Audit of the EPA's Fiscal
Years 2022 and 2021
(Restated) Pesticides
Reregistration and Expedited
Processing Fund Financial
Statements

October 17, 2023 | Report No. 24-F-0003


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Report Contributors

Wanda Arrington
Elizabeth Brinson
Amir Eskarous
Robert Hairston
Tanishia Heilig
Damon Jackson
Sheree James
Ethel Lowery

Demetrios Papakonstantinou
Joshua Rodriguez
Kevin Ross
Philip Weihrouch

Abbreviations

EPA	U.S. Environmental Protection Agency

FIFRA	Federal Insecticide, Fungicide, and Rodenticide Act

FY	Fiscal Year

OIG	Office of Inspector General

U.S.C.	United States Code

Cover Image

A tractor in a field applying pesticides. (EPA image)

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r\nsPEcr0j

At a Gla

24-F-0003
October 17, 2023

Audit of the EPA's Fiscal Years 2022 and 2021 (Restated) Pesticides
Reregistration and Expedited Processing Fund Financial Statements

Why We Did This Audit

To accomplish this objective:

The Food Quality Protection Act
requires that the U.S. Environmental
Protection Agency Office of
Inspector General perform an
annual audit of the financial
statements for the Pesticides
Reregistration and Expedited
Processing Fund.

The EPA is responsible for
reassessing the safety of older
pesticide registrations against
modern health and environmental
testing standards. This process is
known as reregistration.

To expedite the reregistration
process, Congress authorized the
EPA to collect fees from pesticide
manufacturers. The EPA deposits
these fees into the Pesticides
Reregistration and Expedited
Processing Fund. Each year, the
Agency's Office of the Chief
Financial Officer prepares financial
statements that present information
about the fund and the EPA's
progress in reregistering pesticides.

To support this EPA mission-
related effort:

•	Operating efficiently and
effectively.

To address this top EPA
management challenge:

•	Managing business operations
and resources.

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

The EPA Received an Unmodified Opinion for Fiscal Years 2022
and 2021 (Restated)

We rendered an unmodified opinion on the EPA's fiscal years 2022 and 2021 (restated)
Pesticides Reregistration and Expedited Processing Fund, also known as the Federal
Insecticide, Fungicide, and Rodenticide Act, or FIFRA, Fund, financial statements, meaning that
the statements were fairly presented and free of material misstatement.

We found the fund's financial statements to be fairly presented and free
of material misstatement.

Material Weakness and Significant Deficiency Noted

We noted the following material weakness: the EPA did not allocate expenses totaling
approximately $1.2 million to the FIFRA Fund that it paid to the U.S. General Services
Administration for the use of government facilities and to the U.S. Department of Homeland
Security for federal protective services.

We noted the following significant deficiency: the EPA miscalculated the restatement balances
for Software in Development for the FIFRA Fund financial statements note 15,

"Restatements," overstating the balance by $66,622.

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

We did not identify any noncompliance that would result in a material misstatement to the
audited financial statements. In addition, the Agency was in compliance with the statutory
performance measures.

Recommendations and Planned Agency Corrective Actions

We recommend that the chief financial officer record an adjustment to recognize rent and
federal protective services expenses for the FY 2022 FIFRA Fund financial statements and
correct the restatement amount for the Software in Development to accurately capture the
amounts for note 15, "Restatements."

The EPA agreed with the recommendations and completed the corrective actions.

List of OIG reports.


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U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

October 17, 2023

MEMORANDUM

SUBJECT: Audit of the EPA's Fiscal Years 2022 and 2021 (Restated) Pesticides Reregi strati on and
Expedited Processing Fund Financial Statements
Report No. 24-F-0003

FROM: Damon Jackson, Director

This is our report on the subject audit conducted by the U.S. Environmental Protection Agency Office of
Inspector General. The project number for this audit was QA-FY23-0048. This report contains findings
that describe the problems the OIG has identified and the corrective actions the OIG recommends. Final
determination on matters in this report will be made by EPA managers in accordance with established
audit resolution procedures.

The Office of the Chief Financial Officer is responsible for the issues discussed in the report.

In accordance with EPA Manual 2750, your office provided and completed acceptable planned corrective
actions in response to the OIG's recommendations. All recommendations are closed, and no final response
to this report is required. If you submit a response, however, it will be posted on the OIG's website, along
with our memorandum commenting on your response. Your response should be provided as an Adobe
PDF file that complies with accessibility requirements of Section 508 of the Rehabilitation Act of 1973,
as amended. The final response should not contain data that you do not want to be released to the public;
if your response contains such data, you should identify the data for redaction or removal along with
corresponding justification.

Financial Directorate
Office of Audit

TO:

Faisal Amin, Chief Financial Officer

Michal liana Freedhoff, Assistant Administrator
Office of Chemical Safety and Pollution Prevention

We will post this report to our website at www.epaoig.gov.


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Table of Contents

Report on the Audit of the Financial Statements	1

Report on Internal Control over Financial Reporting	3

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements	5

Other Governmental Reporting Requirements	6

Management's Discussion and Analysis	6

Prior Reports	6

A Material Weakness	8

B Significant Deficiency	11

C Status of Recommendations	14

1	Fiscal Years 2022 and 2021 (with Restatements) Pesticides Reregistration and Expedited
Processing Fund Financial Statements	15

2	Agency Response to Draft Report	40

3	Distribution	42

24-F-0003	i


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Inspector General's Audit Report on the EPA's Fiscal
Years 2022 and 2021 (Restated) Pesticides
Reregistration and Expedited Processing Fund
Financial Statements

The Administrator

U.S. Environmental Protection Agency

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of the U.S. Environmental Protection Agency's Pesticides
Reregistration and Expedited Processing Fund, also known as the Federal Insecticide, Fungicide, and
Rodenticide Act, or FIFRA, Fund. These statements comprise the consolidated balance sheets, as of
September 30, 2022 and 2021 (restated); the related statements of net cost and changes in net position;
the statement of budgetary resources for the years then ended; and the related notes to the financial
statements.

In our opinion, the financial statements, including the accompanying notes, present fairly, in all material
respects, the assets, liabilities, net position, net cost, changes in net position, and budgetary resources
of the EPA's FIFRA Fund as of and for the years ended September 30, 2022 and 2021 (restated), in
accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit 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.

Emphasis of Matter Restatements of Fiscal Year 2021

As described in note 15, "Restatements," to the financial statements, the EPA restated its fiscal year 2021
FIFRA Fund financial statements. During FY 2022, the EPA capitalized Software in Development costs that
were expensed in FY 2021 and prior. These expenses should have been capitalized in those respective
years. As a result, income and expenses from other appropriations were overstated, and the changes also
impacted the FY 2021 balance sheet, statement of net cost, and statement of changes in net position.

Our opinion is not modified with respect to these corrections.

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Responsibilities of Management for the Financial Statements

The EPA's management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of America
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.

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
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, we express no such
opinion.

•	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 also 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.

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Report on Internal Control over Financial Reporting

Results of Our Consideration of Internal Control over Financial Reporting

Our consideration of internal control was for the limited purpose of expressing an opinion on the fund's
financial statements and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies; therefore, deficiencies in internal control may exist that
were not identified during our audit. A deficiency in internal control over financial reporting exists when
the design or operation of a control does not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A
material weakness is a deficiency or a combination of deficiencies in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the entity's
financial statements will not be prevented or detected and corrected on a timely basis. A significant
deficiency is a deficiency or a combination of deficiencies in internal control over financial reporting that
is less severe than a material weakness yet important enough to merit attention by those charged with
governance.

We noted one matter that we consider to be a material weakness and one matter that we consider to
be a significant deficiency. These issues are summarized below and detailed in Attachments 1 and 2. We
also communicated less significant internal control matters to the Agency during the course of this audit
and will not issue a separate management letter.

