AGENCY FINANCIAL REPORT
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ABOUT THIS REPORT
In previous years, the Environmental Protection Agency (EPA) produced a consolidated
Performance and Accountability Report (PAR) to describe to the President, Congress, and the
public the Agency's environmental program and financial performance over the course of a
fiscal year. For Fiscal Year (FY) 2010, the EPA has elected to pilot the Office of Management
and Budget's (OMB's) three-part reporting approach as an alternative to the consolidated PAR.
For FY 2010, EPA is producing an Agency Financial Report (APR), an Annual Performance
Report (APR) and an FY2010 Performance and Accountability Highlights, pursuant to the OMB
Circular A-136, Financial Reporting Requirements.
EPA's AFR provides fiscal and high-level performance results that enable the President,
Congress, and the public to assess our accomplishments for each fiscal year (i.e., October 1
through September 30). It will also include EPA's FY 2010 Management Assurance Statement
and FY2010 Financial Statements Audit Report, which provide the Administrator's assurance
statement on the soundness of the Agency's internal controls for financial and programmatic
activities and present progress in addressing Office of Inspector General audit
recommendations, respectively.
EPA's APR provides information on the Agency's performance and progress in achieving the
goals in its Strategic Plan and performance budget. The report is prepared in accordance with
the requirements of OMB Circular A-11. EPA will produce the FY 2010 APR in conjunction with
the FY 2012 Congressional Budget Justification and will post it on the Agency's website at
http://epa.gov/ocfo/budget/index.htm by February 7, 2011.
In addition, EPA will distribute the Performance and Accountability Highlights, a report designed
to distill key financial and performance information from both the AFR and APR in a brief, user-
friendly format that is easily understood by a reader with little technical background in these
areas. The Highlights will be posted on the Agency's website at
www.epa.gov/ocfo/financialperformancereports.htm by February 15, 2011.
How the Report Is Organized
Administrator's Letter
The Administrator's letter transmits EPA's FY2010 AFR from the Agency to the President and
Congress. In the letter, the Administrator describes the Agency's missions, goals, and
accomplishments toward upholding the mission. The letter provides assurance that financial and
performance data presented in the AFR is reliable and complete and conveys material internal
control weaknesses and actions EPA is taking to resolve them.
Section I—Management's Discussion and Analysis (MD&A)
This section contains information on EPA's mission and organizational structure; selected
Agency performance results; an analysis of the financial statements and stewardship figures;
information on systems, legal compliance, and controls; and other management information and
initiatives.
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Section II—Financial Section
This section contains the Message from the Chief Financial Officer (CFO), Agency's financial
statements and related Independent Auditor's Report, as well as other information on the
Agency's financial management.
Section III—Other Accompanying Information
This section provides additional material as specified under OMB Circular A-136, "Financial
Reporting Requirements." The subsection titled "Management Challenges and Integrity
Weaknesses" discusses EPA's progress in strengthening management practices to achieve
program results and presents the Inspector General's list of top management challenges and
the Agency's response.
Appendices
The appendices include a list of relevant EPA Internet links and a glossary of acronyms and
abbreviations.
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ERA'S FY 2010 AGENCY FINANCIAL REPORT
TABLE OF CONTENTS
About This Report i
Table of Contents iii
Administrator's Letter v
SECTION I: MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction I-2
What EPA Does I-2
Who EPA Is I-3
How EPA Works: Collaborating With Partners and Stakeholders I-3
A Framework for Performance Management I-7
FY 2010 Advances in Performance Management I-7
FY2010 Program Performance.
Progress Toward Performance Priorities
Deepwater Horizon BP Oil Spill in the Gulf of Mexico.
Financial Analysis and Stewardship Information
EPA's Sound Financial Management: Good for the Environment, Good for the Nation
EPA's Financial Statements for Fiscal Year 2010
Improving Management and Results
Office of Inspector General Audits, Reviews, and Investigations.
