EPA’s Fiscal Years 2022 and 2021 Consolidated Financial Statements

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

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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

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

Dojxok fli.
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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.

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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

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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
Report!

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

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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

T Improperly Recorded Water Infrastructure Finance and Innovation Act of 2014

I I 1 '!'¦ '! I 1 enue

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.

Unneed ids 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

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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.

V' I I I ! . ess 'i i indard Vouchers Without Adequs > I i . lures

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 , «' 1 " 1 • al Managers' Financial Integrity A , 1 "th

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 Ou w 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,

a §nt 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 w ms, 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 w ws, Regulations, Contracts,
a ant 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.

Prior Audit Coverage

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
Congress, and it is not intended to be and should not
parties.

Damon ftl. (Jacieox

use of the management of the EPA, the OMB, and
be used by anyone other than these specified

Damon Jackson

Certified Public Accountant

Director, Financial Directorate

Office of Audit

Office of Inspector General

U.S. Environmental Protection Agency

November 8, 2022

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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

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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

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.

[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

Fiscal year

Development expenditures

Overhead

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)

23-F-0002 14

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The PRISM software project was not brought to the Research T riangle 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

23-F-0002

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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)

23-F-0002

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Attachment 3

Status of Recommendations
and Potential Monetary Benefits

Rec.
No.

RECOMMENDATIONS

Page
No.

Subject

Status1

Planned
Completion
Action Official Date

Potential
Monetary
Benefits
(In $000s)

Analyze exchange and nonexchange revenue general
ledger accounts and reclassify fiscal year 2022 Water
Infrastructure Finance and Innovation Act nonexchange
revenue to exchange revenue.

Update the Water Infrastructure Finance and Innovation Act
expense accounting models to properly impact exchange

Chief Financial Officer 10/25/22

$7,087

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.

11 Identify any abnormal balances in advance general ledger
accounts and make necessary corrections to ensure debit
and credit balances are properly reflected.

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.

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.

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.

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.

Chief Financial Officer 7/31/23

Chief Financial Officer 9/1/23

Chief Financial Officer 9/15/23

Chief Financial Officer 6/30/23

$9,324

$5,833

Regional Administrator for 2/1/23
Region 4

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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Appendix I

EPA's Fiscal Year 2022 and 2021 Consolidated

Financial Statements

23-F-0002 21

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Table of Contents

Principal Financial Statements,....,...,...,,...,...,...,,.,.,....,...,...,....,... 1

Notes to Financial Statements .8

Note 1. Summary of Significant Accounting Policies 8

Note 2. Fund Balance with Treasury (FBWT) 15

Note 3. Cash and Other Monetary Assets 16

Note 4. Investments, Net 16

Note 5. Accounts Receivable, Net 17

Note 6. Inventory and Related Property 17

Note 7. Loans Receivable, Net 17

Note 8. Accounts Payable 20

Note 9. General Property, Plant and Equipment, Net 21

Note 10. Debt 23

Note 11. Stewardship Property, Plant and Equipment 23

Note 12. Liability to the General Fund for Custodial Assets 24

Note 13. Other Liabilities 25

Note 14. Leases 26

Note 15. Deferred Revenue 27

Note 16. Commitments and Contingencies 27

Note 17. Funds from Dedicated Collections 30

Note 18. Environmental and Disposal Liabilities 35

Note 19. State Credits 36

Note 20. Preauthorized Mixed Funding Agreements 36

Note 21. Custodial Revenues and Accounts Receivable 36

Note 22. Reconciliation of President's Budget to the Statement of Budgetary Resources 37

Note 23. Recoveries and Resources Not Available, Statement of Budgetary Resources 37

Note 24. LInobligated Balances Available 38

Note 25. Undelivered Orders at the End of the Period 38

Note 26. Offsetting Receipts 38

Note 27. Transfers-In and Out, Statement of Changes in Net Position. 39

Note 28. Imputed Financing 40

Note 29. Federal Employee and Veteran Benefits Payable 40

Note 30. Other Adjustments, Statement of Changes in Net Position 41

Note 31. Non-Exchange Revenue, Statement of Changes in Net Position 41

Note 32. Reconciliation of Net Cost of Operations to Net Outlays 42

Note 33. Amounts Held by Treasury 45

Note 34. COVID-19 Activity 48

Note 35. Reclassified Financial Statements for Government-wide Reporting. 49

Required Supplementary Information (Unaudited) 50

Deferred Maintenance 50

Supplemental Combining Statement of Budgetary Resources 54

23-F-0002 22

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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:

Intragov ernmental:

Fund Balance With Treasury (Note 2)

$ 64,103,829 $

11,778,430

Investments, Net (Note 4)

10,297,779

6,155,838

Accounts Receivable, Net (Note 5)

5,717

7,602

Advances and Prepayments

261.776

245.934

Total Intragov ernmental

74.669.101

18.187.804

Other Than Intragovemmental:

Cash and Other Monetary Assets (Note 3)

Accounts Receivable, Net (Note 5)

548,525

580.736

Loans Receivable, Net (Note 7)

1,291,508

586,138

Inventory and Related Property, Net (Note 6)

531

428

General Property, Plant and Equipment, Net (Note 9)

730,992

670,637

Advances and Prepayments

10.536

7.298

Total Other Than Intragovemmental

2,582.102

1.845.247

Total Assets

$ 77.251.203 $

20.033.051

Stewardship Property Plant and Equipment (Note 11)

LIABILITIES:

Intragovemmental:

Accounts Payable (Note 8)

$ 163 $

3.367

Debt (Note 10)

1,557,180

746,839

Advances from Others and Deferred Revenue

183,791

154,235

Other Liabilities

Liability to the General Fund for Custodial Assets (Note 12)

106,560

51,241

Other (Note 13)

199.697

206.237

T otal Intragovemmental

2.047.391

1.161.919

Other Than Intragov ernmental:

Accounts Payable (Note 8)

65,817

56.319

Federal Employee and Veteran Benefits Payable (Note 29)

223.785

235,144

Environmental and Disposal Liabilities (Note 18)

32,156

25,723

Advances from Others and Deferred Revenue

125,105

125,526

Other Liabilities

Deferred Revenue (Note 15)