Material Weakness

The EPA Did Not Allocate the Expenses It Paid to the U.S. General Services
Administration for the Use of Government Facilities and to the U.S. Department of
Homeland Security for Federal Protective Services

We found that the EPA did not allocate expenses totaling approximately $1.2 million to the FIFRA Fund
for rent paid to the General Services Administration for the use of government facilities and for federal
protective services paid to the Department of Homeland Security. The U.S. Government Accountability
Office's GAO-14-7Q4G. Standards for Internal Control in the Federal Government, known as the Green
Book, requires that federal entities have internal control activities to ensure that they provide accurate
and timely recording of transactions and events. The expenses were not allocated because EPA
personnel did not request FIFRA funding allocations or add FIFRA funds to the obligations for rent or
federal protective services in FY 2022. If the EPA does not exercise due diligence when preparing the
financial statements, it risks compromising the accuracy of the financial statements and the reliance on
them to be free of material misstatement.

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Significant Deficiency

The EPA Miscalculated the Restatement Balances for Software in Development for the
FIFRA Fund Financial Statements Note 15, "Restatements"

We found that the EPA miscalculated the restated capitalized expenditure balance for the Software in
Development in the FIFRA Fund restatement note, overstating the balance by $66,621.97. The
Government Accountability Office's Green Book requires that federal entities establish internal control
activities to ensure that they provide accurate and timely recording of transactions and events. EPA
personnel used the obligation fiscal year instead of the actual expenses fiscal year to calculate the
restatement. If the EPA does not exercise due diligence when preparing the financial statements, it risks
compromising the accuracy of the financial statements and the reliance on them to be free of material
misstatement.

Basis for Results of Our Consideration of Internal Control over Financial
Reporting

We performed our procedures related to the fund's internal control over financial reporting in
accordance with government auditing standards generally accepted in the United States of America.

Responsibilities of Management for Internal Control over Financial Reporting

The EPA's 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 FIFRA Fund financial statements as of and for the year
ended September 30, 2022, in accordance with generally accepted auditing standards, we considered
the fund's internal control over financial reporting as a basis for designing our audit procedures, which
are appropriate in the circumstances for the purpose of expressing an opinion on the financial
statements and to comply with Office of Management and Budget Bulletin 22-01, Audit Requirements
for Federal Financial Statements, but not to express an opinion on the effectiveness of the fund's
internal control. Accordingly, we do not express an opinion on the effectiveness of the fund'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.

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Comparison of the EPA's Federal Managers' Financial Integrity Act Report with
Our Evaluation of Internal Control

Office of Management and Budget Bulletin 22-01 requires the Office of Inspector General 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. The Agency's report is prepared and
submitted at the consolidated level, of which the FIFRA Fund is a component. Accordingly, there are no
findings to report at the FIFRA Fund level.

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

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and
Grant Agreements

Providing an opinion on compliance with provisions of laws, regulations, contracts, and grant
agreements was not an objective of our audit, and accordingly, we do not express such an opinion. We
did not identify any instances of noncompliance that would result in a material misstatement to the
audited financial statements.

Basis of Results of Our Tests for Compliance with Laws, Regulations, Contracts,
and Grant Agreements

As part of obtaining reasonable assurance about whether the fund's financial statements are free of
material misstatement, we performed tests of the Agency's compliance with certain provisions of laws,
including those governing the use of budgetary authority, regulations, contracts, and grant agreements,
that have a direct effect on the determination of material amounts and disclosures in the fund's
financial statements.

Responsibilities of Management for Compliance with Laws, Regulations,
Contracts, and Grant Agreements

The EPA's management is responsible for complying with laws, regulations, contracts, and grant
agreements applicable to the Agency and the fund.

Auditor's Responsibilities for Tests of Compliance with Laws, Regulations,
Contracts, and Grant Agreements

We also performed certain other limited procedures as described in the American Institute of Certified
Public Accountants' Codification of Statements on Auditing Standards, AU-C 250, "Consideration of Laws
and Regulations in an Audit of Financial Statements." Office of Management and Budget Bulletin 22-01
mandates that we evaluate compliance with federal financial statement system requirements, including
those referred to in the Federal Financial Management Improvement Act of 1996. We limited our tests

24-F-0003

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of compliance to these provisions and did not test compliance with all laws and regulations applicable to
the EPA.

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts,
and Grant Agreements

The purpose of this report is solely to describe the scope of our testing of compliance with selected
provisions of applicable laws, regulations, contracts, and grant agreements and the results of that
testing and not to provide an opinion on compliance. This report is an integral part of an audit
performed in accordance with government auditing standards generally accepted in the United States of
America in considering compliance. Accordingly, this report on compliance with laws, regulations,
contracts, and grant agreements is not suitable for any other purpose.

Other Governmental Reporting Requirements

Performance Measures

FIFRA, at 7 U.S.C. § 136a-l, requires that the administrator establish and publish annually in the Federal
Register performance measures and goals, including the number of products reregistered, canceled, or
amended, and the status of the product reregistration. In addition, FIFRA requires the OIG to, among
other things, audit and report on the FIFRA Fund fees collected and disbursed and the
EPA's achievement of those established performance measures and goals. Based on our audit, we found
that the EPA was in compliance with the FIFRA statutory performance measure requirements.

Management's Discussion and Analysis

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

Our audit was not designed to express an opinion and, accordingly, we do not express an opinion on the
"Management's Discussion and Analysis" section. We did not identify any material inconsistencies
between the information presented in the fund's financial statements and the information presented in
the "Management's Discussion and Analysis" section.

Prior Reports

In the previous audit of the FIFRA Fund's financial statements—EPA OIG Report No. 22-F-0059. The
EPA's Fiscal Years 2021 and 2020 Financial Statements for the Pesticides Reregistration and Expedited
Processing Fund, issued September 26, 2022—there were no issues reported.

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Uaoum Qacka&n/

Damon Jackson

Certified Public Accountant

Director, Financial Directorate

Office of Audit

Office of Inspector General

U.S. Environmental Protection Agency

August 18, 2023

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Attachment A

Material Weakness

Table of Contents

1 The EPA Did Not Allocate the Expenses It Paid to the General Services Administration
for the Use of Government Facilities or to the Department of Homeland Security for
Federal Protective Services	9

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1 - The EPA Did Not Allocate the Expenses It Paid to
the General Services Administration for the Use
of Government Facilities or to the Department of
Homeland Security for Federal Protective Services

We found that the EPA did not allocate expenses totaling approximately $1.2 million to the FIFRA Fund
for rent paid to the General Services Administration for the use of government facilities and for federal
protective services paid to the Department of Homeland Security. The Green Book requires that federal
entities have internal control activities to ensure that they provide accurate and timely recording of
transactions and events. The expenses were not allocated because EPA personnel did not request FIFRA
funding allocations or add FIFRA funds to the obligations for rent or federal protective services in
FY 2022. If the EPA does not exercise due diligence when preparing the financial statements, it risks
compromising the accuracy of the financial statements and the reliance on them to be free of material
misstatement.

The Green Book requires that federal entities have internal control activities to ensure that they provide
accurate and timely recording of transactions and events. The Green Book defines the five components
of internal control in government. These components are:

•	Monitoring.

•	Information and communication.

•	Control activities.

•	Risk Assessment.

•	Control environment.

Management should design control activities to achieve objectives and respond to risks. The standards
for control activities require appropriate documentation of transactions and internal control.
Management is to clearly document internal control, all transactions, and other significant events in a
manner that allows the documentation to be readily available for examination. The standards for control
activities require accurate and timely recording of transactions and events.