Grants Management
EPA Holds Itself Accountable: Systems, Controls, and Legal Compliance
Federal Managers' Financial Integrity Act
Federal Financial Management Improvement Act
Federal Information Security Management Act
I nspector General Act Amendments of 1988
Defense Contract Audit Agency Audits
-10
-10
-13
-14
-14
-15
-22
-22
-22
-23
-23
-25
-25
-25
-30
SECTION II: FINANCIAL SECTION
Message from the Chief Financial Officer II-2
Principal Financial Statements II-3
Notes to Financial Statements 11-14
Required Supplementary Information (Unaudited) II-56
Required Supplemental Stewardship Information (Unaudited) II-58
Supplemental Information and Other Reporting Requirements (Unaudited) II-60
Audit of EPA's Fiscal 2010 and 2009 Consolidated Financial Statements II-69
SECTION III: OTHER ACCOMPANYING INFORMATION
Introduction III-2
EPA's Progress in Addressing FY 2009 Weaknesses and Significant Deficiencies III-3
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Material Weaknesses 111-3
Agency Weaknesses 111-5
Significant Deficiencies 111-9
Summary of Financial Statement Audit 111-10
Summary of Management Assurance 111-11
FY2010 Key Management Challenges Identified by the Office of Inspector General 111-12
EPA's Response to Office of Inspector General (OIG) Management Challenges III-33
Improper Payments Information Act of 2002 Reporting Details III-47
Risk Assessments III-47
Statistical Sampling Process III-47
Corrective Action Plans III-48
Improper Payment (IP) Reduction Outlook FY2006-FY 2010 III-50
Recovery of I mproper Payments FY 2004-FY 2010 111-50
Ensuring Management Accountability III-50
Information Systems and Infrastructure III-50
Statutory and Regulatory Barriers III-50
Conclusions 111-51
APPENDICES
Appendix A: Public Access A-1
Appendix B: Acronyms and Abbreviations B-1
IV
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ADMINISTRATOR'S LETTER
November 15, 2010
The President
The White House
Washington, D.C. 20500
Dear Mr. President:
I am pleased to submit the U.S. Environmental Protection Agency's Fiscal Year 2010
Agency Financial Report. This report presents the Agency's detailed financial information,
accounting for the use of funds entrusted to us to carry out our mission to protect human health
and the environment. It also provides readers with a sense of the Agency's priorities, strengths,
and challenges in implementing the programs used to fulfill our mission. The financial and
performance data presented in this report are reliable, complete, and updated.
This is the first of three integrated reporting components, an alternative to the
consolidated Performance and Accountability Report produced in previous years. The remaining
two reports, the FY2010 Annual Performance Report and the FY 2010 Performance and
Accountability Highlights, will be available in February 2011.
EPA's Seven Priorities
Seven key themes guided our work in FY 2010, and will continue to guide us going
forward. These priorities are grounded in science, transparency and the rule of law, and they
are built around the challenges and opportunities inherent in our mission to protect the
environment and human health.
Taking Action on Climate Change: During FY 2010, we affirmed decades of science and
overcame years of inaction to finalize our endangerment finding on greenhouse gases. That led
to a finalized reporting system, which will provide a better understanding of the sources of
GHGs and guide efforts to reduce emissions, as well as the nation's first-ever greenhouse gas
emissions standards for vehicles. We're also continuing to work on commonsense rules that will
phase in emissions standards for our largest emitters. These actions are meant to complement
any clean energy and climate legislation that might be taken up by Congress.
Improving Air Quality: American communities face serious health and environmental challenges
from air pollution. During FY 2010, we finalized the first new standards for sulfur and nitrogen
oxide in more than two decades. We also finalized rules on cement plants and used the "Good
Neighbor" provision in the Clean Air Act to propose a transport rule that could have up to $290
billion in health benefits for the American people. Improved monitoring, permitting, and
enforcement will be critical building blocks for air quality improvement.
Assuring the Safety of Chemicals: One of our priorities is to make significant progress in
assuring the safety of chemicals in our products, our environment, and our bodies. During FY
2010, we laid the groundwork for new reforms, pending legislative action by Congress. We also
released our first-ever chemical management plans for several groups of substances and are
strengthening our chemical safety program by coordinating and collaborating with the
appropriate Federal agencies to aggressively assess and manage the risks of chemicals.
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Cleaning Up Our Communities: Using all the tools at our disposal, including targeted
enforcement and compliance efforts, we continue to focus on making safer, healthier
communities. We are accelerating these efforts through our Superfund and Brownfields
programs, particularly to spur environmental cleanup and job creation in disadvantaged
communities. To enhance our strategies, we're developing stronger partnerships with
stakeholders affected by our cleanups.
Protecting America's Waters: Today, our water quality and enforcement programs face complex
challenges that demand both traditional and innovative strategies. To protect our waters, we've
used the Recovery Act and our annual budget to make substantial investments in clean water
and drinking water infrastructure. We also are making swift progress in historic clean-up efforts
throughout the country, like in the Great Lakes and the Chesapeake Bay. And we're initiating
new efforts to protect urban waters and deal with the growing challenge of stormwater runoff.