3,541,093

3,476,737

Other (Note 13)

597.993

618.483

Total Other Than Intragovemmental

4.585.949

4.537.932

Total Liabilities

$ 6.633340 $

5.699.851

Commitments and Contingencies (Note 16)

NET POSITION:

Unexpended Appropriations - Funds from Dedicated Collections (Note 17)

$ 178 $

187

Unexpended Appropriations - Funds from Other than Dedicated Collections

62.618.529

10.400.345

Total Unexpended Appropriations

62,618,707

10,400,532

Cumulative Results of Operations - Funds from Dedicated Collections (Note 17)

7,717,484

3,551,640

Cumulative Results of Operations - Funds from Other than Dedicated Collections

281.672

381.028

Total Cumulative Results of Operations

7.999.156

3.932.668

Total Net Position

70.617.863

14.333.200

Total Liabilities and Net Position

S 77.251.203 S

20.033.051

The accompanying notes are an integral part of these financial statements.

23-F-0002

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United States Environmental Protection Agency
Consolidated Statement of Net Cost
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

2022 2021

COSTS

Gross Costs

$ 10,142,639

9,138,699

Less; Earned Revenue

400.059

555.481

NET COST OF OPERATIONS (Note 32)

$ 9.742.580

8.583.218

The accompanying notes are an integral part of these financial statements.

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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 &
Management

Leaking
Underground
Storage Tanks

Science &
Technology

Superfund

State &
Tribal
Assistance
Agreements

Other

Totals

Costs:

Gross Costs
WCF Elimination

$ 3,161,870

$ 92,373

$ 784,144

$ 1,350,585

$ 4,254,533

$ 821,116
r321.982)

$ 10,464,621
(321.9821

Total Costs

3.161.870

92.373

784.144

1.350.585

4.254.533

499.134

10.142.639

Less:

Earned Revenue
WCF Elimination

35,036

6,328

202,969

477,708
(321.982")

722,041
(321.9821

Total Earned Revenue

35.036

6.328

202.969

155.726

400.059

NET COST OF
OPERATIONS

$ 3.126.834

$ 92373

S 777.816

S 1.147.616

S 4.254.533

$ 343.408

S 9.742.580

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

Leaking
Underground
Storage Tanks

Science &
Technology

Superfund

State &
Tribal
Assistance
Agreements

Other

Totals

Costs:

Gross Costs
WCF Elimination

$ 2,820,994

$ 86,157

$ 765,510

$ 1,364,410

$3,710,627

$ 698,694 $
(307.693)

9,446,392
(307.6931

Total Costs

2.820.994

86.157

765.510

1.364.410

3.710.627

391.001

9.138.699

Less:

Earned Revenue
WCF Elimination

79,315

5,001

295,471

483,387
(307.6931

863,174
(307.6931

Total Earned Revenue

79.315

5.001

295.471

175.694

555.481

NET COST OF
OPERATIONS

S 2.741.679

S 86.157

S 760.509

S 1.068.939

$3,710,627

$ 215307 $

8.583.218

The accompanying notes are an integral part of these financial statements.

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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
Dedicated
Collections

Funds from
Other Than
Dedicated
Collections

Consolidated
Totals

UNEXPENDED APPROPRIATIONS:
Beginning Balance

(Note 17)
S 187

S 10,400,345

$ 10,400,532

Appropriations Received

Other Adjustments (Note 30)

Appropriations Used

Change in Unexpended Appropriations

(9)

65,051,983
(20,398)

52,218,184

65,051,983
(20,398)

52,218,175

Total Unexpended Appropriations

$ 178

S 62.618.529

$ 62.618.707

CUMULATIVE RESULTS OF OPERATIONS:

Beginning Balance

$ 3,551,640

$ 381,028

$ 3,932,668

Appropriations Used
Non-Exchange Revenue (Note 31)
Transfers-In/(Out) Without Reimbursements
Imputed Financing (Note 28)

Other

752,635
4,584,789
26,687
48.268

12,813,401

(4,610,710)
242,257
(48.2681

12,813,410
752,635
(25,921)
268,944

Net Cost of Operations

Net Change in Cumulative Results of Operations

(1.246.544)
4,165,844

(8.496.0361

(99,356)

(9.742.580)

4,066,488

Total Cumulative Results of Operations

7,717,484

281,672

7,999,156

Net Position

$ 7.717.662

S 62.900.201

S 70.617.863

The accompanying notes are an integral part of these financial statements.

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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

Other Than

Dedicated

Consolidated

Collections

Totals

Unexpended Appropriations:

(Note 17)

Beginning Balance

S (189)

S 9,600,037

9,599,848

Appropriations Received

9,200,494

Other Adjustments (Note 30)

(49,123)

Appropriations Used

376

(8.351.063)

(8.350.687)

Change in Unexpended Appropriations

376

800,308

800,684

Total Unexpended Appropriations

$ 187

S 10.400.345

10,400,532

Cumulative Results of Operations:

Beginning Balance

$ 3,307,079

$ 410,430

3,717,509

Appropriations Used

(376)

8,351,063

8,350,687

Non-Exchange Revenue (Note 31)

276,988

Transfers-In/(Out) Without Reimbursements

1,081,150

(1,082,591)

(1,441)

Imputed Financing (Note 28)

26,006

146,137

172,143

Other

769

(769)

Net Cost of Operations

(1.139.976)

(7.443.242)

(8.583.218)

Net Change in Cumulative Results of Operations

244,561

(29,402)

215,159

Total Cumulative Results of Operations

3,551,640

381,028

3,932,668

Net Position

$ 3.551.827

S 10.781.373

14.333.200

The accompanying notes are an integral part of these financial statements.