During our analysis, we found that expenses totaling approximately $1.2 million were not allocated to
the FIFRA Fund for rent paid to the General Services Administration for the use of government facilities
($1,011,000.00) and for the federal protective services paid to the Department of Homeland Security
($195,000.00) in FY 2022. Under the EPA's Resource Management Directives System 2520,
Administrative Control of Appropriated and Other Funds, dated December 2015, "[s]plit funding applies
to all procurement transactions that use multiple appropriations where costs are not directly allocable."
Unlike prior years, for FY 2022, the Agency did not allocate a portion of the expenses for rent and
federal protective services to the FIFRA Fund appropriation each year. FIFRA allocations are based on
budgeted amounts that have remained fairly constant over the preceding several years.

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EPA personnel did not request FIFRA funding allocations or add FIFRA funds to the obligations for rent or
federal protective services in FY 2022. Because the funds were not added to the obligations, no
disbursements were charged against the FIFRA appropriation when payments were processed for rent
and federal protective services. The EPA informed us that it agreed that the FY 2022 allocation of
approximately $1.2 million should have been recognized and that it would prepare an adjustment for
the final financial statements. Furthermore, EPA personnel requested the FYs 2022 and 2023 FIFRA
funding allocations for rent and federal protective services together in FY 2023. The FIFRA funds were
added to the respective obligations in May 2023.

If the EPA does not exercise due diligence when preparing the financial statements, it risks
compromising the accuracy of the financial statements and the reliance of the public and other
interested parties on them to be free of material misstatement.

Recommendation

We recommend that the chief financial officer:

1. Record an adjustment to recognize rent and federal protective services expenses for the fiscal
year 2022 Federal Insecticide, Fungicide, and Rodenticide Act Fund financial statements.

Agency Response and OIG Assessment

The Agency agreed with our finding and recommendation and completed its corrective action. The
adjustment for rent and federal protective services was recorded and included in the final FY 2022 FIFRA
Fund financial statements.

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Attachment B

Significant Deficiency

Table of Contents

1. The EPA Miscalculated the Restatement Balances for Software in Development for
the FIFRA Fund Financial Statements Note 15, "Restatements"	12

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1 - The EPA Miscalculated the Restatement Balances
for Software in Development for the FIFRA Fund
Financial Statements Note 15, "Restatements"

We found that the EPA miscalculated the restated capitalized expenditure balance for the Software in
Development in the FIFRA Fund restatement note, overstating the balance by $66,621.97. The Green
Book requires that federal entities establish internal control activities to ensure that they provide
accurate and timely recording of transactions and events. EPA personnel used the obligation fiscal year
instead of the actual expenses fiscal year to calculate the restatement. If the EPA does not exercise due
diligence when preparing the financial statements, it risks compromising the accuracy of the financial
statements and the reliance on them to be free of material misstatement.

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
only in the development phase and not in the planning and operations phases. The Green Book requires
that federal entities have internal control activities to ensure that they provide accurate and timely
recording of transactions and events. The Green Book defines the five components of internal control in
government. These components are:

•	Monitoring.

•	Information and communication.

•	Control activities.

•	Risk Assessment.

•	Control environment.

Management should design control activities to achieve objectives and respond to risks. The standards
for control activities require appropriate documentation of transactions and internal control.
Management is to clearly document internal control, all transactions, and other significant events in a
manner that allows the documentation to be readily available for examination. The standards for control
activities require accurate and timely recording of transactions and events.

During our analysis of the FY 2022 FIFRA Fund financial statements, we found that the EPA miscalculated
the restated capitalized expenditure balance for Software in Development in note 15, "Restatements."
We noted that the EPA's total restated balance for the Pesticide Registration Information System
Software in Development for FYs 2018 through 2021 was as detailed in Table 1.

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Table 1: FYs 2018 through 2021 Pesticide Registration Information System Software
in Development costs

Fund

Capitalized expenditures ($)

Income and
expenses from
other appropriations ($)

Total ($)

FIFRA

11,094,186.83

1,123,915.44

12,218,102.27

Pesticide Registration
Improvement Act

6,638,109.35

833,102.57

7,471,211.92

Total

17,732,296.18

1,957,018.01

19,689,314.19

Source: OIG analysis of the EPA's note support. (EPA OIG table)

However, during our FY 2022 consolidated financial statement audit,1 the EPA provided us support
showing a total amount of $20,561,590.57 covering the Pesticide Registration Information System
Software in Development for FYs 2019 through 2021. Of this amount, the total cost for FIFRA Fund
should have been $12,151,480.30 and not $12,218,102.27, an overstatement of $66,621.97.

Per our discussion with the EPA, the difference between the support provided during the FIFRA Fund
financial statement audit and the consolidated financial statement audit was because of the use of the
obligation fiscal year during the FIFRA Fund financial statement versus the actual expenses fiscal year
used during the consolidated financial statements. However, as provided by Statement of Federal
Financial Accounting Standards 10, the Agency should have used the expenses for costs incurred and not
the obligated amounts. As such, the methodology of accumulating the prior year costs provided
different total expenses and fiscal years. The EPA is updating the restatement for the FY 2022 FIFRA
Software in Development costs using the fiscal year in which the costs were expended, not by beginning
budget fiscal year as provided in the draft statements submitted to the OIG.

If the EPA does not exercise due diligence when preparing the financial statements, it risks
compromising the accuracy of the financial statements and the reliance of the public and other
interested parties on them to be free of material misstatement.

Recommendation

We recommend that the chief financial officer:

2. Correct the restatement amount for the Software in Development to accurately capture the
amounts for note 15, "Restatements."

Agency Response and OIG Assessment

The Agency agreed with our finding and recommendation and has completed its corrective action. The
restated amount was corrected in the final statements to accurately capture the amounts for note 15.

1 OIG Report No. 22-F-0002, The EPA's Fiscal Years 2022 and 2021 Consolidated Financial Statements, issued
November 15, 2022.

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Status of Recommendations

Attachment C











Planned

Rec.

Page







Completion

No.

No.

Recommendation

Status*

Action Official

Date

10 Record an adjustment to recognize rent and federal protective
services expenses for the fiscal year 2022 Federal Insecticide,
Fungicide, and Rodenticide Act Fund financial statements.

Chief Financial Officer

8/24/23

13 Correct the restatement amount for the Software in Development
to accurately capture the amounts for note 15, "Restatements."

Chief Financial Officer

8/24/23

* C = Corrective action completed.

R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.

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Appendix 1

Fiscal Years 2022 and 2021 (with Restatements)
Pesticides Reregistration and Expedited Processing

Fund Financial Statements

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Fiscal Years 2022 and 2021 (With Restatements)
Pesticides Reregistration and Expedited Processing Fund

Financial Statements

(III

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


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Table of Contents

Management's Discussion and Analysis	,1

Principal Financial Statements	4

Balance Sheet (Restated)	4

Statement of Net Cost (Restated)	5

Statement of Changes in Net Position (Restated)	6

Statement of Budgetary Resources	7

Notes to Financial Statements	S

Note 1. Summary of Significant Accounting Policies	8

A.	Reporting Entities	8

B.	Basis of Presentation	8

C.	Budgets and Budgetary Authority	8

D.	Basis of Accounting	8

E.	Revenues and Other Financing Sources	9

F.	Funds with the Treasury	9

G.	Advances and Prepayments	9

H.	Investments in U.S. Government Securities	9

I.	Property, Plant and Equipment	10

J.	Accounts Receivable and Interest Receivable	10

K.	Liabilities	10

L.	Accrued Unfunded Leave	10

M.	Advances from Others and Deferred Revenue	10

N.	Retirement Plan	10

O.	Non-exchange Revenue	11

P.	Prior Period Adjustment and Restatements	11

Q.	Use of Estimates	11

R.	Reclassifications and Comparative Figures	11

Note 2. Fund Balance with Treasury (FBWT)	12

Note 3. Accounts Receivable, Net	12

Note 4. Accounts Payable	12

Note 5. General Property Plant and Equipment, Net (Restated)	13

Note 6. Other Liabilities	14

Note 7. Recoveries and Resources Not Available, Statement of Budgetary Resources	15

Note 8. Unobligated Balances Available	16

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

Note 10. Federal Employee Benefits Payable	16

Note 11. Income and Expenses from Other Appropriations (Restated)	17

Note 12. Exchange Revenue, Statement of Net Cost	17

Note 13 Intragovernmental Costs and Exchange Revenue (Restated)	18

Note 14. Reconciliation of Net Cost of Operations to Budget (Restated)	19

Note 15. Restatements	21


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Management's Discussion and Analysis


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Under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Federal Food, Drug, and
Cosmetic Act (FFDCA), as amended by the Food Quality Protection Act (FQPA) of 1996, the EPA's
Pesticide Program registers new pesticides and re-evaluates existing pesticides to ensure that they can be
used safely and that levels of residue in food and animal feed are safe (there is a reasonable certainty of
no harm). The Agency must also conclude that, when used in accordance with labeling and common
practices, the product will not generally cause unreasonable adverse effects on the environment.