Expanding the Conversation on Environmentalism and Working for Environmental Justice: To
protect low-income and minority populations disproportionately impacted by environmental and
human-health hazards, we are working to engage citizens through regulations and enforcement,
but also through community-based programs and outreach. We've issued clear rulemaking
guidance so environmental justice concerns are a part of every decision we make at EPA, and
we convened the first meeting in more than a decade of the leaders of the Interagency Working
Group on Environmental Justice.
Building Strong State and Tribal Partnerships: States and tribal nations bear important
responsibilities for environmental protection, but declining tax revenues and fiscal challenges
are pressuring state agencies and tribal governments to do more with fewer resources. During
FY 2010, we strengthened these partnerships and worked with states and tribes to put the
money they received from the Recovery Act to work creating jobs and building more sustainable
communities.
Management
At EPA, we are taking steps to strengthen our management and assure that our internal
controls are appropriate and effective, as required by the Office of Management and Budget
Circular A-123. For FY2010, no new material weaknesses were identified by the Agency or the
Office of Inspector General. Additionally, the Agency removed three material weaknesses
identified as part of the Agency's FY 2009 audited financial statement process. Two material
weaknesses—Understated Unearned Revenue and Understated Accounts Receivable—were
closed, and a third—Improvements in Billings Cost and Reconciling Unearned Revenue for
Superfund State Contracts (SSC) Costs—was downgraded to a significant deficiency. The
Agency continues to review the SSC process as part of its review of internal controls over
financial activities to identify potential process issues and/or gaps in procedures. Section III of
this report, Other Accompanying Information, provides additional information on EPA's internal
control weaknesses. My assurance statement—provided under the Federal Managers' Financial
Integrity Act—appears in Section I of this report, Management's Discussion and Analysis.
The Inspector General, in compliance with the Reports Consolidation Act of 2000, has
identified what he considers to be the Agency's most serious management challenges in FY
2010. Meeting these challenges—such as measuring the results of our programs on human
health and the environment or ensuring that the nation has the funding needed to construct,
repair, and maintain its drinking water and wastewater infrastructure—might take years, as the
Inspector General has acknowledged.
VI
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Meeting the challenges that come along with our Agency's mission will also require the
collaborative efforts of many, including Congress, other federal agencies, states, tribes, and
communities. EPA is committed to working with our partners and stakeholders to meet these
challenges. Section III of this report, Other Accompanying Information, provides additional
information on EPA's management challenges identified by the Office of the Inspector General
and the Agency's response.
Future Direction
With the significant challenges ahead of us, from local issues like clean water, to global
concerns like climate change, EPA's mission to protect human health and the environment has
never been more vital. The American people look to us for leadership, and there is no doubt the
EPA is on the job. Over the course of the last fiscal year, we have made a number of historic
environmental advances while protecting the health of all communities and restoring the trust of
the American people.
As we continue to confront the challenges before us, I have tremendous confidence in
the talent and spirit of our workforce. We will meet our responsibilities for enforcing the nation's
environmental laws and regulations and will work with our state and local partners to meet our
biggest environmental challenges.
Respectfully,
Lisa P. Jackson
VII
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^
ERA'S FY 2010
Agency Financial Report
Section I
Management's Discussion and Analysis
This document is one chapter from the Fiscal Year 2010 Agency Financial Report, U.S.
Environmental Protection Agency (EPA- 190-R-10-003), published on November 15, 2010. This
document is available at:www.epa.gov/ocfo/financialperformancereports.htm. Printed copies of
EPA's FY2010 Agency Financial Report are available from EPA's National Service Center for
Environmental Publications at 1-800-490-9198 or by e-mail at: nscep@bps-lmit.com.
Section I - Page 1
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INTRODUCTION
Note: In previous years, the Environmental Protection Agency (EPA) produced a consolidated
Performance and Accountability Report (PAR) to describe to the President, Congress, and the
public the Agency's environmental program and financial performance over the course of a
fiscal year. For Fiscal Year (FY) 2010, EPA has elected to pilot the Office of Management and
Budget's (OMB's) three-part reporting approach as an alternative to the consolidated PAR. For
FY 2010, EPA is producing an Agency Financial Report (AFR), an Annual Performance Report
(APR) and an FY 2010 Performance and Accountability Highlights, pursuant to the OMB
Circular A-136, Financial Reporting Requirements.