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United States Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Fiscal Years Eliding 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 Y'ear:

Apportioned, Unexpired Accounts
Unapportioned, Unexpired accounts
Expired Unobligated Balance, End of Year
Unobligated Balance, End of Year (total): (Note 24)
Total Budgetary Resources

OUTLAYS, NET AND DISBURSEMENTS, NET
Outlays, Net (total) (discretionary and mandatory)
Distributed Offsetting Receipts (-) (Note 26)

Agency Outlays, Net (discretionary and mandatory)
Disbursements, Net (total) (mandatory)

Budgetary

Non-
Budgetary
Credit Reform
Financing
Account

Budgetary

Non-
Budgetary
Credit Reform
Financing
Account

; 5.674.107

5,951,313

615,240

70,271,764

10,832,321

3.693,794

4,726,214

542.709

181.898

463.239

141.081

; 76.488.580

3.875.692

17.246.873

5.482.535

; 19,513,330

3,875,692

11,874,288

5,482,535

56,844,168

5,279,575

24,464

1,996

106.618

91.014

56.975.250

5.372,585

, 76.488.580

3.875.692

17.246.873

5.482.535

$ 14,318,219
(5.038.820*)
S 9.279.399

$ 9,852,094
ri.48i.4in

S 8.370.683

S 840.409

494.357

The accompanying notes are an integral part of these financial statements.

23-F-0002

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United States Environmental Protection Agency
Statement of Custodial Activity
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

2022

2021

Revenue Activity:

Sources of Cash Collections;
Fines and Penalties
Other

56,390 $
(3.8101

41,035
22.085

Total Cash Collections
Accrual Adjustment
Total Custodial Revenue (Note 21)

52,580
5.935
58.515 S

63,120
(20.6231
42.497

Disposition of Collections:

Transferred to Others (General Fund)
Increases/Decreases in Amounts to be Transferred
Total Disposition of Collections

$
$

52,761 $
5.754
58.515 $

21,273
21.224
42.497

Net Custodial Revenue Activity

The accompanying notes are an integral part of these financial statements.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 fond group.

B. Basis of Presentation

The accompanying financial statements have been prepared to report the financial position and results of operations of
the U. S. Environmental Protection Agency (the EPA or Agency) as required by the Chief Financial Officers Act of
1990 and the Government Management Reform Act of 1994. The reports have been prepared from the financial
system and records of the Agency in accordance with Office of Management and Budget (OMB) Circular No. A-136,
Financial Reporting Requirements, and the EPA accounting pohcies, 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 fond system related services.

The EPA receives two-year appropriated funds to carry out the Frank R. Lautenberg Chemical Safety for the 21s'
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 (WTFIA) 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.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 lees 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
(LLTST) 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

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 tire 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.

10.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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.

11.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S75 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

12.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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.

Superfond contract property used as part of the remedy for a site-specific response action is capitalized in accordance
with the Agency's capitalization threshold. This property is part of the remedy at the site and eventually becomes part
of the site itself. Once the response action has been completed and the remedy implemented, the EPA retains control
of the property (i.e., pump and treat facility) for 10 years or less, and transfers its interest in the facility to the
respective state for mandatory operation and maintenance - usually 20 years or more. Consistent with the EPA's 10-
year retention period, depreciation for this property is based on a 10-year useful life. However, if any property is
transferred to a state in a year or less, this property is charged to expense. If any property is sold prior to the EPA
relinquishing interest, the proceeds from the sale of that property shall be applied against contract payments or
refunded as required by the Federal Acquisition Regulations. An exception to the accounting of contract property
includes equipment purchased by the WCF. This property is retained in EPA's FAS and depreciated utilizing the
straight-line method based upon the asset's in-service date and useful life.

Real property consists of land, buildings, capital and leasehold improvements and capital leases. In FY 2017, the EPA
increased the capitalization threshold for real property, other than land, to S150 thousand from $85 thousand for
buildings and improvements and $25 thousand for plumbing, heating, and sanitation projects. The new threshold was
applied prospectively. Land is capitalized regardless of cost. Buildings are valued at an estimated original cost basis,
and land is valued at fair market value, if purchased prior to FY 1997. Real property purchased after FY 1996 is
valued at actual cost. Depreciation for real property is calculated using the straight-line method over the specific
asset's useful life, ranging from 10 to 50 years. Leasehold improvements are amortized over the lesser of their useful
life or the unexpired lease term. Additions to property and improvements not meeting the capitalization criteria,
expenditures for minor alterations, and repairs and maintenance are expensed when incurred.

Internal use software includes purchased commercial off-the-shelf software, contractor-developed software, and
software that was internally developed by Agency employees. In FY 2017, the EPA reviewed its capitalization
threshold levels for PP&E. The Agency performed an 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 sendee 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.

13.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 SIT AS 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. Ad justments 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 LT.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 S1S4 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.

14.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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-136, 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-Entitv

Assets

Total

Assets

Total

Trust Funds:

Superfund

$ 244.972

$ 244,972

S 138,254

$ 138.254

LUST

24.166

43,540

Oil Spill & Misc.

18.919

27,351

Revolving Funds:

FIl'RA T olerance

31.338

38,362

Working Capital

112.992

109,800

E-Manifest

32.240

19,312

NRDA

2.123

2,161

WIFIA

769

30,837

Appropriated

63,039,162

63.039.162

10,798,706

Other Fund Types

592.723

4.425

597.148

566.449

3.658

570.107

Total

S 64.099.404

$ 4.425

$ 64.103.829

S 11.774.772

$ 3.658

$ 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: 2022 2021

Unobligated Amounts in Fund Balance:

Available for Obligation $ 56,789,464 $ 5,278,005

Unavailable for Obligation 188,011 97,541

Net Receivables from Invested Balances (8,748,354) (5,055,979)

Balances in Treasury Trust Fund (Note 33) 117,500 ' 29,603

Obligated Balance not yet Disbursed 15,179,725 10,876.050

Non-Budgetary FBWT 577.483 553.210

Total S 64.103.829 $ 11.778.430

15.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S10 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 S 10,610,897 317,928 4,810 10,297,779 $ 10,297,779

Non-Marketable FY 2021 S 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 II 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 puiposes. 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.

