concur. The OC's Policy,
Training and Analysis
Division will send
communications to Senior
Resource Officials after the
agency has completed its
Unliquidated Obligation
Reviews, but before the final
certifications are provided in
October, to emphasize the
importance of timely
deobligations of funds in the
current fiscal year.
9/1/2023
6
Implement a plan to ensure that
Pesticide Registration Information
System software-in-development
costs are recorded accurately and
timely.
OCFO/
OC/
RTPFC
Concur. In FY 2023, the
OC's Research Triangle Park
Finance Center will develop
a plan that outlines guidance,
training, and a certification
process for the recording of
software-in-development to
the financial system. In
advance of the plan, the
OC's RTPFC will emphasize
the importance of timely
notification during the
Annual Software Kickoff
meeting.
9/15/2023
110
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No.
Recommendation
Office
High-Level Corrective
Action(s)
Estimated
Completion Date
7
Incorporate in Resources
Management Directive System
2530-02, Processing Journal
Vouchers and Standard Vouchers,
responsibilities for all regional
offices that post voucher
transactions into Compass
Financials to ensure consistent
accounting and financial
management operations.
OCFO/
OC /
PTAD
Concur. The OC'sPTAD
will establish a workgroup
and update Resource
Management Directive
System 2530-02 to include
the responsibilities of the
regional offices for
processing standard
vouchers.
6/30/2023
8
Establish standard operating
procedures for the processing of
standard vouchers that include
applicable internal control elements
to ensure transactions are complete,
accurate, and effectively monitored
through reviews and approvals.
Region
4
Concur. Region 4 is
currently developing regional
standard operating
procedures for processing
standard vouchers. The
procedures will identify the
proper standard voucher
process and the required
documentation for standard
voucher transactions.
Additionally, the procedures
will define the appropriate
level of management reviews
and approvals required in the
standard voucher process.
2/1/2023
CONTACT INFORMATION
If you have any questions regarding this response, please contact the OCFO's Audit Follow-up
Coordinator, Andrew LeBlanc, at leblanc.andrew@epa.gov or (202) 564-1761.
cc: Daniel Blackman
David Bloom
Lek Kadeli
Jeaneanne Gettle
Meshell Jones-Peeler
Nicole Murley
Katherine Trimble
Sandra John
Richard Gray
James Hatfield
OCFO-OC-MANAGERS
Vickie Tellis
Keith Mills
Kristy Eubanks
111
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Wanda Arlington
Mairim Lopez
Claire McWilliams
Demetrios Papakonstantinou
Sheila May
Lasha' Geter
Susan Perkins
Andrew LeBlanc
Jose Kercado
112
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Section III
Other Accompanying
Information
-------
MANAGEMENT INTEGRITY AND
CHALLENGES
Overview of EPA's Efforts
Management challenges and internal control weaknesses represent vulnerabilities in program
operations that may impair the EPA's ability to achieve its mission and threaten the agency's
safeguards against fraud, waste, abuse, and mismanagement These areas are identified through
internal agency reviews and independent reviews by the EPA's external evaluators, such as the OMB,
the Government Accountability Office and EPA's OIG. This section of the AFR discusses in detail two
components: 1) key management challenges identified by EPA's OIG, followed by the agency's
response and 2) a brief discussion of EPA's progress in addressing its FY 2022 material weaknesses.
Under the FMFIA, all federal agencies must provide reasonable assurance that internal controls are
adequate to support the achievement of their intended mission, goals, and objectives. (See Section I,
"Management Discussion and Analysis," for the Administrator's Statement of Assurance.) Additionally,
agencies must report any material weaknesses identified through internal and/or external reviews
and their strategies to remedy the problems. Material weaknesses are vulnerabilities that could
significantly impair or threaten fulfillment of the agency's programs or mission. In FY 2022, the EPA
did not identify any new material weaknesses. As well, no new material weaknesses were identified by
OIG. (See following subsection for a discussion of the EPA's progress in addressing its material
weakness.)
The agency's senior managers remain committed to maintaining effective and efficient internal
controls to ensure that program activities are carried out in accordance with agency policy and
applicable laws and regulations. The agency will continue to address its remaining weaknesses and
report on its progress, as appropriate.
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2023 KEY MANAGEMENT CHALLENGES
Office of Inspector General-Identified Key Management Challenges
The Reports Consolidation Act of 2000 requires the OIG to report on the agency's most serious
management and performance challenges, known as the key management challenges. Management
challenges represent vulnerabilities in program operations and their susceptibility to fraud, waste,
abuse or mismanagement. For FY 2023, the OIG identified eight challenges. The table below
includes issues the OIG identified as key management challenges facing the EPA and the years in
which the OIG identified the challenge.
OIG-identified key management challenges for the EPA
FY
2022
FY
2023
Mitigating the Causes and Adapting to the Impacts of Climate Change. The EPA must
take a leadership role in addressing climate change and mitigating its effect on human
health and the environment.
•
•
Integrating and Leading Environmental Justice Across the Agency and Government.
The EPA must identify and address disproportionally high and adverse human health or
environmental effects on environmental justice communities.
•
•
Providing for the Safe Use of Chemicals. The public must be able to depend on the EPA's
ability to conduct credible and timely assessments of the risks posed by pesticides toxic
chemicals, and other environmental chemicals.
•
•
Safeguarding Scientific Integrity Principles. The EPA must ground science-based
decisions in principles of scientific integrity to ensure that human health and the
environment are protected by using the best available science.
•
•
Ensuring Agency Systems and Other Critical Infrastructure Are Protected Against
Cyberthreats. Information technology is a fundamental and essential resource for the
EPA to carry out its mission, and the Agency must ensure its systems and our nation's
critical infrastructure are protected against cyberthreats.
•
•
Managing Business Operations and Resources. The EPA must have effective business
operations to achieve its mission and safeguard taxpayer dollars.
•
Enforcing Compliance and Environmental Laws and Regulations. Through
enforcement, the EPA ensures that regulated entities are following environmental laws
and will continue to do so, as enforcement actions effectively deter future noncompliance.
•
•
Managing Increased Investment in Infrastructure. The EPA must ensure that its
infrastructure projects, which constitute the Agency's largest investment, use
Infrastructure and Jobs Act appropriations effectively.
•
* This management challenge was retained from the EPA's FYs 2023 Top Management Challenges, issued
October 28,2022, located on the OIG's website at: https: //www.epa.gov/office-inspector-general/top-
management-challenges-epa-and-csb#EPA.
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Office of Inspector General
U.S. Environmental Protection Agency
At a Glance
What Are Management
Challenges?
The Reports Consolidation Act
of 2000 requires each inspector
general to prepare an annual
statement summarizing what the
inspector general considers to be
"the most serious management
and performance challenges
facing the agency" and to briefly
assess the agency's progress in
addressing those challenges.
To identify these top challenges
for fiscal year 2023, the
U.S. Environmental Protection
Agency Office of Inspector
General considered the body of
our work, as well as our objective
and professional observations,
work conducted by the
U.S. Government Accountability
Office, and Agency
documentation and statements.
Report No. 22-N-0004. EPA's_
Fiscal Year 2022 Top
Management Challenges,
identified seven top management
challenges facing the Agency.
We retained all of these
challenges for fiscal year 2023,
with one modification: the
"managing infrastructure funding
and business operations"
challenge was split into two
separate challenges. As such,
we identified eight top
management challenges for the
EPA for fiscal year 2023.