EPA was established in 1970 to consolidate within one agency a variety of federal research,
monitoring, standard-setting and enforcement activities to ensure environmental protection. For
almost 40 years, EPA has been working for a cleaner, healthier environment for the American
people. From regulating vehicle emissions to ensuring that drinking water is safe; from cleaning
up toxic waste to assessing and ensuring the safety of chemicals; and from reducing
greenhouse gas emissions to encouraging conservation, reuse, and recycling, EPA and its
federal, state, local, community partners, and stakeholders have made enormous progress in
protecting the nation's health and environment. America's air, water, and land are cleaner today
than they were only a decade ago, and increasingly people are adopting a "greener" way of
living. Across all sectors of society, people are making choices to preserve resources, prevent
pollution, and reduce impacts on the environment.
As America's environmental steward, EPA leads the nation's environmental science, research,
education, assessment and enforcement efforts. Keeping in line with our core values of science,
transparency, and the rule of law, the Agency is strongly committed to meeting growing
environmental protection needs. EPA's science provides the foundation for Agency decision-
making and the basis for understanding and preparing to address future environmental needs
and issues. Increased transparency is vital for improving programmatic and financial
performance. By making environmental information both available and understandable, EPA
advances its work and furthers public trust in its operations. EPA is working to restore and
preserve ecosystems and to protect children and other vulnerable groups from environmental
risks by strengthening regulations to protect air, water, and food, and, maintaining its
compliance efforts.
EPA has made exceptional progress in protecting the environment. Despite the historic
environmental advances made along the way, much work remains. The environmental problems
the country faces today are often more complex than those of years past, and implementing
solutions—both nationally and globally—is more challenging. These environmental concerns
and other obstacles drive the Agency's commitment to ensure that communities, individuals,
businesses, and state, local and tribal governments all have access to accurate information to
assist in managing human health and environmental risks.
What EPA Does
EPA's mission is to protect human health and the environment. To achieve a cleaner, healthier
environment, the Agency:
Section I - Page 2
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• Develops regulations to implement Congressional law. EPA develops regulations as
directed by environmental law written by Congress and sets national standards for
environmental programs. Where allowed by law, EPA delegates to states and tribes the
authority and responsibility to implement programs and ensure that standards are met.
• Takes legal action through enforcement. EPA enforces environmental laws, regulations,
and standards ensuring consistency and a level playing field, and assists states, tribes, and
the regulated community in understanding and complying with environmental requirements.
• Awards grants to states, tribes, nonprofits and others. EPA spends nearly half its
budget on grants to state and tribal environmental programs, non-profits organizations,
educational institutions, and other entities. These grants support program development and
implementation, research to improve the scientific basis for decisions on environmental and
human health issues, and sharing of best practices and innovative approaches.
• Studies current environmental issues and anticipates future issues to further its
mission. EPA researches approaches to environmental challenges and assists in the
development of innovative solutions to solve environmental problems through its nationwide
laboratories.
• Sponsors partnerships to reduce environmental impacts and promote environmental
stewardship. EPA Partnership Programs address a wide variety of environmental issues
by working collaboratively with more than 13,000 companies, organizations, communities,
and individuals.
• Fosters environmental education and awareness. EPA works to help people understand
environmental issues, appreciate their shared responsibility for protecting the environment,
and learn how they can reduce their use of energy and materials, reuse what they can, and
recycle the rest. To promote environmental awareness, the Agency publishes a variety of
materials and provides the public access to information on its website.
Who EPA Is
EPA's 17,000 employees include engineers, scientists, and policy analysts; others are legal,
public affairs, financial, information management, computer, and administrative specialists. EPA
is headquartered in Washington, D.C. The Agency also has 10 regional offices and more than a
dozen laboratories and field offices across the country. For more information, visit EPA at
www.epa.gov.
How EPA Works: Collaborating With Partners and Stakeholders
Addressing today's complex environmental issues requires greater transparency and
cooperative action; establishing and enhancing working partnerships; and combining EPA's
resources with those of other federal agencies and state, local, and tribal partners. EPA
understands that government alone cannot begin to address all of the nation's environmental
challenges. The Agency also works with business and industry, non-profit organizations,
environmental groups, and educational institutions in a wide variety of collaborative efforts.
Section I - Page 3
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U.S. Environmental Protection Agency
The mission of the Environmental Protection Agency is to protect human health and the environment
Assistant Administrator
for Administration and
Resource Management
Manages EfiA's hitman, financial,
and physical resources.