16.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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:

2022 2021

Intr agovernm ental:

Accounts & Interest Receivable

6,579 S

10,775

Less: Allowance for LIncollectible Accounts

mi)

(3.173')

Total

5.717 $

7.602

2022

2021

Other Than Intragovernmental:

Unbilled Accounts Receivable

130,572 $

131.461

Accounts & Interest Receivable

2,625,563

2,664.810

Less: Allowance for Uncollectible Accounts

(2.207.610)

(2.215.535)

Total

548.525 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 S

428

Total

531 S

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 WIFLA Direct Loans program. In fiscal years 2022 and 2021, the Agency received borrowing
authority of $6.0 billion and S6.0 billion respectively for the non-subsidy portion of loan proceeds disbursed. For the
fiscal year ended September 30, 2022 and 2021, the Agency closed S6.2 billion and S5.7 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.

17.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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

S 734,357

566

(148,785)

S 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

Direct Loan Program

2022 Interest
Differential

Defaults

Fees and Other
Collections

Other Subsidy
Costs

Total

WIFIA

(5,015)

S (5,015)

Direct Loan Program

2021 Interest
Differential

Defaults

Fees and Other
Collections

Other Subsidy
Costs

Total

WIFIA

(2,577)

$ (2,577)

Modifications and Reestimates

2022
Total

Direct Loan Program Modifications

Interest
Rate
Reestimates

Technical
Reestimates

FAI
Reestimates

Total
Reestimates

WIFIA

22,769

208,342

7,536

$ 238,647

Direct Loan Program

2021
Total
Modifications

Interest
Rate
Reestimates

Technical
Reestimates

FAI
Reestimates

Total
Reestimates

WIFIA

7,226

114,482

$ 121,708

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

Total Direct Loans Subsidy Expense

Direct Loan Program 2022 2021

W1FIA S 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

2022

2021

Beginning Balance of the Subsidy Allowance

(148,785) $

(24,500)

Add: Subsidy Expense for Direct Loans Disbursed During the Reporting Years

by Component

Other Subsidy Costs

(5.0151

(2.5771

Total of the Above Subsidy Expense Components

(5,015) $

(2,577)

Adjustments

Add or Subtract Subsidy Reestimates by Component

Interest Rate Reestimates

(22,769)

(7,226)

Technical/Default Reestimates

(208,343)

(114,482)

FAI Adjustment

(7.536)

Total of the Above Reestimate Components

(238.6481 S

(121.7081

Ending Balance of the Subsidy Cost Allowance

(392.4481 S

(148.7851

19.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 (164,43 8)

Less downward reestimates 48,268

Allowance for loan and interest loss adjustments (127.493)

Ending balance of loans receivable, net S 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

Intr agovernm ental:

Accounts Payable

163

3.367

Accrued Liabilities

Liabilities for Allocation

Total

163

3.367

2022

2021

Other Than Intragovernmental:

Accounts Payable

39,579

56.306

Advances Payable

26,223

(2)

Interest Payable

Total

65.817

56.319

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 infoimation.

As of September 30, 2022, General PP&E Cost consisted of the following:

2022

EPA-

Contractor

Land

Held

Software

Held

and

Capital

Equipment

(Production)

(Development)

Eauipment

Buildings

Leases

Total

Balance,

Beginning of

Year

S 330,579

S 440,896

S 55,537

S 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

$ 440.896

S 96.640

S 39.526

$ 862.775

S 24.485

$ 1.796.517

30,2022

As of September 30, 2022, General PP&E Accumulated Depreciation consisted of the following:

Balance,

Beginning of

Year 8

> 225,982

Dispositions

(9.799)

Revaluations

(301)

Depreciation

Expense

19.748

Balance,

September 5

> 235.630

30,2022

2022

EPA- Contractor Land

Held Software Software Held and Capital

Equipment (Production) (Development) Equipment Buildings Leases Total

33,822 $ - $ 19,851 $ 339,775 S 21,764 S 1,041,194

(9,799)

(8,667) - 1 (8,967)

4.685 - - 17.849 815 43.097

438.507 S S 11.184 $ 357.624 S 22.580 S 1.065.525

21.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 $ 2.389 $ 96.640 S 28.342 S 505.151 $ 1.905 $ 730.992
30,2022

As of September 30, 2021, General PP&E Cost consisted of the following:

2021

EPA-

Contractor

Land

Held

Software

Held

and

Capital

Equipment

(Production)

(Development)

Equipment

Buildings

Leases

Total

Balance,

Beginning of

Year

$ 321,002

$ 439,787

$ 45,865

$ 33,895

S 802,321

$ 24,485

$ 1,667,355

Additions

23.898

1,109

11,959

12,010

30,623

79,599

Dispositions

(14389)

(2,262)

(14,287)

(4,228)

(35,166)

Revaluations

(25)

Balance,

September

$ 330.579

$ 440.896

$ 55.537

S 31.618

$ 828.716

$ 24.485

$ 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

(14,544)

(2,161)
68

50.170

1.041.194

22.

Balance,

Beginning of

Y ear $

217,928 $

420,502 $

$ 26,484 !

S 321,799

$ 20,948

Additions

(14,481)

(63)

Dispositions

1,518

(3,742)

Revaluations

Depreciation

Expense

20.949

13.320

(2.891)

17.976

816

Balance,

September $

225.982 S

433.822 $

$ 19.851 :

£ 339.775

$ 21.764

30,2021

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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

Held

and

Capital

Eauimnent

(Production)

(Development)

Eauimnent

Buildings

Leases

Total

Balance

September

$ 104.597

$ 7.074

$ 55.537

S 11.767

$ 488.941

$ 2.721

$ 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 W1FIA 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 S 221,652 S 525.187 S 746.839 S 810,341 $ 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).

23.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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

Additions

Ending Balance

Superfund Sites with Land Acquired:

Beginning Balance

Additions

Withdrawals

fl)

Ending Balance

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 851,241 thousand, respectively.