In accordance with FIFRA and FFDCA, the pesticide program administers the Pesticides Reregi strati on and
Expedited Processing Fund (FIFRA fund). As of 1996, fees for maintenance of pesticide registrations are
deposited to the FIFRA fund, which is available to the EPA without further appropriation.

Under the FFDCA, EPA sets "tolerances", or maximum residue levels. If a pesticide is intended to be used
in a manner that may result in residues in food or animal feed, the applicant must petition EPA for
establishment of a tolerance (or exemption from a tolerance). Tolerances are set at levels that ensure a
reasonable certainty of no harm from the potential pesticide residues in food combined with other non-
occupational exposure.

The passage of the Food Quality Protection Act (FQPA) in 1996 provided for additional fees to support
reregi strati on activities and required tolerances to be reassessed as part of the reregi strati on program.
Effective January 1997, all fees related to tolerance activities were deposited in the FIFRA fund. With
passage of the Pesticide Registration Improvement Act (PRIA 1) of 2003 and amendments in 2007, 2012
and 2019, no additional tolerance petition fees were to be deposited to the FIFRA fund through FY 2023.
As a result, no additional tolerance petition fees were deposited to the FIFRA fund in FY 2021 and FY
2022. The fourth reauthorization of PRIA, the Pesticide Registration Improvement Act of 2022 (PRIA 5)
was signed into law on December 29, 2022 but is effective starting in FY 2023 so does not have bearing
for FY 2021 or 2022.

The Pesticide Reregistration and Registration Review Programs

EPA is responsible for re-evaluating the safety of existing pesticides. Since the passage of FIFRA in 1947,
scientific analysis techniques have grown much more precise and sophisticated and health and
environmental standards have become more stringent. With the 1988 amendments to FIFRA (FIFRA '88),
Congress mandated the accelerated reregistration of all products registered prior to November 1, 1984. The
statute required completion of Reregistration Eligibility Decisions (REDs) and tolerance reassessment for
all food- use active ingredients by 2006.

All REDs for the active ingredients have been completed, the last being completed in FY 2008. A RED is
a decision by the Agency defining whether products containing the pesticide active ingredient are eligible
or ineligible for reregistration. Following the issuance of the RED, the registrant must comply with the
RED by submitting product-specific data and revised labels for each product containing that active
ingredient or cancel the product registration. Based on its review of the data, if the product has met all the
requirements, the EPA then reregisters the product.

EPA's FY 2022 Annual FIFRA Financial Statements

1.


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The FQPA introduced a new program called Registration Review which replaced EPA's Pesticide
Reregi strati on and Tolerance Reassessment programs as those programs were completed. Unlike earlier
review programs, Registration Review applies to all registered pesticides. EPA reviews each registered
pesticide every 15 years to determine whether it still meets the FIFRA standard for registration. In this
way, the Agency ensures that all registered pesticides do not pose unreasonable risks to human health or
the environment when used as directed on product labeling.

FQPA also reauthorized the collection of maintenance fees through 2001 to complete the review of older
pesticides to ensure they meet current standards (increasing annual fees from $14 million to $16 million
per year through 2000) and required all tolerances (over 9,700) to be reassessed by 2006. The
2002 appropriations bill extended maintenance fees to $17 million for another year, and the 2003
appropriations extended them to $21.5 million for that year. Passage of PRIA 1 in FY 2004 extended
maintenance fees through FY 2008 (with annual fees totaling $26 million in FY 2004; $27 million in FY
2005-2006; $21 million in FY 2007; and $15 million in FY 2008). Passage of the Pesticide Registration
Improvement Renewal Act (PRIA 2) in October 2007 extended maintenance fees through FY 2012 ($22
million each FY). PRIA 2 provided for maintenance fees to offset the costs of registration review
beginning in FY 2008.

For pesticides registered before October 1, 2007, EPA had an initial statutory mandate to complete
Registration Review decisions by October 1, 2022; there are a total of 726 cases that need to have
decisions completed. For each case, the steps in this process include, in this order: opening dockets,
developing work plans, completing risk assessments, and making decisions regarding any risk
management measures. It is important to open dockets and develop work plans for as many cases as
possible early in the process so that there is time to complete the risk assessments and make decisions. In
2021 and 2022, EPA continued completing risk assessments and making decisions to meet its initial
statutory deadline of October 1, 2022. At the initial statutory deadline of October 1, 2022, EPA had
completed 685 Draft Risk Assessments, 630 Proposed Interim/Proposed Final Decisions, and 582 Interim
or Final Decisions. The FY 2023 omnibus appropriations bill, enacted on December 29, 2022, extended
the deadline to complete the initial Registration Review of each pesticide or pesticide case to October 1,
2026. EPA is continuing to work on these remaining Registration Review cases.

Congress authorized the collection of maintenance fees from manufacturers to supplement appropriated
funds to support reregi strati on and registration review programs. Maintenance fees are assessed on a
product-by-product basis with caps on the maximum number of products for which any single company
would have to pay fees, as well as fee reductions for qualified small businesses. Registrations for minor
use registrations and public health pesticides are also eligible for waivers and/or refunds of maintenance
fees. Fees are deposited into the FIFRA Reregi strati on and Expedited Processing Fund. By statute, excess
monies in the FIFRA Reregi strati on and Expedited Revolving Processing Fund may be invested. Between
11.1% and 12.5% of collected maintenance fees each year are used to support inert ingredient clearances
as well as expedited processing of fast-track amendments. PRIA 3 also had set aside approximately
$800,000 of the collected maintenance fees for fiscal years 2013 through 2017 to enhance specified IT
systems.

PRIA 4 became effective March 8, 2019, and raised the maintenance fee annual collection target from
$27.8 million under PRIA 3 to $31 million through fiscal year 2023. EPA had invoiced for FY 2019
maintenance fees in December 2019 under PRIA 3 authority and using the PRIA 3 collection target of
$27.8M. When PRIA 4 was enacted midway through the fiscal year, rather than reinvoice for the
additional $3.2M to achieve the increased annual target specified in PRIA 4, EPA utilized a provision in
PRIA 4 which allows the EPA to average across fiscal years within PRIA 4 to account for over/under

EPA's FY 2022 Annual FIFRA Financial Statements

2.


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collection in a given fiscal year. For the remaining 4 years of PRIA 4 authority, EPA's collection target
will be $31.8M/year. PRIA 4 replaced the specific IT enhancement set-aside from PRIA 3 with two new
maintenance fee set-asides of up to $500K each annually through fiscal year 2023 for the efficacy
guideline development and rulemaking for invertebrate pests of significant public health or economic
importance, and the Good Laboratory Practices (GLP) standards compliance monitoring program. PRIA 4
also removed an appropriations constraint on spending FIFRA maintenance fees.