General Counsel
Pnwdes /ego/ service to ail
organizational elements
of the Agency.
i,
Assistant Administrator
for Chemical Safety and
Pollution Prevention
Regulates pestiadcs cmd criem/cols to
protect publk beo/ifi ond the
cnwronmenf and p/ornates innovative
programs to parent pcjJhit*on,
II
Region I
Boston, MA
Region 5
Chicago, IL
Administrator
Deputy Administrator
Provides ovfrotl superwsion of the Age/icy
and is responsible directly to the President
of the United Slates.
Inspector General
Assistant Administrator
for Research and
Development
Meets programs"icsexucft and
development needs and conducts
on integrated rcsccrcri and
development program fbf the Agency
I
Region 2
New York, NY
Region 6
Dallas, TX
Assistant Administrator
for Enforcement and
Compliance Assurance
Detvers c&mfj/rtwice with U.S.
environmental tows and promotes
pflHutron preventron.
T
Assistant Administrator
for International
and Tribal Affairs
M artrigrs Agent y it
thuitut t
regions ond acts as the focal1 fjcwnr on
I
Assistant Administrator
for Solid Waste and
Emergency Response
I
Region 3
Philadelphia, PA
Region 7
Kansas City, KS
Chief Financial Officer
Montrges ond coordinates EW s
pJannfng. budgeting a/id accountability
processes and provides financial
management serwces.
Assistant Administrator
for Environmental
Information
Assistant Administrator
for Water
Dew/ops ncrtrono1/ programs, (ecfviiica/
po/ioes. ond rcgUiTotrons rf/c/Crng to
dnnfanp water: mite/ tjLfaJit^;g/ouind
ivater; pofJutron source sttTJidocds; r/nd
the pfotecfton of ivetkmds, marrne.
and csliraifjne arc as
Region 4
Atlanta, G A
Region 8
Denver, CO
Region 9
San Francisco, CA
Region 10
Seattle, WA
Section I - Page 4
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hts of Environmenta
Region 10 Reducing Diesel Emissions in Western
United States
In 2010, EPA awarded over $18.4 million m Diesel Emis-
sions Reduction Act (DERA) grant funds through the West
Coast Collaborative (WCC). These awards assist states,
cities, tribes, and non-profits in reducing diesel emissions and
protecting public health. When combined with matching
tunds of $29.4 million from the private sector and State and
local air agencies in Alaska, Arizona, California, Hawaii,
Idaho, Nevada, Oregon, and Washington, the DERA grant
funds were leveraged into almost $700 million in monetized
health benefits from reductions in fine paniculate matter
emissions. Upgrading 9,265 diesel engines resulted in emis-
sion reductions of 11,034 tons of nitrogen oxide and 438
tons of particulate matter. Many of these projects address air
toxics risk in environmental justice communities.
http://westcoastcollaborative.org/
Region 9 EnhancingWastewater Collection and
Treatment in Hawaii
A multibillion dollar settlement was reached with the city
and county ot Honolulu, Hawaii, t
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Accomplishment, EPA
ons
Reg/on 5 Funding the Great Lakes Restoration Initiative
In 2010, President Obama announced $475 million in new funding
for the Great Lakes Restoration Initiative, the largest investment in
the Great Lakes in two decades. The initiative targets some of the
most serious threats to the Great Lakes: invasive species, nonpoint
source pollution, and contaminated sediment. EPA awarded more
than 250 grants totaling approximately $150 million to states,
municipalities, universities, and nonprofit organizations.
http://www.greatiakesrestoration.us/
Region 4 Cleaning Up the Tennessee Valley Authority
(TVA) Kingston Fossil Plant
When a dike used to contain fly ash at die plant failed in Decem-
ber 2008, -5.4M cubic yards of fly ash were released into a pond,
three adjacent sloughs, and the main Emory River channel. By
September 2010, EPA had already completed the necessary time-
critical removal actions (well ahead of schedule) and seamlessly
transitioned to non-time-critical activities. Over 3.5M cubic yards
of fly ash have already been removed from sensitive environments,
and actions are underway to permanently and safely close the failed
dredge cell. http://www.epa.gov/region4/kingston/index,h.tml
Region I Mitigating Urban Stormwater Pollution
Region 1 broke new ground with first-time use of "residual
designation" authority under the Clean Water Act to rem-
edy severe water pollution problems in the Charles River
watershed (metro Boston) and Long Creek in Portland,
Maine. Permits will require extensive retrofitting of green
infrastructure techniques to restore the natural water cycle.