Address inquiries to our public
affairs office at (202) 566-2391 or
OIG WEBCOMMENTS@epa.gov.
List of OIG reports.
The EPA's Fiscal Year 2023 Top Management
Challenges
What We Found
We identified eight top management challenges for the EPA for fiscal year 2023:
1. Mitigating the Causes and Adapting to the Impacts of Climate Change.
The EPA must take a leadership role in addressing climate change and
mitigating its effect on human health and the environment.
2. Integrating and Leading Environmental Justice Across the Agency and
Government. The EPA must identify and address disproportionately high
and adverse human health or environmental effects on environmental
justice communities.
3. Providing for the Safe Use of Chemicals. The public must be able to
depend on the EPA's ability to conduct credible and timely assessments of
the risks posed by pesticides, toxic chemicals, and other environmental
chemicals.
4. Safeguarding Scientific Integrity Principles. The EPA must ground
science-based decisions in principles of scientific integrity to ensure that
human health and the environment are protected by using the best-available
science.
5. Ensuring Agency Systems and Other Critical Infrastructure Are
Protected Against Cyberthreats. Information technology is a fundamental
and essential resource for the EPA to carry out its mission, and the Agency
must ensure its systems and our nation's critical infrastructure are protected
against cyberthreats.
6. Managing Business Operations and Resources. The EPA must have
effective business operations to achieve its mission and safeguard taxpayer
dollars.
7. Enforcing Compliance with Environmental Laws and Regulations.
Through enforcement, the EPA ensures that regulated entities are following
environmental laws and will continue to do so, as enforcement actions
effectively deter future noncompliance.
8. Managing Increased Investment in Infrastructure. The EPA must ensure
that its infrastructure projects, which constitute the Agency's largest
investment, use Infrastructure Investment and Jobs Act appropriations
effectively.
We have identified these as the most serious management and performance
challenges facing the EPA, representing vulnerabilities to waste, fraud, abuse,
and mismanagement or the most significant barriers to the EPA accomplishing
its mission.
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Agency Response to Office of Inspector General-Identified Management Challenges
The Office of the Inspector General has not transmitted the final "EPA's FY2023 Top
Management Challenges" report. Once the OIG issues the final report, the agency plans to
review the revised final and prepare a response, which will be separately transmitted no
later than 30 days from the issuance of this report.
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PROGRESS IN ADDRESSING FY 2022
WEAKNESSES
In FY 2022, no new material weaknesses were identified. The EPA continues to make progress in
addressing its one previously identified material weakness for which corrective actions are still
underway. The agency expects to implement and validate all corrective for this material weakness in
FY 2022.
Material Weakness
EPA Needs to Improve Its Financial Statement Preparation Process
During the FY 2019 financial statement audit, the OIG stated that failure to properly record accounting
transactions and exercise due diligence in the preparation of the agency's financial statements
compromises the accuracy of the financial statements and the reliance on them to be free of material
misstatement. However, after the completion of the FY 2021 financial statement audit, the OIG (in
coordination with OMB) made the determination this finding should be identified as an agency
significant deficiency, not a material weakness.
The EPA continues to address this issue based upon the established corrective plan of action to
evaluate and improve its financial statement preparation process and to provide accurate and reliable
supporting documentation for adjustments and corrections. Specifically, the agency informed staff of
the need to include more supporting analysis and the rationale for the adjustments made and the
accounting basis for determining the adjustments. To increase efficiency, the agency implemented the
CaseWare software that provides format controls and footnote cross checks. The agency developed
Standard Operating Procedures and a reviewer's checklist for the preparation of its financial statement
audit The SOPs and the checklist will be reviewed annually to validate effectiveness. The agency
expects to complete implementation and validation of all corrective actions in FY 2023.
For reporting purposes, the EPA considers the material weakness identified in the FY 2019 financial
statement audit as resolved.
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Summary of Financial Statement Audit
Audit Opinion
Unmodified
Restatement
No
Material Weaknesses
Beginning
Balance
New
Resolved
Consolidated
Ending
Balance
0
0
0
0
0
Total Material Weaknesses
0
0
0
0
0
Summary of Management Assurances
Effectiveness of Internal Control Over Financial Reporting (FMFIA § 2)
Statement of Assurance
Modified
Material Weaknesses
Beginning
Balance
New
Resolved
Consolidated
Reassessed
Ending
Balance
0
0
0
0
0
0
Total Material Weaknesses
0
0
0
0
0
0
Effectiveness of Internal Control Over Operations (FMFIA § 2)
Statement of Assurance
Unmodified
Material Weaknesses
Beginning
Balance
New
Resolved
Consolidated
Reassessed
Ending
Balance
Total Material Weaknesses
0
0
0
0
0
0
Conformance With Financial Management System Requirements (FMFIA § 4)
Statement of Assurance
Systems Conform to Financial Management Systems Requirements
Non-Conformances
Beginning
Balance
New
Resolved
Consolidated
Reassessed
Ending
Balance
Total Non-Conformances
0
0
0
0
0
0
Compliance With FFMIA
Agency
Auditor
1. System Requirement
No lack of compliance
noted.
No lack of compliance noted.
2. Accounting Standards
No lack of compliance
noted.
No lack of compliance noted.
3. USSGL at Transaction Level
No lack of compliance
noted.
No lack of compliance noted.
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PAYMENT INTEGRITY
I. Payment Reporting
The Payment Integrity Information Act of 2019 requires executive branch agencies to review all programs
and activities annually identify those that may be susceptible to significant improper payments and report
the results of their improper payment activities to the President and Congress through their annual
Agency Financial Report or Performance and Accountability Report PIIA further requires each agency's
OIG to determine if their agencies programs or activities are compliant with the statute.
The EPA is dedicated to reducing fraud, waste, and abuse and presents the following improper payment
information in accordance with PIIA; OMB guidance found in Circular A-123, Appendix C, Requirements for
Payment Integrity Improvement; and the reporting requirements contained in OMB Circular A-136,
Financial Reporting Requirements. The OMB implementing guidance directs federal agencies to take the
following steps:
1) Review all programs and activities at least once every three years to identify those that are
susceptible to significant improper payments, defined as gross annual improper payments
exceeding (a) both 1.5 percent of program outlays and $10 million of estimated improper payments
or (b) $100 million of estimated improper payments (regardless of the rate).
2) Obtain a statistically valid estimate of the annual amounts of improper payments in programs
identified as susceptible to significant improper payments.
3) Implement a plan to reduce improper payments in these programs.
4) Report the annual amount of each program's overpayments and recoveries.
An improper payment is defined as any payment that should not have been made or that was made in an
incorrect amount, including an overpayment or underpayment, under a statutory, contractual,
administrative, or other legally applicable requirements. And it includes any payment to an ineligible
recipient; any payment for an ineligible good or service; any duplicate payment; any payment for a good or
service not received, except for those payments where authorized by law; and any payment that does not
account for credit for applicable discounts. Further, the term "payment for an ineligible good or service"
includes a payment for any good or service that is rejected under any provision of any contract, grant,
lease, cooperative agreement, or other funding mechanism.
The term "payment" means any transfer or commitment for future transfer of federal funds such as cash,
securities, loans, loan guarantees, and insurance subsidies to any non-federal person or entity or a federal
employee, that is made by a federal agency, a federal contractor, a federal grantee, or a governmental or
other organization administering a federal program or activity.