24.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S

16,126

Other Accrued Liabilities

152,350

Loan Reestimates

769

Liability for Deposit Funds

(2)

Non-Current

Unfunded FEC-A Liability

8,447

Unfunded Unemployment Liability-

Payable to Treasuiy Judgement Fund

22.000

Total Intragovernmental

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 S

5,128

126,411
360,811
103,166
1,476

596.992 S

1,770

(769)

1,001

1,770
126,411
360,811
103,166
1,476
(169)

597,993

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

Other Liabilities consist of the following as of September 30, 2021:

Covered by Not Covered by

Budgetary Budgetary

Resources Resources Total

Current

Employer Contributions & Payroll Taxes

29,503

Other Accrued Liabilities

144,640

Loan Reestimates

770

Liability for Deposit Funds

(2)

Non-Current

Unfunded FECA Liability

9,018

Unfunded Unemployment Liability

308

Payable to Treasury Judgement Fund

22.000

Total Intragovernmental

174.143

32.094

206.237

Other Liabilities - Other Than Intragovernmental

Current

Liability for Deposit Funds, Other Than

5,626

Intragovernmental

Other Accrued Liabilities

147,393

Grant Liabilities

369,003

Accrued Funded Payroll and Benefits

94,136

Capital Lease Liabilities

2.325

Total Other Than Intragovernmental:

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 S

24.485

Total

24.485

Accumulated Amortization

22.581 S

21.764

26.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S 931

2024 962

2025 325

Total Future Minimum Lease Payments 2,218

Less: Imputed Interest ( 7421

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 fends 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
ill 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
FRPs, 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 S3,541.1 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 lund< 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 S1.77M 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.

27.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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.

€, 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 S2.7 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.

28.

23-F-0002

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United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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., et al. 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 Superfimd
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 S22 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 S8.3 million in the period ending September 30,2021.

29.

23-F-0002

-------
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

Balance Sheet for Fiscal the Year Ended 2022
Intragovernmental

I'urid I ialance with Treasury
Investments, Net
Accounts Receivable, Net
Advances and Prepayments
Total Intragovernmental Assets
Other Than Intragovernmental
Accounts Receivable, Net
Loans Receivable, Net
General Property, Plant, and Equipment. Net
Advances and Prepayments
Total Other Than Intragovernmental

Total Assets
Intragovernmental
Accounts Payable
Debt

Advances from Others and Deferred Revenue
Liability lo the General Fund for Custodial Assets
Other Liabilities
Total Intragovernmental Liabilities
Other Than Intragovernmental
Accounts Payable
Federal Employee Benefits Payable
Advances from Others and Deferred Revenue
Deferred Revenue
Other Liabilities
Total Other Than Intragovernmental Liabilities

Total Liabilities
Unexpended Appropriations
Cumulative Results of Operations
Total Liabilities and Net Position

Eliminations

Total Funds

between

Total Funds

Other Funds

from Dedicated

Dedicated from Dedicated

Environmental

from Dedicated

Collections

Services

LUST

SuDcrfund

Collections

Combined

Funds

Consolidated

$ 572,474 Si

24.166 :

i 551,926

$ 105,639

S 1,254,205 !

f (306,954) %

947,251

1,218.255

9.079.524

10,297.779

10.297,779

92.713

8,657,245

287,177

9,037,135

(8.748,509)

288,626

20.272

1.007

21.367

572,474

1,335,222

18,308,967

393,823

20,610,486

(9,055,463)

11,555,023

460,932

4.541

465,473

1,291,124

32,357

20.593

53,009

772

494.061

1.316.258

1.810.378

J 572.474

1.335.281

18.803.028

1.710.081

22.420.864

f9.055.463i S

13365.401

92.715

8,688,339

8,781,054

(8.748,489) $

8,781,054

1,557.180

1,557,180

164,486

4.789

169,275

22,362

485

41.337

51.621

93.443

93.200

8.916.524

1.613.590

10.623.314

(8.748.489)

10.623.314

33,685

984

34,718

10,135

261

10,432

44,970

45,988

90,958

3,541,093

6.358

84.736

4.619

95.713

6.443

3.714.619

51.852

3.772.914

99.643

12.631.143

1.665.442

14.396.228

C8.748.489) *

5.647.739

(113) $

291

178

572.474

1.235.638

6.171.998

44.348

8.024.458

('306.974')

7.717.484

572.474 $ 1.335.281 S 18.803.028 $ 1.710.081 S 22.420.864 S (9.055.463) $ 13365.401

30.

23-F-0002

-------
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
2022

Gross Program Costs
Less: Earned Revenues
Net Costs of Operations

Environmental
Services

Total Funds
Other Funds from Dedicated
Collections
Combined

from Dedicated
Collections

Eliminations
between
Dedicated
Collections
Funds

Total Funds
from Dedicated
Collections
Consolidated

92.373

1,350,585

138.211

1,581,169

(513)

5i)6 923

132 169

638.579

(303.9541

334 62^

513 *

92.373

843.662

6.042

942.590

303.954 *

1.246.544

Statement of Changes in Net Position for the h'iscal
Year Ended 2022
Unexpended Appropriations

Beginning Balance

(104) S

291

187 $

187

Appropriations Used

(9)

T9~i

Total Unexpended Appropriations

(113) $

291

178 $

178

Cumulative Results of Operations

Beginning Balance

546,001

1,072.946

1,899,380 $

33.333

3,551,660 $

(20) $

3,551,640

Appropriations Used

Excise lax & customs

245.048

413,002

658,050

Misc. taxes & receipts

26,986

9.716

60,652

230

97,5H4

(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-Tn/l'Out) Without "Reimbursement

4,616,482

(31,693)

4,584,789

Imputed Financing

301

26,135

251

26,687

Other Financing Sources

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

572.474

1.235.638

6.171.885 $

44.639

8.024.636 $

J306.974) $

7.717.662

31.