Ninety-eight percent of regulated areas near Long Creek
signed on to watershed restoration utility, and retrofit
construction is underway,
http://www.restorelongcreek.org/
Reg/on 2 Advancing New Jersey Site Cleanup With
American Recovery and Reinvestment Act Funds
Supported by $50 million in Recovery Act funding, Region
2 accelerated the cleanup of contaminated soil and debris
at the Cornell Dubilier Electronics site, a former elec-
tronic parts and capacitor manufacturing facility in South
Plainheld, New Jersey. The treatment and disposal of the
soil, which is contaminated with semi-volatile organic
compounds, metals, and polychlormated biphenyls, will
allow redevelopment to begin at the industrial park.
Approximately 68 jobs have been created, and more than
41,000 tons of soil has already been treated. The project was
included in the White House list ot the 100 Recovery Act
Projects That Are Changing America,
http://www.epa.gov/region02/superfund/npl/cornell/
Region 3 Implementing a Rigorous "Pollution
Diet" for the Chesapeake Bay
Region i is developing a rigorous pollution diet for meeting
water quality standards in the Chesapeake Bay and its tidal
tributaries through a Total Maximum Daily Load (TMDL)
to be issued in 2010, The nation's largest TMDL will
include strict limits on nitrogen, phosphorus and sediment
pollution and will be informed by detailed implementation
plans drown by the six watershed states and the District of
Columbia to meet the assigned pollution reductions. The
TMDL and an associated accountability framework are
serving as a model for the nation for the assurance required
by the Clean Water Act that point and nonpoint source
controls can be achieved to meet water quality goals.
http://www.epa.gov/chesapeak ebaytmd I
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A Framework for Performance Management
EPA is accountable for managing its programs and using its resources efficiently and effectively
to achieve results. Measuring performance and making adjustments to improve results are
essential to good management. In FY 2010, the Agency continued to advance its performance
management capabilities and systems.
As required by the Government Performance and Results Act, EPA develops a five-year
Strategic Plan (www.epa.gov/ocfo/plan/plan.htm), which establishes the Agency's long-term
strategic goals, along with supporting objectives and strategic targets. To support achievement
of the long-term goals and objectives outlined in the Strategic Plan, EPA prepares an Annual
Performance Plan and Budget, which commits the Agency to a suite of annual performance
measures. EPA reports its results against these annual performance measures and discusses
progress toward longer-term objectives in its Annual Performance Report, which the Agency
presents in its Congressional Budget Justification.
EPA's Performance Management Framework
Results, Measurement,
Reporting, and Evaluation
Annual Performance Report
• Measures Central
• Executive Management Dashboard
Strategic Planning
Strategic Plan
• Environmental Futures
• Long-term Planning/Measures/
Target Setting
Operations
and Execution
National Program Guidance
Regional Performance
Commitments
Performance Partnership
Agreements
Annual Planning
and Budgeting
Annual Plan and Budget
• Annual Measures/Target
Setting
• Internal Budget Hearings
FY 2010 Advances in Performance Management
During FY 2010, EPA developed and implemented a number of key initiatives to further
strengthen the Agency's performance management system.
New Strategic Plan. The Agency published its FY 2011-2015 EPA Strategic Plan which
provides a blueprint for accomplishing the Agency's priorities over the next five years. The
streamlined, executive-level plan presents five strategic goals for advancing EPA's
environmental and human-health outcomes and the Administrator's priorities. The plan also
presents five cross-cutting fundamental strategies designed to transform how EPA delivers
Section I - Page 7
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environmental and human health protection both inside and outside the Agency. The FY2011-
2015 EPA Strategic Plan is available at www.epa.gov/ocfo/plan/2015/FY 2011-
2015 EPA Strategic Plan with hyperlinks.pdf.
Fiscal Year 2011 - 2015 Strategic Goals Crosscutting Fundamental Strategies
1. Taking Action on Climate Change and Improving Air 1. Expanding the Conversation on Environmentalism
Quality 2. Working for Environmental Justice and Children's Health
2. Protecting America's Waters 3. Advancing Science, Research, and Technological
3. Cleaning Up Communities and Advancing Sustainable Innovation
Development 4. Strengthening State, Tribal, and International Partnerships
4. Ensuring the Safety of Chemicals and Preventing 5. Strengthening EPA's Workforce and Capabilities
Pollution
5. Enforcing Environmental Laws
Priority Goals. In FY 2010, EPA established a limited number of high priority performance
goals (Priority Goals), a new component of the Administration's performance management
framework. Priority Goals communicate the performance improvements EPA will accomplish
relative to its priorities using existing legislative authority and resources. These specific,
measureable, near-term priority goals align with the Agency's long-term strategic and annual
measures and serve as key indicators of progress toward the Agency's five strategic goals.