In FY 2022, to meet the OMB guidance requirementto review all programs and activities atleastonce
every three years, the EPA conducted improper payment risk assessments using a systematic approach to
determine whether each program or payment stream is susceptible to significant improper payments. The
risk assessments required an evaluation of risk factors that could contribute to the potential for significant
improper payments. In completing the risk assessments, each office addressed risks known at the time of
completion. Results showed that all payment streams were unlikely to be susceptible to significant
improper payments.
Office of Inspector General's Compliance Determination for FY2021
On June 27, 2022, the EPA's Office of Inspector General's released its annual report of the agency's PIIA
compliance. In the report, the EPA's OIG stated that:
"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's improper payment reporting requirements
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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 OIG basis for making the non-compliance determination was as follows:
"For the Grants payment stream, the agency's improper payment procedures did not require the use of
the cost-allowance principles in 2 C.F.R. part 200, subpart E, when determining whether a payment was
improper."
"For the remaining payment streams, the EPA's risk assessments were insufficient because the EPA had
not established an adequate methodology for determining risk-assessment attributes and results."
After reviewing the EPA's response to the draft version of this report, the OIG reiterated its conclusions
and recommendations as follows:
"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."
Although, the EPA does not agree with the non-compliance findings, since the OMB expanded guidance for
improper payment reviews was distributed after the agency had completed its FY2021 review, the EPA
has proposed corrective actions to address the concerns raised in the OIG recommendations. Many of
those corrective actions are under way while the EPA waits to receive a formal response from the OIG on
the proposed corrective actions. Also, noteworthy, despite making a non-compliance finding, the OIG did
not identify any program or payment stream as susceptible to significant improper payments.
During the OIG's review of the EPA's grants payments, the OIG questioned the allowability of the costs
from part, or in total, of certain payments due to the lack of the agency incorporating 2 C.F.R. Part 200,
Subpart E - Cost Principles as part of their grant payment stream improper payments review. Although
incorporating Cost Principles was not a requirement at the time of its review, the EPA has reassessed those
payments identified by the OIG during their audit using the more stringent Cost Principles requirements.
As a result, the EPA is restating the FY 2021 improper payments rate (in Table 2 below) to reflect the
adjusted rate. Nevertheless, the increased rate did not cause the grants payment stream to exceed the
threshold to be considered susceptible to improper payments.
The OIG also recommended for the agency to conduct an "off-cycle" risk assessment in FY 2023 for all
programs and activities with greater than $10 million in outlays. The agency agrees that given the updated
OMB guidance an interim review is needed and it will complete the Qualitative Risk Assessment in FY
2023.
Another OIG recommendation states the agency should develop a standard operating procedure document
for conducting qualitative risk assessments, which should include language on a sufficient methodology for
concluding whether payment streams are susceptible to significant improper payments. The EPA
conferred with other leading agencies in the area of improper payment prevention and identified best
practices that can be incorporated into its review. Standard operating procedures and risk assessment
templates have been developed or updated to fulfill the OIG recommendation and the agency will use them
for the FY 2023 off-cycle qualitative risk assessments.
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The final OIG recommendation stated the agency must periodically train its personnel on procedures and
methodology for performing quantitative risk assessments on the agency's programs. In particular, the OIG
encouraged the emphasis of the application of the Cost Principles and adherence to the terms and
conditions of federal awards for the grants program. Working with the Office of Grants and Debarment,
OCFO will be enhancing the training provided to its review staff to identify potential questioned costs
based on the new OMB guidance. If question costs arise, then OGD will apply a more detailed 2 CFR cost
principles review to determine whether a payment was improper or proper.
Summary of current risk levels in EPA programs
The OMB uses three levels to classify federal agency improper payments risk: High Priority, Susceptible to
Significant Improper Payments, and Not Susceptible to Improper Payments. None of the agency's
programs were identified as high priority, as defined under PIIA exceeding $100 million of annual
estimated improper payments. As of FY 2021, no agency programs/payment streams were considered
susceptible to improper payments. In FY 2021, the agency determined that the grants program was no
longer considered susceptible to significant improper payments. Therefore, the program discontinued
annual statistical testing of program grants in FY2022 but will undertake a qualitative and quantitative
risk assessments in FY2023 based on the recommended interim review. Table 1 summarizes the risk level
for each of the agency's payment streams.
Table 1: Risk Level
Payment Stream
Not Susceptible to
Significant Ips
Susceptible to
Significant IPs
High Priority
Commodities
X
Contracts
X
CWSRF
X
DWSRF
X
Grants
X
Hurricane Sandy
X
Payroll
X
Purchase Cards
X
Travel
X
2018 Disaster Relief
Funds
X
II. Risk Assessment
Federal agencies are required to conduct risk assessments of their programs or activities to determine
whether they are susceptible to significant improper payments. PIIA requires risk assessments to be
conducted at least once eveiy three years for programs that are not deemed susceptible to significant
improper payments.
A quantitative risk assessment may consist of a true statistical sample or a non-statistical assessment
where a subset of the population is sampled non-randomly, for which the ratio of improper payments is
projected to the annual outlays. A qualitative risk assessment is an evaluation of risk factors that could
contribute to the occurrence of significant improper payments EPA utilizes both qualitative and
quantitative methods to assess the risk of improper payments in its payment streams.
The following risk factors are addressed in the agency's qualitative risk assessments:
1) Whether the program reviewed is new to the agency;
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2) The complexity of the program reviewed;
3) The volume of payments made through the program reviewed;
4) Whether payments or payment eligibility decisions are made outside of the agency,
such as by a State or local government;
5) Recent major changes in program funding, authorities, practices, or procedures;
6) The level, experience, and quality of training for personnel responsible for making
program eligibility determinations or certifying that payments are accurate;
7) Significant deficiencies in the audit report or other relevant management findings of
the agency that might hinder accurate payment certification;
8) Similarities (a combination of outlays, mission, payment process, etc.) to other
programs that have reported IP and UP estimates or been deemed susceptible to
significant IPs;
9) The accuracy and reliability of IP and UP estimates previously reported for the
program, or other indicator of potential susceptibility to IPs and UPs identified by the
OIG of the executive agency, the Government Accountability Office, other audits
performed by or on behalf of the Federal, State, or local government, disclosures by the
executive agency, or any other means;
10) Whether the program lacks information or data systems to confirm eligibility or
provide for other payment integrity needs; and
11) The risk of fraud as assessed by the agency under the Standards for Internal Control
in the Federal Government published by the Government Accountability Office
(commonly known as the 'Green Book').
12) Whether the agency has adequately addressed the risk factors identified in the Government Charge
Card Abuse Prevention Act of 2012;
The qualitative risk assessments consist of a questionnaire designed to provide the payment streams with
a tool for self-evaluation of these risk factors in consideration of their existing internal controls. Directions
for completion of the questionnaire are provided to the program managers of each payment stream.
Payment streams justify their ratings with a brief narrative and supporting documentation. The payment
stream self-assessment ratings provide the basis for the assigned risk scores. Upon completion, the OCFO
tabulates a scorecard providing an overall risk rating for each payment stream on a scale of 1 to 5.
If the final score is between 1.0 - 2.5, the payment stream is not susceptible to significant improper
payments; if the score is between 2.6 - 3.6, the payment stream is considered likely to be susceptible to
significant improper payments; and if the score is 3.7 or above, the payment stream is at high risk of
significant improper payments.
In FY 2022, improper payment risk assessments were performed in commodities, contracts, CWSRF,
DWSRF, Hurricane Sandy payroll, purchase cards, and travel, all of which were identified as not
susceptible to significant per payments.