23-F-0002

-------
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

Balance Sheet for Fiscal the Year Ended 2021

Services

LUST

Sunerfund

Collections

Combined

Funds

Consolidated

Intragovernmental

Fund Balance with Treasury

546,001

43.540

389,847

135,505

1,114,893

(251,593) $

863,300

Investments, Net

1,037.121

5,118,717

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

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

Loans Receivable. Net

586.087

586,087

General Property, Plant, and Equipment, Net

24,516

3,407

27,996

Advances and Prepayments

775

Total Other Than Intragovernmental

515.860

596.608

1.112.541

Total Assets

546.001

1.166.810

11.013.064

855.085

13.580.960

f5.307.588) $

8.273.372

Intragovernmental

Accounts Payable

86.187

5,002,107

5,088,294

(5.056,121) S

5,088,294

Debt

746,839

Advances from Others arid Deferred Revenue

1 25,956

13,873

139,829

139,K29

Liability to the General Fund for Custodial Assets

22.362

22,362

Other Liabilities

597

61.026

2,085

63.708

Total Intragovernmental I,labilities

86.784

5.21 1.451

762,797

6.061.032

f5.056.l2l)

6.061.032

Other Than Intragovernmental

Accounts Payable

31,903

1,220

33,126

Federal Employee Benefits Pavablc

10,858

192

11,082

Advances from Others and Deferred Revenue

40,518

51,730

92,248

Deterred Revenue

3,476,732

Other Liabilities

7.045

90.879

5.522

103.446

Total Other Than Intragovernmental Liabilities

7.080

3.650.890

58,664

3.716.634

Total Liabilities

93.864

8.862.341

821.461

9.777.666

(5.056.121) S

4.721.545

Unexpended Appropriations
Cumulative Results of Operations

546.001

1.072.946

(104) $
2.150.827

291
33,333

187
3.803.107

("251.467)

187
3.551.640

Total Liabilities and Net Position

546.001

1.166.810

11.013.064

855.085

13.580.960

f5.307.588> $

8.273.372

32.

23-F-0002

-------
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

Gross Program Costs
Less: Earned Revenues
Net Costs of Operations

Environmental
Services

Total Funds
Other Funds from Dedicated
Collections
Combined

from Dedicated
Collections

Eliminations
between
Dedicated
Collections
Funds

Total Funds
from Dedicated
Collections
Consolidated

86.157

1,364,410

137.107 $

1,587,674

545 40b

152.214

697 635

Q49 937^

447.698

ri3) $

86.157

819.002

MS. 1071 S

890.039

249.937 *

1.139.976

Statement of Changes in Net Position for the h'iscal
Year Ended 2021
Unexpended Appropriations

Beginning Balance
Appropriations Used

(89") $
(15)

(100) s

391

(189) $
376

(189)
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

(391)

(376)

Excise lax & customs

241.786

241,786

Misc. taxes & receipts

27,823

476

4,901

3,85.5

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-Tn/l'Out) Without "Reimbursement

1,11 1,423

(8,774)

1,102,649

(21,502)

1,081,147

Imputed Financing

277

25,472

256

26,005

Other Financing Sources

769

Net Cost of Operations

(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

1.072.946

2.150.723 $

33.625 $

3.803.295 $

C251.467) $

3.551.828

33.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

A. Funds from Dedicated Collections

L 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.

it. 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.

iii. Superfund Trust Fund:

In 1980, the Superfund Trust Fund was established by CERC.LA 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

L 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.

34.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

Hi. ReregLstratimi 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 Quahty 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
went (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 SI.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.

35.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 lias 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. Preauthorked Mixed Funding Agreements

Under Superfund preauthorized mixed funding agreements, FRPs 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.
Colleetability 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 S

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

36.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S 22.620 S 17.256 $ 1.481 S 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
Downward Adjustments of Prior Year Delivered Orders
Permanent Reduction Prior Year Balances
Other Adjustments
Total

Unobligated Balance from Prior Year Budget Authority, Net
(discretionary and mandatory)

Temporarily Not Available - Rescinded Authority

Permanently Not Available:

Rescinded Authority
Cancelled Authority

Total Permanently Not Available

310,599
11,898

(20.9751

301,522

335,603
19,061
(27,991)
(15.6271

311,046

S 5.674.107 $ 5.951.313
(6.428)

21.065

6,428
27.991

21.065

34.419

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 S 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

Intragovemmental:

Unpaid Undelivered Orders $ 1,309,147 $ 617.433

Paid Undelivered Orders 330,617 300,357
Other Than Intragovemmental:

Unpaid Undelivered Orders 27,441,476 20,650,862

Paid Undelivered Orders 3.736 297.852

Total S 29.W4.976 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

S 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

$ 5,038.820 S

1,481,411

38.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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:

2022 2021

Net Transfers from Invested Funds

$ 5,041,849 $

1,525,315

Transfer to the Department of Transportation

85,500

Transfers to Another Agency

6,055

29.854

Total of Net Transfers on the Statement of Budgetary Resources

$ 5.133.404 $

1,555.169

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

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

$ (31,695)

5.661

S (8,005)

28.624

39.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 Ffeadquarters 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 S97.8 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:

FY 2022 Payroll and Benefits Payable

Employer Contributions Payable - Thrift Savings Plan
Actuarial FECA Liability
Accrued Unfunded Annual Leave
Total - Current

Covered by Not Covered
Budgetary by Budgetary
Resources Resources

Total

2,813 $

2.813

45,758

45.758

175.214

2.813 S

220.972 S

223.785

FY 2021 Payroll and Benefits Payable

Employer Contributions Payable - Thrift Savings Plan
Actuarial FECA Liability-
Accrued 1 nfunded Annual Leave
Total - Current

Covered by Not Covered
Budgetary by Budgetary
Resources Resources

51,143
181.492

Total

2,509 $ - $ 2.509
51.143

181.492

2.509 $ 232.635 S 235.144

40.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 $ 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:

2022

2021

Interest on Trust Fund
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue

Funds from
Dedicated
Collections

$ 66,012
658,050
1,587
26.986
S 752.635

All Other
Funds

Funds from
Dedicated
Collections

S 6,421
241,786
(2,740)
31.521
S 276.988

All Other
Funds

41.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

Note 32. Reconciliation of Net Cost of Operations to Net Outlays
For the Fiscal Year Elided September 30, 2022:

Intra-
governmental

Other Than
Intra-

governmental Total 2022

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

(Increase)/Deerease 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

$ 1,840,316 $

7,902,264 S

9,742,580

(43,097)

(952)

109,348

(1.941)

(32,154)

(34,095)

1.432

947,601

949,033

(44.891)

(44,891)

15,839

3,238

19,077

39.769

(9,498)

30,271

(810,341)

(6,433)

(6.433)

11.359

11,359

(29,058)

(73,967)

(103,025)

(268,943)