EPA Priority Goals
EPA will improve the country's ability to measure and control Green House Gas (GHG) emissions. Building a foundation
for action is essential.
• By June 15, 2011, EPA will make publicly available 100 percent of facility-level GHG emissions data submitted to
EPA in compliance with the GHG Reporting Rule.
• In 2011, EPA working with the U.S. Department of Transportation will begin implementation of regulations
designed to reduce the GHG emissions from light duty vehicles sold in the U.S. starting with model year 2012.
Clean water is essential for our quality of life and the health of our communities. EPA will take actions over the next two
years to improve water quality.
• Chesapeake Bay watershed states (including the District of Columbia) will develop and submit Phase I watershed
implementation plans by the end of calendar year (CY) 2010 and Phase II plans by the end of CY 2011 in support
of EPA's final Chesapeake Bay Total Maximum Daily Load (TMDL) which will result in pollution limits needed to
restore Chesapeake Bay water quality.
• Increase pollutant reducing enforcement actions in waters that do not meet water quality standards, and posts
results and analysis on the web.
• Over the next two years, EPA will initiate the review/revision of at least four drinking water standards to
strengthen public health protection.
EPA will ensure that environmental health and protection is delivered to our communities.
• By 2012, EPA will have initiated 20 enhanced Brownfields community level projects that will include a new area-
wide planning effort to benefit under-served and economically disadvantaged communities. This will allow those
communities to assess and address a single large or multiple Brownfields sites within their boundaries, thereby
advancing area-wide planning to enable redevelopment of Brownfields properties on a broader scale. EPA will
provide technical assistance, coordinate its enforcement, water and air quality programs, and work with other
federal agencies, states, tribes, and local governments to implement associated targeted environmental
improvements identified in each community's area-wide plan.
Section I - Page 8
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American Recovery and Reinvestment Act of 2009 (Recovery Act) Reporting. Since the
end of FY 2009, EPA has tracked program performance for six key environmental programs
funded through the Recovery Act which invest in clean water and drinking water projects,
implement diesel emission reduction technologies, clean up leaking underground storage tanks,
revitalize and reuse Brownfields, and clean up Superfund sites. To ensure accountability and
demonstrate progress toward meeting program goals, EPA provides quarterly performance
updates consistent with the timing of quarterly recipient reporting and weekly financial and
activity reports. The Agency also tracks performance for the Office of Inspector General (OIG)
work funded by the Recovery Act. These performance reports are available at
http://epa.gov/recovery/plans.htmltfplans.
Enhanced Executive Management Dashboard. EPA's Executive Management Dashboard
provides access to up-to-date performance and financial information for Agency managers to
use in assessing program and performance status. Managers can view the results of their
programs (as well as progress of other programs and regions) across time and determine
whether they are meeting their annual targets. FY 2010 enhancements to the Dashboard
included a new semi-annual reporting page—a live, single point of access to the Agency's
comprehensive suite of performance measures and results.
Section I - Page 9
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FY 2010 PROGRAM PERFORMANCE
During FY 2010, EPA and its partners achieved significant results under each of the five long-
term environmental goals established in its 2006-2011 Strategic Plan: 1) Clean Air and Global
Climate Change, 2) Clean and Safe Water, 3) Land Preservation and Restoration, 4) Healthy
Communities and Ecosystems, and 5) Compliance and Environmental Stewardship
(www.epa.gov/ocfo/plan/plan.htm). Detailed FY 2010 performance results by strategic goal are
presented in EPA's FY 2010 APR, which EPA will issue with its FY 2012 Congressional Budget
Justification and post on the Agency's website at www.epa.gov/ocfo/budget/index.htm by
February 7, 2011.
To focus the Agency's efforts and guide its work in FY 2010 and beyond, the Administrator
outlined seven priorities. This section highlights a few of the Agency's accomplishments in these
priority areas.