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III. Recoveries of Improper Payments
Programs Susceptible to Improper Payments
Table 2 is an updated calculation of the grants payment stream improper payments rate from the EPA
incorporating Cost Principles when reassessing costs identified by the OIG during their audit After
reassessing the OIG-identified costs, the EPA was able to re-confirm the finding of the grants program
being not susceptible to improper payments. The website https://pavmentaccuracv.gov/ contains more
detailed information on improper payments as well as information reported in prior year AFRs.
Table 2. Restatement of FY 2021 Grants Improper Payment Rate
($ in millions)
FY 2021
FY 2021 Restated
$ Outlays
1,634.58
1,634.58
$ Proper
1,626.39
1,611.50
$ Improper
8.18
23.08
IP°/o
0.50%
1.41%
Proper %
99.50%
98.59%
T-i
fM
$ Overpay
0.03
14.93
O
rsj
$ Underpay
0.00
0.00
>-
LL.
$ Insufficient Documentation
8.15
8.15
% Sample Overpaid
6.67%
26.3%
% Sample Underpaid
0.00%
0.00%
% Sample Insufficient Documentation
93.33%
73.7%
Sampling Timeframe Start
Oct 1, 2019
Oct 1, 2019
Sampling Timeframe End
Sept 30, 2020
Sept 30, 2020
Table 3 provides information on the estimated number of improper payments made directly by the
federal government and improper payments made by recipients of federal money.
Table 3: Monetary Loss
($ in millions)
Program
Estimated Total
Monetary Loss to
the Government
Monetary
Loss within
the Agency's
Control
Monetary
Loss Outside
the Agency's
Control
Estimated Non-
Monetary Loss
to the
Government
Unknown
(Insufficient
Documentation
to Determine)
Grants
14.93
$0.00
14.93
0.00
8.15
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Table 4 identifies the root causes of error.
Table 4: Improper Payment Root Cause Category Matrix (Grants)
($ in millions)
Reason for Improper Payment
Type of Improper Payment
Overpayments
Underpayments
Unknown
Totals
Program Design or Structural Issue
-
-
-
-
Inability to
Authenticate
Eligibility:
Inability to Access Data
-
-
-
Data Needed Does Not Exist
-
-
-
Failure to
Verify:
Death Data
-
-
-
Financial Data
-
-
-
Excluded Party Data
-
-
-
Prisoner Data
—
—
—
—
Other Eligibility Data
-
-
-
-
Administrative
or Process
Error Made by:
Federal Agency
-
-
-
-
State or Local Agency
10.55
-
-
10.55
Other Party
4.38
-
-
4.38
Medical Necessity
-
-
-
-
Insufficient Documentation to Determine
-
-
8.15
8.15
Other Reason
-
-
-
-
Totals
14.93
-
8.15
23.08
Recoveries of Improper Payments
PIIA requires agencies to conduct payment recapture audit reviews in any program expending more than
$1 million annually. The low dollar value of improper payments recovered by an external payment
recapture auditor resulted in an effort that was not cost-effective for the agency or the contractor.
Therefore, the EPA no longer uses a payment recapture audit firm to conduct formal payment recapture
audits.
Nevertheless, the agency performs overpayment recovery activities internally, leveraging the work of
agency employees and agency resources. As part of this process, each payment stream is routinely
monitored to assure the effectiveness of internal controls and identify issues that could give rise to
overpayments. The agency's payment review and recovery activities are part of its overall program of
internal control over disbursements, which includes establishing and assessing internal controls to
prevent improper payments, reviewing disbursements, assessing root causes of error, developing
corrective action plans where appropriate, and tracking the recovery of overpayments.
The following table quantifies the results of the agency's efforts to identify and recapture overpayments
across all payment streams.
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Table 5: Overpayments Recaptured Outside of Payment Recapture Audits w
($ in millions)
Program
Amount Identified
in FY 2022(2)
Amount Recovered
in FY 2022P)
Commodities P)
0.065
0.062
Contracts P)
0.16
0.16
CWSRF
0.31
0.03
DWSRF
2.47
2.64
Grants
0.87
0.72
Hurricane Sandy
0.18
0.18
Payroll M
1.32
0.74
Purchase Cards
0.00
0.00
T ravel
0.009
0.008
2018 Disaster Relief
0.00
0.00
Other P)
0.97
0.17
Total
6.35
4.71
Recapture Rate - 74%
1) The amounts displayed in this table were identified and recovered using a variety of means available to
the Agency.
2) The Amount Recovered can include overpayments identified in prior fiscal years (as well as from the
current fiscal year) but residual repayments were only received in FY 2022. This can lead to payment
stream fiscal year recapture rates of greater than 100%.
3) The amounts for contracts and commodities do not include lost discounts, which are
considered improper payments but uncollectible.
4) Payroll consists of salary, benefits, and awards. The amount of improper payments can be
overstated if this figure also includes adjustments to pay (factors impacting changes include:
changes to employee grade/step and health plans may lag behind bi-weekly payroll
payments).
5) "Other" consists of improper payments identified either by audits, or by criminal, civil, and
administrative case investigations, closed out during FY 2022. Repayments can, and often
do, take several years to complete.
The information provided below summarizes the actions and methods used by the agency to recoup
overpayments, a justification of any overpayments determined not to be collectible, and any conditions
giving rise to improper payments and how those conditions are being resolved.
Commodities and Contracts
Given the historically low percentage of improper payments in commodities and contracts, the agency
relies on its internal review process to detect and recover overpayments. The agency produces monthly
reports for each payment stream and uses these reports as its primary tool for tracking and resolving
improper payments. These reports identify the number and dollar amount of improper payments, the
source and reason for the improper payment, the number of preventive reviews conducted, and the value
of recoveries.
The commercial payments are subject to financial review, invoice approval, and payment certification.
Since all commercial payments are subject to rigorous internal controls, the agency relies upon its system
of internal controls to minimize errors. Below is a summary of the internal controls in place over the
agency's commercial invoice payment process.
The payment processing cycle requires that all invoices be subjected to rigorous review and approval by
separate entities. Steps taken to ensure payment accuracy and validity, which serve to prevent improper
payments, include 1) the Research Triangle Park Finance Center's review for adequate funding and proper
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invoice acceptance; 2) comprehensive system edits to guard against duplicate payments, exceeding ceiling
cost and fees, billing against incorrect period of performance dates, and payment to wrong vendor; 3)
electronic submission of the invoice to Project Officers and Approving Officials for validation of proper
receipt of goods and services, period of performance dates, labor rates, and appropriateness of payment,
citing disallowances or disapprovals of costs if appropriate; and 4) review by the RTP Finance Center of
suspensions and disallowances, if taken, prior to the final payment certification for the Treasury
processing. Additional preventive reviews are performed by the RTP Finance Center on all credit and re-
submitted invoices. Furthermore, the EPA Contracting Officers perform annual reviews of invoices on each
contract they administer, and DCAA audits are performed on cost-reimbursable contracts at the request of
the agency.
Vendors doing business with federal agencies occasionally offer discounts when invoices are paid in full
and within the specified discount period (e.g., within 10 days of billing). The EPA makes its best effort to
take all discounts, as they represent a form of savings to the agency. However, there are valid reasons for
which it is not feasible to take every discount that is offered, including: 1) an insufficient discount period to
process a discount offer, such as a discount offer in which the required processing time for payment
exceeds the number of days of the offer; and 2) a situation in which it is not economically advantageous to
take the discount Specifically, if the discount rate exceeds the Treasury's current value of funds rate,
taking the discount saves the government money, so the discount is accepted by paying the invoice early.