742.182

8.807.741

9,549.923

309

4,186,832

(17,397)

(17.397)

4.187.141

4.169.744

(5.038,820)

(5,038,820)

306.387

306,432

23.554

268,566

$ (4,313.990) $

13.593.389 S

9.279.399

42.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding September 30, 2022 and 2021
(Dollars in Thousands)

For the Fiscal Year Elided September 30, 2021:

Intra-

governmental

Other Than

intra-
governmental

Total 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

S 1,500,235

$ 7,082,983

57,687
4,186
(72,607)

$ 8,583,218

57,687
4,186
(72,607)

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

(20,495)
50

(70,576)
47,670

77,112
513,387

(624)

56,617
513,437
(70.576)
47,046

(Increase)/Decrease in Liabilities:

Accounts Payable and Accrued Liabilities

Loans Guarantee Liability (Non-FCRA)/Loans Payable

Environmental and Disposal Liabilities

Payroll and Benefits Payable

Other Liabilities

29,710
525,187

56,867

3,623

(12.660)
(2,595)
56,111

33,333
57.5.187
(12.660)
(2,595)
112,978

Other Financing Sources:

Other Imputed Financing
Total Components of Net Cost That Are Not Part of Net
Outlavs

(172,143)
1.896.505

7.706.603

(172,143)

Components of Net Outlays That Are Not Part of Net Cost:
Acquisition of Inventory

375

Other Financing Sources:

Transfer Out (In) Without Reimbursement

(25,286)

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

(25.286)

375

(24.911)

Miscellaneous Items

Custodial/Non-Exchange Revenue

Appropriated Receipts for Trust Fund/Special Funds

22,106
20.028

22,129
20.028

Other Temporary Timing Differences

231,740

NET OUTLAYS

S 1.871.242

S 7.980.852

S 9.852.094

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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.

44.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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. Superftind

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 Superftind
Trust Fund maintained by Treasury.

SUPERFUND FY 2022

EPA

Treasury

Combined

Undistributed Balances

Uninvested Fund Balance

103.683

Total Undistributed Balance

103,683

103.683

Interest Receivable

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

Cost Recoveries

303,954

Fines and Penalties

3.000

Total Revenue

719,956

Appropriations Received

4,675,799

Interest Income

56.135

Total Receipts

5,451,890

5.451,890

Outlays

Transfers to/from EPA, Net

5.076.897

C5.076.8971

Total Outlays

5.076.897

(5.076.8971

Net Income

5.076.897

374.993

5.451.890

45.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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

Interest Receivable

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

Total Revenue

251,593

251.593

Appropriations Received

1,153,462

Interest Income

5.927

Total Receipts

1.410.982

1,410,982

Outlavs

Transfers to/from EPA, Net

1.475.171

fl.475.171~)

Total Outlays

1.475.171

(1.475.171)

Net Income

1.475,171

(64.1891

1.410.982

46.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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

Com bined

Undistributed Balances

Uninvested Fund Balance

13.817

S 13.817

Total Undistributed Balance

13,817

13.817

Interest Receivable

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

S 92.714

1.139.359

S 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

Total Revenue

245,047

Interest Income

9.716

Total Receipts

254.763

$ 254.763

Outlays

Transfers to/from EPA, Net

$ 92.293

f92.293)

Total Outlays

$ 92,293

(92.2931

Net Income

$ 92.293

162.470

$ 254.763

47.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements

For the Fiscal Years Eliding September 30, 2022 and 2021

(Dollars in Thousands)

LUST FY 2021

EPA

Treasury

Com bined

Undistributed Balances

Uninvested Fund Balance

25.686

Total Undistributed Balance

25,686

25.686

Investments, Net

85.921

951.201

1.037.122

Total - Assets

$ 85,921

976.887

1.062.808

Liabilities and Equity

Equity

S 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

<7341

(734)

Total Revenue

241,786

241.786

Interest Income

476

Total Receipts

242.262

Outlavs

Transfers to/from EPA Net

$ 92.203

(92.203)

Total Outlays

$ 92.203

(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 Coronavims 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 S7.2 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' recover)' 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, S33.0 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 \ Management's Discussion and Analysis, Financial
Analysis and Stewardship Information.

48.

23-F-0002

-------
United States Environmental Protection Agency
Notes to the Financial Statements
For the Fiscal Years Eliding 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 intragovemmental 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 intragovemmental 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 "intragovemmental" 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

Ded Seated
Collections
Combined

Dedicated

Collections
Eliminations

Ail Other
Amounts
(with
Eliminations)

Eliminations
Between
Dedicated
and Other

Total

Reclassified Statement
Line

Gross Costs

$ 10,142,639

Other Than

Intragovemmental Costs

1,190,190

7,149,534

8,339,724

Other Than

Intragovemmenta] Gross
Costs

1,190,190

7,149,534

8,339,724

Total Other Than
Intragovemmental Costs

Intragovemtnetital 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

Purchase of Assets

53,588

53.588

Borrowing and Other
Interest Expense

(6,278)

Other Expenses (w/o
Reciprocals)

391,060

1,167,375

1,558,435

Total Intragovemmental
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)

S 286,035

Non-Federal Earned
Revenue

Intragovemmental
Revenue

20,799

47,829

68,628

Buy/Sell Revalue

Purchase of Assets Offset

20,799

47,918

68,717

Total Intragovemmental
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

49.

23-F-0002

-------
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 S

119.869

Total Deferred Maintenance

142.324 S

119.869

50.

23-F-0002

-------
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 folly 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 folly
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 folly 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.

51.

23-F-0002

-------
Required Supplementary Information (Unaudited) Cont.

Kl'.V Held Equipment:

Policv

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:

Policv

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 far
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 sendee 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.

52.

23-F-0002

-------
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

53.