Highlights and Accomplishments

Reregistration and Expedited Processing Fund (FIFRA) Financial Perspective

During FY 2022, the Agency's obligations charged against the Reregistration and Expedited Processing
Revolving Fund for the cost of the reregistration, registration review and other FIFRA activities
authorized by 7 U.S.C. 136(k)(2)(A) were $42.1 million and 169.6 work-years. Of this amount, the EPA
obligated approximately $27.2 million for Personnel Compensation and Benefits (PC&B).

Appropriated funds are used in addition to pesticide user fees. In FY 2022, the total appropriations that
funded registration review, reregistration and other FIFRA activities authorized by 7 U.S.C. 136(k)(2)(A)
were approximately $10.4 million.

The Fund has two types of receipts: fee collections and interest earned on investments. Of the $31.6
million in FY 2022 receipts, more than 99.9% were fee collections. Total unobligated balance in the fund
at the end of FY 2022 was $17.6 million.

Registration Review Program (FIFRA) Performance Measures

The following measures support the program's strategic goals under the FY 2022 - FY 2026 Strategic Plan:
ensuring the safety of chemicals and pollution prevention.

Measure 2: Number of pesticide registration review dockets opened for registration review cases with
statutory completion dates that fall after October 1, 2022.

Results: EPA opened 35 registration review dockets in FY 2022, exceeding the target of 25 dockets opened.

Measure 3: Number of draft risk assessments completed for pesticide registration review cases with
statutory completion dates that fall after October 1, 2022.

Results: EPA completed 25 draft risk assessments in FY 2022, exceeding the target of 9 draft risk
assessments completed.

EPA's FY 2022 Annual FIFRA Financial Statements

3.


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Principal Financial Statements

U.S. Environmental Protection Agency
FIFRA
Balance Sheet
As of September 30, 2022 and 2021 (Restated)
(Dollars in Thousands)

2022

ASSETS:

Intragovernmental:

Fund Balance With Treasury (Note 2)
Advances and Prepayments
Total Intragovernmental

31,338
414
31,752

(Restated)
2021

38,362
185
38,547

Other Than Intragovernmental:

Accounts Receivable, Net (Note 3)

General Property Plant and Equipment, Net (Note 5) (Restated)
Total Other Than Intragovernmental

1

12.215

12.216

9,529
9,529

Total Assets

43,968 $

48,076

LIABILITIES:

Intragovernmental:

Other (Note 6)	$ 2,696	$ 716

Total Intragovernmental	2,696	716

Other Than Intragovernmental:

Accounts Payable (Note 4)	120	30

Federal Employee Benefits Payable (Note 10)	3,578	4,026

Advances from Others and Deferred Revenue	27,453	36,362

Other (Note 6)	1,714	1,800

Total Other Than Intragovernmental	32,865	42,218

Total Liabilities	$ 35,561	$ 42,934

NET POSITION:

Cumulative Results of Operations - Funds from Dedicated Collections

(Restated)	$ 8,407	$ 5,142

Total Net Position	8,407	5,142

Total Liabilities and Net Position	$ 43,968	$ 48,076

The accompanying notes are an integral part of these financial statements.
EPA's FY 2022 Annual FIFRA Financial Statements

4.


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U.S. Environmental Protection Agency
FIFRA
Statement of Net Cost
For the Fiscal Years Ended September 30, 2022 and 2021 (Restated)
(Dollars in Thousands)

COSTS

Gross Costs (Note 13) (Restated)

Expenses from Other Appropriations (Note 11) (Restated)

Total Costs
Less:

Earned Revenue (Note 13)

NET COST OF OPERATIONS (Note 14) (Restated)

(Restated)
2022	2021

39,419 $

43,768

31,520

40,226

70,939

83,994

41,140

46,684

29,799 $

37,310

The accompanying notes are an integral part of these financial statements.
EPA's FY 2022 Annual FIFRA Financial Statements

5.


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U.S. Environmental Protection Agency
FIFRA

Statement of Changes in Net Position
For the Fiscal Years Ended September 30, 2022 and 2021 (Restated)
(Dollars in Thousands)

(Restated)
2022	2021

CUMULATIVE RESULTS OF OPERATIONS:

Beginning Balance	$ 5,142 $ (4,519)

Corrections of Errors (Note 15)	-	4,536

Beginning Balance, as Adjusted	5,142	17

Non-exchange Revenue
Transfers In/(Out) Without Reimbursement
Income from Other Appropriations (Notes 11 and 15) (Restated)
Imputed Financing
Net Cost of Operations (Notes 13, 14 and 15) (Restated)

Net Change in Cumulative Results of Operations (Restated)

Total Cumulative Results of Operations (Restated)

Net Position (Restated)

98

14

2

-

31,520

40,226

1,444

2,195

(29,799)

(37,310)

3,265

5,125

8,407

5,142

8,407 $

5,142

The accompanying notes are an integral part of these financial statements.
EPA's FY 2022 Annual FIFRA Financial Statements

6.


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U.S. Environmental Protection Agency
FIFRA

Statement of Budgetary Resources
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

BUDGETARY RESOURCES

Unobligated Balance From Prior Year Budget Authority, Net (mandatory) (Note 7) $
Spending Authority from Offsetting Collections (mandatory)

Total Budgetary Resources	$

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward adjustments (total)	$

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts
Unapportioned, Unexpired Accounts
Unobligated Balance, End of Year (total): (Note 8)

Total Status of Budgetary Resources	$

OUTLAYS, NET

Outlays, Net (total) (mandatory)	$

Distributed Offsetting Receipts (-)

Agency Outlays, Net (mandatory) (Note 14)	$

2022	2021

26,877	$ 43,842

32,225	32,155

59,102	$ 75,997

41,511	$ 49,832

17,068	25,796

523	369

17,591	26,165

59,102	$ 75,997

7,122 $ 14,225
7,122 $ 14,225

The accompanying notes are an integral part of these financial statements.
EPA's FY 2022 Annual FIFRA Financial Statements

7.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended 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, land, hazardous waste, pesticides, and toxic substances.

The FIFRA Revolving Fund was authorized in 1988 by amendments to the Federal Insecticide, Fungicide
and Rodenticide Act (FIFRA). The 1988 amendments mandated the accelerated re-registration of all
products registered prior to November 1, 1984. Congress authorized the collection of maintenance fees to
supplement appropriations to fund re-registration and to fund expedited processing of pesticides.

Maintenance fees are assessed on registrants of pesticide products. FIFRA also includes provisions for the
registration of new pesticides (funded in part from the PRIA or Pesticide Registration Fund), monitoring the
distribution and use of pesticides, issuing civil or criminal penalties for violations, establishing cooperative
agreements with the states, and certifying training programs for users of restricted chemicals. Appropriated
funds, apart from partial funding of registration from Pesticide Registration Service Fees in the Pesticide
Registration Fund, pay for these activities. The FIFRA Revolving Fund is accounted for under Treasury
symbol number 68X4310.

The FIFRA fund may charge some administrative costs directly to the fund and charge the remainder of the
administrative costs to Agency-wide appropriations. See Note 11 Income and Expenses from Other
Appropriations for amounts included in Income from Other Appropriations on the Statement of Changes in
Net Position and as Expenses from Other Appropriations on the Statement of Net Cost.

B.	Basis of Presentation

These financial statements have been prepared to report the financial position and results of operations of the
EPA for the Reregi strati on and Expedited Processing (FIFRA) Revolving Fund as required by the Chief
Financial Officers Act of 1990. The reports have been prepared from the books and records of the EPA in
accordance with Office of Management and Budget (OMB) Circular A-136 Financial Reporting
Requirements, and the EPA's accounting policies which are summarized in this note. These statements are
therefore different from the financial reports also prepared by the EPA pursuant to OMB directives that are
used to monitor and control the EPA's use of budgetary resources.