However, if the discount rate is less than the current value of funds rate, taking the discount is not cost-
effective for the government, so the discount is rejected, and the invoice is paid as close to the payment
due date as possible. For FY 2022 reporting, improper payments stemming from lost discounts totaled just
under $16,000 for commodities and contracts combined.
Improper payments can result from typographical errors, payments to incorrect vendors, duplicate
payments, or lost discounts. Numerous training sessions have been conducted, and standard operating
procedures have been updated to ensure the most current processes are properly documented. Any
significant changes in policy or procedures are communicated in a timely manner. Despite the agency's
best efforts to collect all overpayments, some overpayments are not recoverable. For example, lost
discounts can result when the agency is unable to pay an invoice within the specified time by the vendor.
While reported as improper payments, lost discounts are not recoverable and are excluded from the
recovery percentage for both contracts and commodities.
B) Clean and Drinking Water State Revolving Funds
The SRFs are not susceptible to significant improper payments. For the SRFs, the agency both identifies
and recovers improper payments during the state review process. The EPA Regions are required to
conduct annual reviews of state SRF programs using checklists developed by headquarters. Included in the
checklist are questions about potential improper payments which the regions discuss with the state SRF
staff during the reviews. Errors in the SRFs most often arise from duplicate payments, funds drawn from
the wrong account, incorrect proportionality used for drawing federal funds, ineligible expenses,
transcription errors, or inadequate cost documentation. Many of the payment errors are immediately
corrected by the state or are resolved by adjusting a subsequent cash draw. For issues requiring more
detailed analysis, the state provides the agency with a plan for resolving the improper payments and
reaches an agreement on the planned course of action. The agreement is described in the EPA's Program
Evaluation Report, and the agency follows up with the state to ensure compliance.
C) Grants
For the agency's grants payment stream, overpayments principally consist of unallowable costs or lack of
supporting documentation. When overpayments arise, the EPA seeks to recover them either by
establishing a receivable and collecting money from the recipient or by offsetting future payment requests.
The agency follows established debt collection procedures to recapture overpayments.
The EPA identifies overpayments in grants both through statistical sampling and through non-statistical
means. As part of its non-statistical activity, the agency conducts transaction testing of active grant
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recipients through Advanced Administrative Monitoring reviews. Recipients selected for non-statistical
reviews are chosen based on the results of risk assessments performed by grants management officers.
Using a standard protocol, an onsite or desk review is performed, and each recipient's administrative and
financial management controls are examined. The reviews include an analysis of the recipient's
administrative policies and procedures and the testing of a judgmental sample of three non-consecutive
draws.
In addition, the agency responds to single audits and audits conducted by the OIG and uses them as a
means of identifying and recovering improper payments. The agency follows established processes for
evaluating questioned costs, validating, or disallowing costs where appropriate, and seeking the recovery
of any sustained overpayments. The EPA also identifies improper payments originating from enforcement
actions, grant adjustments, and recipient overdraws. Grant adjustments arise when a recipient must return
any unexpended drawn amounts prior to close out of the grant. Recipient overdraws occur when funds are
erroneously drawn in advance of immediate cash needs, and the recipient is directed to repay the funds
while also being reminded of the immediate cash needs rule. Depending on the type of error, improper
payment information is tracked by the Office of the Controller and the Office of Grants and Debarment, and
the records of each are reconciled to ensure complete and accurate reporting. The EPA also seeks to
prevent improper payments. Prior to the issuance of a grant award, OGD's Compliance Team conduct pre-
award certification of non-profit recipients that receive awards in excess of $200K to ensure their written
policies and procedures specify acceptable internal controls for safeguarding federal funds. Re-
certifications are conducted every four years. Grants Management Officers concur on all certifications.
GMOs are also required to ensure that recipients are not listed in the Excluded Parties List System within
the System for Award Management The EPA conducts annual baseline monitoring reviews of all recipients
to ensure overall compliance with assistance agreement terms and conditions, as well as all applicable
federal regulations. If deemed necessary, recipients can be placed on a reimbursement payment plan
which requires submission of cost documentation (receipts, invoices, etc.) for review and approval prior to
receiving reimbursement.
D) Hurricane Sandy
Due to several years of sustained low improper payment rates, Hurricane Sandy funding is no longer
considered susceptible to significant improper payments. The EPA continues to conduct oversight of SRF-
related Hurricane Sandy funds through ongoing transaction testing. In FYs 2018 - 2022, one improper
payment for this program was identified due to a proportionality miscalculation. All funds have been
recovered.
E) Payroll
The agency's payroll is not susceptible to significant improper payments. Payroll is a largely automated
process driven by the submission of employee time and attendance records and personnel actions. In-
service debt can arise for a variety of reasons during the period of employment. When in-service debt
arises, the employee is notified of the debt, given the right to dispute the debt, provided payment options,
and an account receivable is recorded by the agency's shared service payroll provider, the Interior
Business Center. Debts are typically recovered through payroll deductions in subsequent pay periods.
Out-of-service debt can arise when an employee leaves the agency and owes funds back to the EPA
following separation. The EPA establishes the debt and tracks recovery status. A small portion of the EPA's
out-of-service debt was uncollectible due to the separating employee retiring on disability. For both in-
service and out-of-service debt, recoveries are actively pursued by following established debt collection
procedures.
In late FY 2022, personnel based out of specific regions in Alaska contacted the EPA that their Cost-of-
Living Adjustments were not processed. Interior Business Center, the agency's payroll provider, identified
this as an issue beyond the EPA findings and impacting other agencies. IBC and the EPA will be working to
resolve the payroll issue with the affected parties. At the time of the year-end reporting, the exact dollar
amounts associated with these improper payments were not known. The agency will include updated
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improper payment information for this matter in the FY 2023 Annual Financial Report
F) Purchase Cards
The purchase card program is not susceptible to significant improper payments, and no improper
payments were identified in FY 2022.
G) Travel
Travel is not susceptible to significant improper payments. For travel, improper payments can include
ineligible expenses and insufficient or missing supporting documentation. When an overpayment is
identified for travel, the Agency establishes a receivable, and existing procedures are followed to ensure
prompt recovery.
IV. Agency Improvement of Payment Accuracy with the Do Not Pay Initiative
PIIA requires federal agencies to implement the Do Not Pay initiative, a government-wide solution
designed to prevent payment errors and detect waste, fraud, and abuse in programs administered by the
federal government The EPA's payments are screened by the Treasury's DNP working system to detect
improper payments. The Treasury analyzes each agency's payments and provides a monthly report
itemizing any payments that were made to potentially ineligible recipients. These potential matches are
identified when the name of an agency's payee matches the name of an individual or entity listed in federal
data sources contained in the Treasury's DNP working system.
In FY 2022, the Treasury screened the EPA payments through the following DNP data sources on a post-
payment basis: the Social Security Administration's Death Master File and the General Services
Administration's System for Award Management Exclusion List Through September 30, 2022,
approximately $2.42 billion of the EPA payments were screened, and no improper payments were
identified. In addition, 54,977 the EPA payments totaling $4.2 billion were made via the Automated
Standard Application for Payments, and ASAP's grantee listing is monitored by the Treasury. Finally,
agency payments are routinely monitored by the Treasury Offset Program, which offsets federal payments
to recipients with delinquent federal nontax debt These different tools provide a valuable external check
of the agency's payment integrity.