23-F-0002

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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)

BUDGETARY RESOURCES

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

Borrowing Authority (discretionary and mandatory)
Spending Authority Fran Offsetting Collection
Total Budgetary Resources

STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total)
Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts
Unapportioned, Unexpired Accounts
Expired Unobligated Balance. End of Year
Unobligated Balance, End of Year (total):

Totai Status of Budgetary I

OUTLAYS, NET

Outlays. Net (total) ('discretionary and mandator)')
Distributed Offsetting Receipts (-) (Note 26)
Agency Outlays, Net (discretionary and mandatory)
Net (total) (mandatory)

environmental

Underground

State Tribal

Programs &

Storage

Science &

Assistance

Technology

Superfund

'i^reements

Other

Totals

I 494,871

11,629

$ 149,483

3,698,435

$ 962,007

S 357,682

$ 5,674,107

6,546,366

85,500

750,174

5,077,704

11,338,047

46.473,974

70,271,765

3.693.794

3,693,794

44.45?

6.793

38,030

26.340

608.985

724.605

1 7,085,694

S 103.922

S 937.68?

8,802.479

$12,300,054

S51.134.435

$ 80,364,271

; 3,281,512

84,446

$ 780,771

2,586,267

$ 4,258,742

$12,397,284

$ 23,389,022

3,717,612

19,458

140.761

6,215,552

8,041,312

38,709,473

56,844,168

24,445

24,463

86.570

16.155

660

3.233

106.618

3.804.182

19.476

156.916

6.216,212

8.041.312

38.737.151

56.975.249

; 7.085,694

103,922

$ 937,68?

8,802,479

$12,300,054

S 51,134,435

$ 80,364,271

; 2,901,448

93,005

$ 748,632

1,384.363

$ 4,268,037

$ 4,922,734

$ 14,318,219

(4,979,753)

(59,067)

(5,038,820)

; 2.901.448

93.005

$ 748.632

$ (3,595.390) $ 4,268,037

$ 4,863,667

$ 9.279.399

$ 840,409

54.

23-F-0002

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Appendix

Agency Response to Draft Report

| EJB 'I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

$ v\lfj § WASHINGTON DC 2M6-?

i, *r'1* f

November 11, 2022

MEMORANDUM

SUBJECT: Response to the Office ofliispector General Draft Report, Project No. OA-FY22-0121.
"EPA '$ Fiscal Years 2022 and 202J Consolidated Financial Statements, " dated
November 10, 2022

FROM: Faisal Amiii, Chief Financial Officer Arnin,
Office of the Chief Financial Officer Faisal

Diu&ta ly signed
by Amin, Faisal
Dato 2022.11,11
08 j6 53-05*00'

TO: Damon Jackson, Director

Financial Directorate
Office of Audit

Thank you for the opportunity to respond to the issues and recommendations in the subject draft
report. The following is a summary of the U.S. Environmental Protection Agency's overall
position, along with its position on the report's recommendations. This response has been
coordinated with and agreed upon by Region 4.

AGENCY'S OVERALL POSITION

The draft report contains seven recommendations for the Office of the Chief Financial Officer
and one recommendation for Region 4. The EPA agrees with the Office of Inspector General's
recommendations.

AGENCY RESPONSE TO DRAFT REPORT RECOMMENDATIONS

No.

Recommendation

Office

High-Level Corrective
Action(s)

Estimated
Completion Date

Analyze exchange and
nonexchange revenue general
ledger accounts and reclassify fiscal
year 2022 Water Infrastructure
Finance and Innovation Act
nonexchange revenue to exchange
revenue.

OCFO/

OC/

ACAD

Concur. The FY 2022
WIFIA revenue recorded as
nonexchange revenue has
been reclassified to exchange
revenue.

Completed
10/25/2022

23-F-0002

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No.

Recommendation

Office

High-Level Corrective
Action(s)

Estimated
Completion Date

Update the Water Infrastructure
Finance and Innovation Act
expense accounting models to
properly impact exchange revenue.

OCFO/

OC/

ACAD

Concur. The WIFIA
accounting models have been
updated to properly record
exchange revenue.

Completed
10/25/2022

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

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

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

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

23-F-0002

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No.

Recommendation

Office

High-Level Corrective
Action(s)

Estimated
Completion Date

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

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

23-F-0002

-------
Keith Mills

Kristy Eubanks

Wanda Arlington

Mairim Lopez

Claire McWilliams

Demetrios Papakonstantinou

Sheila May

Lasha' Geter

Susan Perkins

Andrew LeBlanc

Jose Kercado

23-F-0002

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Distribution

Appendix III

The Administrator

Deputy Administrator

Chief of Staff, Office of the Administrator

Deputy Chief of Staff, Office of the Administrator

Chief Financial Officer

Assistant Administrator for Chemical Safety and Pollution Prevention
Region 4 Administrator
Agency Follow-Up Coordinator
General Counsel

Associate Administrator for Congressional and Intergovernmental Relations

Associate Administrator for Public Affairs

Deputy Chief Financial Officer

Associate Chief Financial Officer

Associate Chief Financial Officer for Policy

Deputy Assistant Administrator for Pesticide Programs, Office of Chemical Safety and Pollution
Prevention

Deputy Assistant Administrator for Chemical Safety and Pollution Prevention

Deputy Assistant Administrator for Management, Office of Chemical Safety and Pollution Prevention
Director, Information Technology and Resource Management, Office of Chemical Safety and Pollution

Prevention
Region 4 Deputy Regional Administrator
Controller
Deputy Controller
Associate Deputy Controller

Director, Office of Continuous Improvement, Office of the Chief Financial Officer
Director, Office of Regional Operations

Director, Office of Budget, Office of the Chief Financial Officer

Director, Office of Planning, Analysis and Accountability, Office of the Chief Financial Officer
Director, Office of Resource and Information Management, Office of the Chief Financial Officer
Director, Office of Technology Solutions, Office of the Chief Financial Officer
Director, Accounting and Cost Analysis Division, Office of the Controller
Director, Policy, Training, and Accountability Division, Office of the Controller

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

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

Chief, Budget and Finance Section, Budget Operations and Financial Management Branch, Mission

Support Division, Region 4
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Liaison, Office of Budget, Office of the Chief Financial Officer
Audit Liaison, Office of Technology Solutions, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Region 4

23-F-0002

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Senior Audit Advisor, Office of Chemical Safety and Pollution Prevention
Backup Audit Follow-Up Coordinator, Office of the Chief Financial Officer

23-F-0002

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