C.	Budgets and Budgetary Accounting

Funding of the FIFRA Revolving Fund is provided by fees collected from industry to offset costs incurred by
the EPA in carrying out these programs. Each year, the EPA submits an apportionment request to OMB
based on the anticipated collections of industry fees.

D.	Basis of Accounting

Generally Accepted Accounting Principles (GAAP) for federal entities is the standard prescribed by the
Federal Accounting Standards Advisory Board (FASAB), which is the official standard-setting body for the
Federal Government and the American Institute of Certified Public Accountants (AICPA). The financial
statements are prepared in accordance with GAAP for federal entities.

EPA's FY 2022 Annual FIFRA Financial Statements

8.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Transactions are recorded on an accrual accounting basis and a budgetary basis. Under the accrual method,
revenues are recognized when earned and expenses are recognized when liabilities are incurred, without
regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and
controls over the use of federal funds posted in accordance with OMB directives and the U.S. Treasury
regulations.

E.	Revenues and Other Financing Sources

The EPA's 2002 appropriations bill extended authority to collect maintenance fees by one year in the amount
of $17 million and the FY 2003 appropriations extended the authority to collect fees again by one year in the
amount of $21.5 million. Passage of the Pesticide Registration Improvement Act (PRIA) in 2004 extended
the authority to collect maintenance fees through FY 2008 (with annual fee amounts at $26 million in FY
2004; $27 million in FY 2005-2006; $21 million in FY 2007; and $15 million in FY 2008). Passage of the
Pesticide Registration Improvement Renewal Act (commonly referred to as PRIA II) in 2007 extended the
authority to collect maintenance fees through FY 2012 (with annual fee amounts set at $22 million each year
from 2008-2012). For FYs 2022 and 2021, the FIFRA Revolving Fund received funding from maintenance
fees collected on existing registered pesticide products and from interest collected on investments in U.S.
Government securities. For FYs 2022 and 2021, revenues were recognized from fee collections to the extent
that expenses are incurred during the fiscal year.

F.	Funds with the Treasury

The FIFRA fund deposits receipts and processes disbursements through its operating account maintained at
the U.S. Department of Treasury. Cash funds in excess of immediate needs are invested in U.S. Government
securities.

G.	Advances and Prepayments

FIFRA advances funds to the EPA's Working Capital Fund to pay for computer, postage, and other
administrative support services.

H.	Investments in U. S. Government Securities

Investments in U. S. Government securities are maintained by Treasury and are reported at amortized cost net
of unamortized discounts. Discounts are amortized over the term of the investments and reported as interest
income. FIFRA holds the investments to maturity, unless needed to finance operations of the fund. No
provision is made for unrealized gains or losses on these securities because, most cases, they are held to
maturity.

EPA's FY 2022 Annual FIFRA Financial Statements

9.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

I. Property, Plant, and Equipment

General property, plant and equipment for FIFRA includes software in production. 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
threshold from $250 thousand to $5 million to better align with major software acquisition investments. The
$5 million threshold will be applied prospectively to software acquisitions and modifications/enhancements
placed into service after September 30, 2016. Software assets placed into service prior to October 1, 2016
were capitalized at the $250 thousand threshold. Internal use software is capitalized at full cost (direct and
indirect) and amortized using the straight-line method over its useful life, not exceeding five years.

J. Accounts Receivable and Interest Receivable

FIFRA receivables are mainly for interest receivable on investments.

K. Liabilities

Liabilities represent the amount of monies or other resources that are more likely than not to be paid by the
Agency as the result of an Agency transaction or event that has already occurred and can be reasonably
estimated. However, no liability can be paid by the Agency without an appropriation or other collections.
Liabilities for which an appropriation has not been enacted are classified as advances from others and
deferred revenue, and there is no certainty that the appropriations will be enacted. For FIFRA, advances
from others and deferred revenue are liquidated from fee receipts and interest earnings since FIFRA receives
no appropriation. Fees collected by the Agency are classified as advances from others and deferred revenue
until expended. Liabilities of the Agency, arising from other than contracts can be abrogated by the
Government acting in its sovereign capacity.

L. Accrued Unfunded Annual Leave

Annual, sick, and other leave is expensed as taken during the fiscal year. Sick leave earned but not taken is
not accrued as a liability. It is expensed as it is used. 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 Benefits Payable."

M. Advances from Others and Deferred Revenue (see Note 11)

Fees collected by the FIFRA program that have not yet been expended are considered deferred revenue.
Deferred revenue will fluctuate in conjunction with expenses paid from other appropriations and program
expenses.

N. Retirement Plan

There are two primary retirement systems for federal employees. Employees hired prior to January 1, 1987,
may participate in the Civil Service Retirement System (CSRS). On January 1, 1987, the Federal Employees
Retirement System (FERS) went into effect pursuant to Public Law 99-335. Most employees hired after
December 31, 1986, are automatically covered by FERS and Social Security. Employees hired prior to
January 1, 1987, elected to either join FERS and Social Security or remain in CSRS. A primary feature of

EPA's FY 2022 Annual FIFRA Financial Statements

10.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

FERS is that it offers a savings plan to which the Agency automatically contributes one percent of pay and
matches any employee contributions up to an additional four percent of pay. The Agency also contributes the
employer's matching share for Social Security.

With the issuance of SFFAS No. 5, Accounting for Liabilities of the Federal Government, accounting, and
reporting standards were established for liabilities relating to the federal employee benefit programs
(Retirement, Health Benefits, and Life Insurance). SFFAS No. 5 requires that the employing agencies
recognize the cost of pensions and other retirement benefits during their employees' active years of service.
SFFAS No. 5 requires that the Office of Personnel Management (OPM), as administrator of the CSRS and
FERS, the Federal Employees Health Benefits Program, and the Federal Employees Group Life Insurance
Program, provide federal agencies with the actuarial cost factors to compute the liability for each program.

O. Non-exchange Revenue

Non-exchange revenue is entirely comprised of interest earned on Treasury Securities.

P. Prior Period Adjustments and Restatements

Prior period adjustments, if any, are made in accordance with SFFAS No. 21, Reporting Corrections of
Errors and Changes in Accounting Principles. Specifically, prior period adjustments will only be made for
material prior period errors to: (1) the current period financial statements, and (2) the prior period financial
statements presented for comparison. Adjustments related to changes in accounting principles will only be
made to the current period financial statements, but not to prior period financial statements presented for
comparison.

Q. Use of Estimates

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

R. Reclassifications and Comparative Figures

Certain reclassifications have been made to the prior year's financial statements to enhance comparability
with the current year's financial statements in accordance with Office of Management and Budget (OMB)
Circular No. A-136, Financial Reporting Requirements revised June 3, 2022. As a result, the form and
content of the Balance Sheet, Statement of Changes in Net Position and footnotes has changed to conform
with OMB Circular No. A-136.

EPA's FY 2022 Annual FIFRA Financial Statements

11.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Note 2. Fund Balance With Treasury (FBWT)

Fund Balance with Treasury as of September 30, 2022 and 2021 consists of the following:

2022	2021

Entity Non-Entity	Entity	Non-Entity

Assets	Assets	Total	Assets	Assets	Total

Revolving Funds:

FIFRA	$ 31,338 $ -	$ 31,338 $ 38,362	$ - $ 38,362

Total	$ 31,338 $ -	$ 31,338 $ 38,362	$ - $ 38,362

Status of Fund Balances:

Unobligated Amounts in Fund Balance:

Available for Obligation
Obligated Balance not yet Disbursed
Unavailable for Obligation
Total

2022

2021

$ 17,068	$ 26,165

11,905	10,364

2,365	1,833

$ 31,338	$ 38,362

Note 3. Accounts Receivable, Net

Accounts Receivable as of September 30, 2022 and 2021, consist of the following:

2022	2021

Non-Federal:

Accounts & Interest Receivable	$	1 $ -

Total	$	1 $ -

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.