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CIVIL MONETARY PENALTY ADJUSTMENT
FOR INFLATION
Report on Inflationary Adjustments to Civil Monetary Penalties
Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. EPA and
other federal agencies are required to adjust their maximum and minimum statutory civil penalty
amounts by January 15 each year to account for inflation. In accordance with this requirement, EPA
promulgated the Civil Monetary Penalty Inflation Adjustment Rule (Rule) on January 12, 2022, which
became effective the same day. For details on this Rule, see 87 Fed. Reg. 1676-1679, codified in Table
1 of 40 CFR § 19.4. EPA will amend 40 CFR § 19.4 by January 15, 2023, to reflect changes in inflation
since the last adjustment.
Current Statutory Maximum/Minimum Civil Penalties under
EPA's 2022 Civil Monetary Penalty Inflation Adjustment Rule
U.S. Code Citation
Environmental statute
Year statutory
penalty
authority was
enacted
Latest year of
adjustment
(via statute or
regulation)
Statutory civil
penalties for
violations that
occurred after
November 2, 2015,
where penalties are
assessed on or after
January 12, 2022
7 U.S.C. 136/.(a)(l)
FEDERAL INSECTICIDE,
FUNGICIDE, AND RODENTICIDE
ACT fFIFRA]
1972
2022
$21,805
7 U.S.C. 136/.fa")f2")
FIFRA
1972
2022
$3,198
7 U.S.C. 136/.fa")f2")
FIFRA
1978
2022
$3,198/$2,061
15 U.S.C.
2615fa")(T)
TOXIC SUBSTANCES CONTROL
ACT fTSCA]
2016
2022
$43,611
15 U.S.C. 2647fa]
TSCA
1986
2022
$12,537
15 U.S.C. 2647fg]
TSCA
1990
2022
$10,360
31 U.S.C.
3802 fa") fl")
PROGRAM FRAUD CIVIL
REMEDIES ACT fPFCRA]
1986
2022
$12,537
31 U.S.C.
3802 fa] f2]
PFCRA
1986
2022
$12,537
33 U.S.C. 1319fd]
CLEAN WATER ACT fCWA]
1987
2022
$59,973
33 U.S.C.
1319fg]f2]fA]
CWA
1987
2022
$23,989/$59,973
33 U.S.C.
1319fB)f2)fB)
CWA
1987
2022
$23,989/$299,857
IJSC
1321 fb") f 6") f B") fi")
CWA
1990
2022
$20,719/$51,796
33 U.S.C.
132 l(b)(6)(B)(ii)
CWA
1990
2022
$20,719/$258,978
33 U.S.C.
1321(b)(7)(A)
CWA
1990
2022
$51,796/$2,072
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U.S. Code Citation
Environmental statute
Year statutory
penalty
authority was
enacted
Latest year of
adjustment
(via statute or
regulation)
Statutory civil
penalties for
violations that
occurred after
November 2, 2015,
where penalties are
assessed on or after
January 12, 2022
33 U.S.C.
1321(b)(7)(B)
CWA
1990
2022
$51,796
33 U.S.C.
1321(b)(7)(C)
CWA
1990
2022
$51,796
33 U.S.C.
1321(b)(7)(D)
CWA
1990
2022
$207,183/$6,215
33 U.S.C.
1414b(d)(l)
MARINE PROTECTION,
RESEARCH, AND SANCTUARIES
ACT (MPRSA)
1988
2022
$1,380
33 U.S.C. 1415(a)
MPRSA
1972
2022
$218,048/$287,632
33 U.S.C. 1901
note (see
1409(a)(2)(A))
CERTAIN ALASKAN CRUISE SHIP
OPERATIONS (CACSO)
2000
2022
$15,897/$39,740
33 U.S.C. 1901
note (see
1409(a)(2)(B))
CACSO
2000
2022
$15,897/$198,698
33 U.S.C. 1901
note (see
1409(b)(1))
CACSO
2000
2022
$39,740
33 U.S.C.
1908(b)(1)
ACT TO PREVENT POLLUTION
FROM SHIPS (APPS)
1980
2022
$81,540
33 U.S.C.
1908(b)(2)
APPS
1980
2022
$16,307
42 U.S.C. 300g-
3(b)
SAFE DRINKING WATER ACT
(SDWA)
1986
2022
$62,689
42 U.S.C. 300g-
3(g)(3)(A)
SDWA
1986
2022
$62,689
42 U.S.C. 300g-
3(g)(3)(B)
SDWA
1986/1996
2022
$12,537/$43,678
42 U.S.C. 300g-
3(g)(3)(C)
SDWA
1996
2022
$43,678
42 U.S.C. 300h-
2(b)(1)
SDWA
1986
2022
$62,689
42 U.S.C. 300h-
2(c)(1)
SDWA
1986
2022
$25,076/$313,448
42 U.S.C. 300h-
2(c)(2)
SDWA
1986
2022
$12,537/$313,448
42 U.S.C. 300h-
3(c)
SDWA
1974
2022
$21,805/$46,517
42 U.S.C. 300i(b)
SDWA
1996
2022
$26,209
42 U.S.C. 300i-l(c)
SDWA
2002
2022
$152,557/$1,525,582
42 U.S.C.
300j(e)(2)
SDWA
1974
2022
$10,902
42 U.S.C. 300j-4(c)
SDWA
1986
2022
$62,689
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U.S. Code Citation
Environmental statute
Year statutory
penalty
authority was
enacted
Latest year of
adjustment
(via statute or
regulation)
Statutory civil
penalties for
violations that
occurred after
November 2, 2015,
where penalties are
assessed on or after
January 12, 2022
42 U.S.C. 300j-
6(b)(2)
SDWA
1996
2022
$43,678
42 U.S.C. 300j-
2 3 fd")
SDWA
1988
2022
$11,506/$115,054
42 U.S.C.
4852 d(b) (5)
RESIDENTIAL LEAD-BASED
PAINT HAZARD REDUCTION ACT
OF 1992
1992
2022
$19,507
42 U.S.C.
4910(a)(2)
NOISE CONTROL ACT OF 1972
1978
2022
$41,219
42 U.S.C.
6928(a)(3)
RESOURCE CONSERVATION AND
RECOVERY ACT (RCRA)
1976
2022
$109,024
42 U.S.C. 6928(c)
RCRA
1984
2022
$65,666
42 U.S.C. 6928(g)
RCRA
1980
2022
$81,540
42 U.S.C.
6928(h)(2)
RCRA
1984
2022
$65,666
42 U.S.C. 6934(e)
RCRA
1980
2022
$16,307
42 U.S.C. 6973(b)
RCRA
1980
2022
$16,307
42 U.S.C.
6991e(a)(3)
RCRA
1984
2022
$65,666
42 U.S.C.
6991e(d)(l)
RCRA
1984
2022
$26,269
42 U.S.C.
6991e(d)(2)
RCRA
1984
2022
$26,269
42 U.S.C. 7413(b)
CLEAN AIR ACT (CAA)
1977
2022
$109,024
42 U.S.C.
7413(d)(1)
CAA
1990
2022
$51,796/$414,364
42 U.S.C.
7413(d)(3)
CAA
1990
2022
$10,360
42 U.S.C. 7524(a)
CAA
1990
2022
$51,796/$5,179
42 U.S.C.
7524(c)(1)
CAA
1990
2022
$414,364
42 U.S.C.
7545(d)(1)
CAA
1990
2022
$51,796
42 U.S.C.
9604(e)(5)(B)
COMPREHENSIVE
ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY
ACT (CERCLA)
1986
2022
$62,689
42 U.S.C.
9606(b)(1)
CERCLA
1986
2022
$62,689
42 U.S.C.
9609(a)(1)
CERCLA
1986
2022
$62,689
42 U.S.C. 9609(b)
CERCLA
1986
2022
$62,689/$188,069
42 U.S.C. 9609(c)
CERCLA
1986
2022
$62,689/$188,069
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U.S. Code Citation
Environmental statute
Year statutory
penalty
authority was
Latest year of
adjustment
(via statute or
Statutory civil
penalties for
violations that
occurred after
enacted
regulation)
November 2, 2015,
where penalties are
assessed on or after
January 12, 2022
42 U.S.C. 11045(a)
EMERGENCY PLANNING AND
COMMUNITY RIGHT-TO-KNOW
ACT (EPCRA)
1986
2022
$62,689
42 U.S.C.
EPCRA
1986
2022
$62,689
11045(b)(1)(A)
42 U.S.C.
EPCRA
1986
2022
$62,689/$188,069
11045(b)(2)
42 U.S.C.
EPCRA
1986
2022
$62,689/$188,069
11045(b)(3)
42 U.S.C.
EPCRA
1986
2022
$62,689
11045(c)(1)
42 U.S.C.
EPCRA
1986
2022
$25,076
11045(c)(2)
42 U.S.C.
EPCRA
1986
2022
$62,689
11045(d)(1)
42 U.S.C.
MERCURY-CONTAINING AND
1996
2022
$17,474
14304(a)(1)
RECHARGEABLE BATTERY
MANAGEMENT ACT (BATTERY
ACT)
42 U.S.C. 14304(g)
BATTERY ACT
1996
2022
$17,474
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BIENNIAL REVIEW OF USER FEES
The CFO Act of 1990 and OMB Circular No. A-25 Revised, User Charges, directs agencies to biennially
review their fees, royalties, rents, and other charges and recommend adjustments, as appropriate, to
reflect unanticipated changes in costs or market values. OMB Circular No. A-25 Revised also directs
agencies to review other agency programs and determine whether fees should be initiated for
government services or goods for which fees are not charged.
The EPA administers eight user fee programs. The bold-highlighted programs are statutorily required
to recover the full cost of the goods and services provided.
EPA's User Fee Programs
Pesticide Registration Service Fees
Pesticide Maintenance Fees
Motor Vehicle and Engine Compliance Fee
Program
Water Infrastructure Finance and
Innovation Act Fees
e-Manifest Fees
Toxic Substance Control Act Fees
Lead-Based Paint Fee Program
Clean Air Part 71 Permit Fees
During FY 2022, EPA reviewed the Clean Air Part 71 Permit Fees, Pesticide Maintenance Fees,
Pesticide Registration Fees, and the e-Manifest Fees. The agency review concluded the fee program to
be compliant with the statutory requirements and regulations to recover the cost share of the fees'
activities. No recommendations were made to adjust the fee levels. Fees not reviewed during this
reporting period will be reviewed in FY 2023.
The agency also conducted a review to determine whether fees should be assessed for programs that
provide special benefits to recipients beyond the public. The review looked at a subset of the total
universe of potential fee programs identified as part of the FY 2022 user fee process.
The EPA will be working with OMB in FY 2023 to determine if exceptions are justified for each
program that was reviewed. For some programs, the cost of collecting fees can often represent an
unduly large part of the activity or other conditions may exist that would cause the implementation of
a fee to be inappropriate.
The agency is exploring options and opportunities for programs where collecting fees may be
appropriate, for which the EPA is not recommending an exception to OMB. In the FY 2023 President's
Budget, the agency outlined the following legislative proposals to expand the range of activities that
the EPA can fund with existing pesticide registration and maintenance fees.
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GRANTS PROGRAM
The EPA has tracked assistance agreement closeout performance since its first five-year Grants
Management Plan was issued in 2002. The EPA reports to the OMB in its AFR on two grants closeout
performance measures: 90% closure of recently expired grants and 99% closure of grants that expired
in earlier years. The agency has consistently exceeded or met these targets or, in limited instances,
missed them by a few percentage points. Below is a summary table showing the total number of
federal grant and cooperative agreement awards and balances for which closeout has not yet occurred,
but for which the period of performance has elapsed by more than two years.
CATEGORY
2-3 Years
FY19-20
4-5 Years
FY17-18
>5 Years
Before FY17
Number of
Grants/Cooperative
Agreements with Zero Dollar
Balances
29
6
9
Number of
Grants/Cooperative
Agreements with Undisbursed
Balances
24
10
3
Total Amount of Undisbursed
Balances
$3,786,532
$2,118,873
$1,231,630
The EPA has made great progress in reducing the cost of undisbursed balances on expired grants as
well as reducing the number of older grants that have expired but have not been closed out. The timely
closeout of grants can be delayed for a variety of reasons, but generally these include open audits with
unresolved findings and where recipient appeal rights have not yet been exhausted, or lack of required
documentation from the recipient. The EPA monitors unliquidated obligations on expired assistance
agreements as well, requiring an annual review of ULOs to determine if funds are no longer needed
and can be deobligated and the assistance agreement closed out.
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CLIMATE-RELATED FINANCIAL RISK
Climate Adaptation Plan
In 2021, EPA released its new US EPA's Climate Adaptation Plan: October 2021 in response to Executive
Order (E.O.) 14008: Tackling the Climate Crisis at Home and Abroad. EPA's Climate Adaptation Action Plan
accelerates and focuses attention on five priority actions the Agency will take over the next four years to
increase human and ecosystem resilience as the climate changes and disruptive impacts increase:
1. Integrate climate adaptation into the EPA programs, policies, rulemaking processes, and enforcement
activities.
2. Consult and partner with tribes, states, territories, local governments, environmental justice
organizations, community groups, businesses, and other federal agencies to strengthen adaptive
capacity and increase the resilience of the nation, with a particular focus on advancing environmental
justice.
3. Implement measures to protect the agency's workforce, facilities, critical infrastructure, supply
chains, and procurement processes from the risks posed by climate change.
4. Measure and evaluate performance.
5. Identify and address climate adaptation science needs.
The EPA Program and Regional Offices developed Climate Adaption Implementation Plans. Final plans are
located at: https: //www.epa.gov/climate-adaptation/climate-adaptation-plan. Additional information on
the Plan is located on the EPA Climate Adaptation Website: EPA.gov/Climate-Adaptation
EPA Sustainability Plans
Strategic plans help the EPA meet federal sustainability requirements and its own internal goals to reduce
greenhouse gas emissions, resource use and other environmental impacts.
EPA's Sustainability Report and Implementation Plan identifies targets for reducing agencywide GHG
emissions and outlines steps to reduce energy, water, waste, and other resource use. It also addresses ways
the agency will incorporate sustainability across its facilities, purchases, and operations. Goal areas include:
• Facility energy efficiency
• Efficiency measures, investment and performance contracting
• Renewable energy
• Water efficiency
• High performance sustainable buildings
• Waste management and diversion
• Transportation/fleet management
• Sustainable acquisition
• Electronics stewardship
• GHG emissions reductions
Read EPA's latest Sustainability Report and Implementation Plan.