Note 4. Accounts Payable

The Accounts Payable are current liabilities and consist of the following amounts as of September 30, 2022
and 2021:

2022	2021

2022	2021

Other Than Intragovernmental:

Accounts Payable	$	120 $	30

Total	$	120 $	30

EPA's FY 2022 Annual FIFRA Financial Statements

12.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Note 5. General Property, Plant and Equipment, Net (Restated)

General property, plant, and equipment (PP&E) consist of software, real property, EPA-held and contractor-
held personal property, and capital leases.

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

EPA-

Held	Software	Software

Equipment (production) (development) Total
Balance, Beginning of Year	$	768 $	330 $	9,043 $ 10,141

Additions	-	-	2,765	2,765

Balance, End of Year	$	768 $	330 $ 11,808 $ 12,906

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

EPA-

Held	Software	Software

Equipment	(production)	(development) Total

Balance, Beginning of Year $ 282 $	330	$ - $ 612

Depreciation Expense 79	-	- 79

Balance, End of Year $ 361	$ 330	$ - $ 691

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

EPA-

Held	Software	Software

Equipment Production (development) Total
Balance, End of Year, Net	$	407 $ -	$ 11,808 $ 12,215

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

Balance, Beginning of Year

Additions

Balance, End of Year

EPA-
Held
Equipment
600

168
768

$

Software
(production)

$

330

330

(Restated)
Software
(development)
$	4,536

4,507
$	9,043

Total
5,466

4,675
10,141

EPA's FY 2022 Annual FIFRA Financial Statements

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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

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

EPA-

Held	Software	Software

Equipment	(production)	(development) Total

Balance, Beginning of Year $ 159 $	323	$ - $ 482

Depreciation Expense 123	7	- 130

Balance, End of Year $ 282 $	330	$ - $ 612

As of September 30, 2021, General PP&E, Net (Restated) consisted of the following:

EPA-	(Restated)

Held Software	Software

Equipment	(production) (production)	Total

Balance, End of Year, Net $ 486	$ -	$ 9,043 $ 9,529

Note 6. Other Liabilities

At various periods throughout FY 2022 and FY 2021 employees with their associated payroll costs were
transferred from FIFRA to the Environmental Programs and Management (EPM) appropriation. These
employees were transferred to keep FIFRA's obligations and disbursements within budgetary limits. When
resources become available, the employees charging to FIFRA increased to utilize resources as much as
possible.

This process has led to variations between the year-end liabilities of FYs 2022 and 2021. The liabilities
covered by budgetary resources (both Intragovernmental and non-Federal) represent unpaid payroll and
benefits at year-end.

Other Liabilities consist of the following as of September 30, 2022:

Current

Employer Contributions & Payroll Taxes
Other Accrued Liabilities
Total Intragovernmental

Other Liabilities - Other Than Intragovernmental
Current

Other Accrued Liabilities
Accrued Funded Payroll and Benefits
Total Other Than Intragovernmental

Covered by
Budgetary
Resources

$
$

$
$

Not Covered
by

Budgetary
Resources

237 $
2,459
2,696 $

739 $
975
1,714 $

Total

$	237

2,459
$ 2,696

739
975
1,714

EPA's FY 2022 Annual FIFRA Financial Statements

14.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

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

Current

Employer Contributions & Payroll Taxes
Other Accrued Liabilities
Total Intragovernmental

Other Liabilities - Other Than Intragovernmental
Current

Other Accrued Liabilities
Accrued Funded Payroll and Benefits
Total Other Than Intragovernmental

Covered by
Budgetary
Resources

$

Not Covered
by

Budgetary
Resources

176 $
540

716 $

1,066 $

734
1,800 $

Total

176
540
716

1,066
734
1,800

Note 7. 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.	$ 26,165 $ 42,223

Adjustments to Budgetary Resources Made During the Current Year

Downward Adjustments of Prior Year Undelivered Orders	625	1,599

Other Adjustments	87	136

Total	712	1,735

Unobligated Balance from Prior Year Budget Authority, Net

(mandatory)	$ 26,877 $ 43,958

Temporary Reduction-New Budget Authority	$ (1>842) $ (1,833)

EPA's FY 2022 Annual FIFRA Financial Statements

15.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Note 8. Unobligated Balances 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	$ 17,591 $ 26,165

Total	$ 17,591 $ 26,165

Note 9. Undelivered Orders at the End of the Period

Budgetary resources obligated for undelivered orders as of September 30, 2022 and 2021:

Intragovernmental:

Unpaid Undelivered Orders
Paid Undelivered Orders
Other Than Intragovernmental:
Unpaid Undelivered Orders
Total

2022	2021

$ 613	$ 129

414	185

7,843	7,602

$ 8,870	$ 7,916

Note 10. Federal Employee Benefits Payable

Payroll and benefits payable to the EPA employees for the years September 30, 2022 and 2021 consist of the
following:

Covered by
Budgetary
Resources

FY 2022 Federal Employee Benefits Payable

Employer Contributions Payable - Thrift Savings Plan
Total - Current

$

Not Covered
by Budgetary
Resources

119 $
119

Total

119
119

Accrued Unfunded Annual Leave
Total - Non-Current

Total

3,459
3,459

3,459
3,459

119 $ 3,459 $

3,578

EPA's FY 2022 Annual FIFRA Financial Statements

16.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Covered by
Budgetary
Resources

FY 2021 Federal Employee Benefits Payable

Employer Contributions Payable - Thrift Savings Plan
Total - Current

$

Not Covered
by Budgetary
Resources

89 $
89

Total

89
89

Accrued Unfunded Annual Leave
Total - Non-Current

3,937
3,937

3,937
3,937

Total

89 $

3,937 $

4,026

Note 11. Income and Expenses from Other Appropriations (Restated)

The Statement of Net Cost reports the program costs that include the full cost of the program outputs and
consist of the direct costs and all other costs that can be directly traced, assigned on a cause-and-effect basis,
or reasonably allocated to program outputs.

During FYs 2022 and 2021, the EPA had two appropriations which funded a variety of programmatic and
non-programmatic activities across the Agency, subject to statutory requirements. The EPM appropriation
was created to fund personnel compensation and benefits, travel, procurement, and contract activities.

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

Income from Other Appropriations
Expenses from Other Appropriations
Net Effect

Restated
2022	2021

$ 31,520 $ 40,226
31,520	40,226

$ - $ -

Note 12. Exchange Revenues, Statement of Net Cost

For FYs 2022 and 2021, the exchange revenues reported on the Statement of Net Cost is comprised of non-
Federal amounts.

EPA's FY 2022 Annual FIFRA Financial Statements

17.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Note 13. Intragovernmental Costs and Exchange Revenue (Restated)

(Restated)

2022	2021

Costs:

Intragovernmental $ 13,497	$ 14,820

Other Than Intragovernmental (Restated) 25,922	28,948

Expenses from Other Appropriations (Restated) 31,520	40,226

Total Costs $ 70,939	$ 83,994

Revenue:

Other Than Intragovernmental 41,140	46,684

Total Revenue 41,140	46,684

Net Cost of Operations: $ 29,799	$ 37,310

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

EPA's FY 2022 Annual FIFRA Financial Statements

18.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

Note 14. Reconciliation of Net Cost of Operations to Budget (Restated)
For the Fiscal Year 2022:

NET COST

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

Property, Plant and Equipment Depreciation
Applied Overhead/Cost Capitalization Offset
Expenses from Other Appropriations

Increase/(Decrease) in Assets:

Accounts Receivable
Other Assets

Intra-
governmental
$ 13,497

Other Than

Intra-
governmental

$

16,302 $

(79)
2,765
(31,520)

Total 2022
29,799

229

(79)
2,765
(31,520)

1

229

(Increase)/Decrease in Liabilities:

Accounts Payable

Federal Employee Benefits Payable

Other Liabilities

Other Financing Sources:

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

Miscellaneous Items

Custodial/Non-exchange revenue

Total Miscellaneous Items

Other Temporary Timing Differences

NET OUTLAYS

(1,980) (90)	(2,070)

447	447

8,994	8,994

(1,444) -	(1,444)

(3,195) (19,482)	(22,677)

(98) -	(98)

(98) -	(98)

98	98

$ 10,204 $ (3,082) $	7,122

EPA's FY 2022 Annual FIFRA Financial Statements

19.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

For the Fiscal Year 2021 (Restated):

NET COST (Restated)

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

Property, Plant and Equipment Depreciation
Applied Overhead/Cost Capitalization Offset (Restated)
Other (Restated)

Increase/(Decrease) in Assets:

Other Assets

(Increase)/Decrease in Liabilities:

Accounts Payable

Federal Employee Benefits Payable

Other Liabilities

Other Financing Sources:

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

Miscellaneous Items

Custodial/Non-exchange revenue

Total Miscellaneous Items

Other Temporary Timing Differences

NET OUTLAYS

Intra-
governmental
$ 14,820

(Restated)
Other Than

Intra-
governmental

$

$

134

(258)
14,529

(2,195)
27,030

(13)
(13)

27,017 $

22,490 $

(130)
4,676
(40,227)

(196)
405
177

(12,805)

13

(12,792) $

Total 2021
37,310

(130)
4,676
(40,227)

134

(454)
405
14,706

(2,195)
14,225

(13)
(13)
13
14,225

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

EPA's FY 2022 Annual FIFRA Financial Statements

20.


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U.S. Environmental Protection Agency
FIFRA

Notes to the Financial Statements
For the Fiscal Years Ended September 30, 2022 and 2021
(Dollars in Thousands)

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.

Note 15. Restatements

Software In Development

During FY 2022, EPA capitalized software in development costs of $4,290 that were expensed in FY 2021
and $4,536 that were expensed in FY 2020 and prior. These expenses should have been capitalized in those
respective years. The agency is restating the capitalization of software in development costs into the periods
in which they occurred.

As a result, income and expenses from other appropriations were overstated by $1,125, the amount of costs
included in the income and expenses from other appropriations in FY 2021 that were impacted by the
capitalization of software in development restatement.

The changes impact FY 2021 Balance Sheet, Statement of Net Cost and Statements of Changes in Net
Position.

For the Year Ended September 30, 2021

Balance Sheet:

General Property Plant and Equipment, Net
Cumulative Results of Operation - Fund from Dedicated
Collections

Previously	Restated

Reported Restatement Amount

704
(3,683)

8,825 $
8,825 $

9,529
5,142

Statement of Net Cost:

Gross Costs

$

48,057

(4,289)

$

43,768

Expenses from Other Appropriations

$

41,351

(1,125)

$

40,226

Net Cost of Operations

$

42,724

(5,414)

$

37,310

Cumulative Results of Operations:

Net Position - Beginning Balance

$

(4,519)

4,536

$

17

Income from Other Appropriations

$

41,351

(1,125)

$

40,226

Total Net Position

$

(3,683)

8,825

$

5,142

EPA's FY 2022 Annual FIFRA Financial Statements

21.


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^fe0sn^

\p

Appendix 2

Agency Response to Draft Report

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

<

\ W\/S 5	WASHINGTON. D C. 20460

V

WJ

*1 PROi^	September 22, 2023

OFFICE OF THE
CHIEF FINANCIAL OFFICER

MEMORANDUM

SUBJECT: Response to the Office of Inspector General Draft Report. Project No. OA-FY23-0048,

"Audit of the EPA's Fiscal Years 2022 and 2021 (Restated) Pesticides Reregistration and
Expedited Processing Fund Financial Statements, " dated September 12, 2023

FROM: Faisal Amin, Chief Financial Officer
Office of the Chief Financial Officer

Amin, Fsissl Date20230922

17:14:16-04'00'

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 the Office of
Chemical Safety and Pollution Prevention.

AGENCY'S OVER AFT, POSITION

The draft report contains two recommendations for the Office of the Chief Financial Officer. The agency
agrees with both recommendations.

AGENCY RESPONSE TO DRAFT REPORT RECOMMENDATIONS

Recommendation

Office

High-Level Intended
Corrective Action(s)

Estimated
Completion Date

1. Record an adjustment to
recognize the rent and protective
services expenses for the FY
2022 FIFRA Fund financial
statements.

OCFO

Concur. The adjustment for the
rent and protective services was
recorded and included in the
final FY 2022 Federal
Insecticide, Fungicide, and
Rodenticide Act Fund financial
statements.

Completed

8/24/2023

24-F-0003

40


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2. Correct the restatement amount
for the Software in Development
to accurately capture the amounts
for note 15, "Restatements."

OCFO

Concur. The restatement amount
was corrected in the final
statements to accurately capture
the amounts for Note 15.

Completed

8/24/2023

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, or the OCSPP's
Senior Audit Advisor, Janet Weiner, at Weiner.Janet@epa.gov or (202) 564-2309.

cc: Gregg Treml
Lek Kadeli
Meshell Jones-Peeler
Adil Gulamali
OCFO-OC-MANAGERS
Wanda Arlington
Demetrios Papakonstantinou
Shannon Lackey
Mairim Lopez
Sheila May
Andrew Sheeran
Gabrielle Hanson
Luby Harvey
Brian Katz
Janet Weiner
Susan Perkins
Andrew LeBlanc
Jose Kercado

24-F-0003

41


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Appendix 3

Distribution

The Administrator

Deputy Administrator

Chief of Staff, Office of the Administrator

Deputy Chief of Staff, Office of the Administrator

Chief Financial Officer

Agency Follow-Up Coordinator

General Counsel

Assistant Administrator for Chemical Safety and Pollution Prevention

Associate Administrator for Congressional and Intergovernmental Relations

Associate Administrator for Public Affairs

Deputy Chief Financial Officer

Deputy Chief Financial Officer for Policy

Associate Chief Financial Officer

Deputy Assistant Administrator for Chemical Safety and Pollution Prevention

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

Senior Budget Officer, Office of Program Support, Office of Chemical Safety and Pollution Prevention
Director, Office of Pesticide Programs, Office of Chemical Safety and Pollution Prevention
Chief of Staff, Office of Chemical Safety and Pollution Prevention

Director, Information Technology and Resource Management Division, Office of Program Support, Office

of Chemical Safety and Pollution Prevention
Controller
Deputy Controller
Associate Deputy Controller

Director, Office of Technology Solutions, Office of the Chief Financial Officer

Director, Accounting and Cost Analysis Division, Office of the Chief Financial Officer

Director, Policy, Training, and Accountability Division, Office of the Controller

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

Deputy Director, Office of Technology Solutions, Office of the Chief Financial Officer

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

Office of the Chief Financial Officer
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Director, Office of Continuous Improvement, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of the Administrator
Senior Audit Advisor, Office of Chemical Safety and Pollution Prevention
Audit Liaison, Office of Technology Solutions, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Office of Pesticide Programs, Office of Chemical Safety and
Pollution Prevention

24-F-0003

42


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Whistleblower Protection

U.S. Environmental Protection Agency
The whistleblower protection coordinator's role
is to educate Agency employees about
prohibitions against retaliation for protected
disclosures and the rights and remedies against
retaliation. For more information, please visit
the OIG's whistleblower protection webpage.

Contact us:

Congressional Inquiries: OIG.CoiwessionalAffairs(53epa.gov

Media Inquiries: OIG,PublicAffairs@epa.gov
line EPA OIG Hotline: OIG.Hotline@epa.gov

w Web: epaoig.gov

Follow us:

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Linkedln: linkedin.com/company/epa-oig
YouTube: youtube.com/epaoig

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