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Section IV
Appendices
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APPENDIX A
PUBLIC ACCESS
138
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The EPA invites the public to access its website atwww.epa.gov to obtain the latest environmental
news, browse agency topics, learn about environmental conditions in their communities, obtain
information on interest groups, research laws and regulations, search specific program areas, or
access the EPA's historical database.
EPA newsroom: www.epa.gov/newsroom
News releases: www.epa.gov/newsroom/news-releases
Regional newsrooms: https://www.epa.g0v/newsroom/browse-news-releases#region
Laws, regulations, guidance and dockets: https://www.epa.gov/laws-regulations
Major environmental laws: https://www.epa.gov/laws-
regulations/laws-and-executive-orders
EPA's Regulations website: https: //www.epa.gov/laws-regulations/regulations
Where you live: https: //www.epa.gov/children/where-you-live
Community Information: https: //www.epa.gov/nutrientpollution/what-you-can-do-
vour-community
EPA regional offices: https://www.epa.gov/aboutepa/visiting-regional-office
Information sources: http s://www, epa. gov /quality /ep a- info r matio n-
quality- guidelines
Hotlines and clearinghouses: https: //www.epa.gov/home/epa-
hotlines
Publications: https://nepis.epa.gov/EPA/html/pubindex.html
Education resources: www.epa.gov/students/
Office of Environmental Education: www.epa.gov/education
About EPA: www.epa.gov/aboutepa
EPA organizational structure: www.epa.gov/aboutepa/epa-organizational-structure
EPA programs with a geographic focus: https://www.epa.gov/environmental-
topics/environmental-information-location
EPA for business and nonprofits:
https://www.epa.gov/grants/grants-management-guidance-
non-profit-organizations
Small Business Gateway: www.epa.gov/osbp/
Grants, fellowships, and environmental financing: https://www.epa.gov/grants
Budget and performance: www.epa.gov/planandbudget
Careers: www.epa.gov/careers/
EPA en Espanol: https: //espanol.epa.gov/
EPA tieng Viet: https://www.epa.gov/lep/vietnamese
EPA : https://www.epa.gov/lep/korean
139
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APPENDIX B
ACRONYMS AND ABBREVIATIONS
140
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ACE Affordable Clean Energy GAAP
ADA Anti-deficiency Act GAO
ADP Action Development Process GMO
ALJ Administrative Law Judge GSA
AFR Agency Financial Report GTAS
AME August Mack Environmental
AICPA American Institute of Certified Public HVAC
Accountants IA
APPS Act to Prevent Pollution from Ships IBC
APR Annual Performance Report IP
ASAP Automated Standard Application for IPERA
Payments
B&F Building and Facilities IIJA
BFS Bureau of Fiscal Services IRA
BP British Petroleum IPIA
BIL Bipartisan Infrastructure Law IPP
CAA Clean Air Act LUST
CACSO Certain Alaskan Cruise Ship Operations MOU
CARES Coronavirus Aid, Relief and Economic MPRSA
Security Act
CEC Commission of the North American NEIC
Agreement on Environmental Cooperation NPL
CERCLA Comprehensive Environmental Response NRDA
Compensation and Liability Act OCE
CDPHE Colorado Department of Public Health and OECA
Environment
CFO Chief Financial Officer OCFO
CFR Code of Federal Regulations OFR
CO Contracting Officer OGD
CSRS Civil Service Retirement System OIG
CW Clean Water OMB
CWA Clean Water Act OPA
CWSRF Clean Water State Revolving Fund OPM
Generally Accepted Accounting Principles
Government Accountability Office
Grants Management Office
U.S. General Services Administration
Governmentwide Treasury Accounting
Symbol
Heating, Ventilation, and Air Conditioning
Interagency Agreement
Interior Business Center
Improper Payment
Improper Payments Elimination and
Recovery Act
Infrastructure Investment & Jobs Act
Inflation Reduction Act
Improper Payments Information Act
Invoice Processing Platform
Leaking Underground Storage Tank
Memorandum of Understanding
Marine, Protection, Research, and Sanctuaries
Act
National Enforcement Investigations Center
National Priorities List
Natural Resource Damages Assessment
Office of Civil Enforcement
Office of Enforcement and Compliance
Assurance
Office of the Chief Financial Officer
Office of the Federal Register
Office of Grants and Debarment
Office of Inspector General
Office of Management and Budget
Oil Pollution Act
Office of Personnel Management
141
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DATA Data Accountability and Transparency ORD
Act PFCRA
DCAA Defense Contract Audit Agency PMA
DM&R Deferred Maintenance and Repairs PO
DNP Do Not Pay PP&E
DW Drink Water PRASA
DWH Deepwater Horizon PRIA
DWSRF Drinking Water State Revolving PIIA
Fund PFCRA
PRFA
EPA U.S. Environmental Protection Agency PROMESA
EPCRA Emergency Planning and Community Right-
to-know Act PRP
EPM Environmental Programs and Management UNEP
UP
FAR Federal Acquisition Regulations ULO
FAS Fixed Assets Subsystem RCRA
R&I
RTF
RTP
FASAB Federal Accounting Standards SARA
Advisory Board
FBWT Fund Balance with Treasury SDWA
FECA Federal Employees Compensation Act SFFAS
FERS Federal Employees Retirement System
FFMIA Federal Financial Management Improvement SOP
Act of 1996 SRF
FIFRA Federal Insecticide, Fungicide and SSC
Rodenticide Act S&T
FMFIA Federal Managers' Financial Integrity Act of STAG
1982 TED
Financial Report Treasury
FRPP Federal Real Property Profile TSCA
Fiscal Year USSGL
WCF
WIFIA
Office of Research and Development
Program Fraud Civil Remedies Act
President's Management Agenda
Project Officer
Plant, Property and Equipment
Puerto Rico Aqueduct and Sewer Authority
Pesticides Registration Improvement Act
Payment Integrity Information Act
Program Fraud Civil Remedies Act
Pollution Removal Funding Agreements
Puerto Rico Oversight, Management, and
Economic Stability Act
Potential Responsible Party
United Nations Environmental Program
Unknown Payment
Unliquidated Obligation
Resource Conservation and Recovery Act
Repair and Improvement
Reduce the Footprint
Research Triangle Park
Superfund Amendments and
Reauthorization Act
Safe Drinking Water Act
Statement of Federal Financial Accounting
Standards
Standard Operating Procedures
State Revolving Fund
Superfund State Contracts
Science & Technology
State and Tribal Assistance Grants
Talent Enterprise Diagnostic
U.S. Department of Treasury
Toxic Substance Control Act
U.S. Standard General Ledger
Working Capital Fund
Water Infrastructure Finance and
Innovation Act
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WE WELCOME YOUR COMMENTS!
Thank you for your interest in the U.S. Environmental Protection Agency's Fiscal Year 2022 Agency
Financial Report. We welcome your comments on how we can make this report a more informative
document for our readers. Please send your comments to:
Office of the Chief Financial Officer
Office of Financial Management
Environmental Protection Agency
1200 Pennsylvania Ave., NW
Washington, D.C. 20460
ocfoinfo@epa.gov
This report is available at
http://www.epa.gov/planandbudget
Printed copies of this report are available from EPA's National Service Center for Environmental
Publications at 1-800-490-9198 or by email at nscep@bps-lmitcom.
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U.S. Environmental Protection Agency
Fiscal Year 2022 Agency Financial Report
EPA-190-R-22-004
November 15,2022
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