Administrator Jackson's Priorities
1. Taking Action on Climate Change
2. Improving Air Quality
3. Assuring the Safety of Chemicals
4. Cleaning Up Our Communities
5. Protecting America's Waters
6. Expanding the Conversation on Environmentalism
and Working for Environmental Justice
7. Building Strong State and Tribal Partnerships
Progress Toward Performance Priorities
Taking Action on Climate Change. During FY 2010, EPA continued to make historic progress
in addressing climate change. In December 2009, the Administrator signed two distinct findings
under Section 202(a) of the Clean Air Act regarding greenhouse gases: an Endangerment
Finding that six key greenhouse gases threaten the public health and welfare of current and
future generations, and a Cause or Contribute Finding that the combined emissions of these
greenhouse gases from new motor vehicles and engines contribute to the greenhouse gas
pollution which threatens public health and welfare.
In April 2010, in response to the Administration's commitment to move toward a clean energy,
climate friendly economy, EPA and the Department of Transportation jointly established new
federal rules that set the first-ever national greenhouse gas emissions standards and will
significantly increase the fuel economy of all new passenger cars and light trucks sold in the
United States. The rules will conserve about 1.8 billion barrels of oil nationally, reduce nearly a
billion tons of greenhouse gas emissions over the lives of the vehicles covered, and potentially
save the average buyer of a 2016 model year car $3,000 over the life of the vehicle.
Improving Air Quality. Despite the national trend of improving air quality over the last few
decades, some American communities have not attained air quality standards and continue to
face health and environmental challenges from air pollution. During FY 2010, EPA continued to
implement the Clean Air Act Amendments of 1990 and other environmental laws to reduce and
prevent harmful emissions from motor vehicles, fuels, power plants and other large sources that
contribute to outdoor air pollution. The Agency issued a final new health standard for sulfur
dioxide and strengthened the health-based standard for nitrogen dioxide, which when fully
implemented, will improve public health protection from power plants, industrial facilities, and
vehicles. EPA finalized revisions to the National Renewable Fuel Standard Program, which will
expand development and use of renewable fuels and reduce imports of petroleum. When fully
Section I - Page 10
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implemented in 2022, the program is expected to reduce greenhouse gas emissions by 138
million metric tons. EPA and the Department of Transportation also proposed revisions to fuel
economy labels on new cars and light duty trucks available for sale. The new, more
comprehensive labels will include fuel economy ratings and information on greenhouse gas
emissions and smog-forming air pollutants.
Assuring the Safety of Chemicals. During FY 2010, EPA substantially accelerated its pace in
assessing the safety of the most ubiquitous chemicals. The Agency completed hazard
characterizations for 270 high production volume (HPV) chemicals (chemicals
produced/imported in amounts greater than one million pounds annually), a 65 percent increase
over FY 2009; neared issuing a final Toxic Substances Control Act (TSCA) test rule for 19 HPVs
(expected November 2010); and proposed a test rule covering 29 HPVs (February 2010); and
proposed significant expansions and improvements in the TSCA Inventory Update Rule to
obtain the data needed to assess chemical safety. EPA implemented the 2008 Lead-based
Paint Renovation, Repair, and Painting Rule, effective April 2010, which requires renovation
contractors to be trained and certified in the use of lead-safe work practices when renovating
housing and child-occupied facilities built prior to 1978. EPA clarified confidential business
information policies for reviewing chemical identity claims in health and safety studies, thereby
allowing the public unprecedented access to important chemical safety information. Also in FY
2010, EPA for the first time provided free online public access in a downloadable format to the
entire TSCA Chemical Substance Inventory, or approximately 84,000 chemicals in commerce,
including 30 years of test data and other health and safety data on a portion of those chemicals
(www.epa.gov/opptintr/newchems/pubs/invntory.htmtfdatagov).
Cleaning Up Our Communities. In FY2010, EPA launched the Integrated Cleanup Initiative
(ICI), a three-year strategy to improve land cleanup programs by accelerating cleanups,
addressing a greater number of contaminated sites, and putting these sites back into productive
use while protecting human health and the environment. The ICI is examining opportunities for
improvements across all of EPA's land cleanup programs, including the Superfund, Brownfields,
Federal Facilities, Resource Conservation and Recovery Act, and Underground Storage Tanks
Programs. Under the Sustainable Communities Partnership, EPA, the Department of Housing
and Urban Development and the Department of Transportation coordinate federal policies,
programs, and resources to help build more sustainable communities. In February 2010, the
Partnership selected five community pilot projects to integrate housing, transportation, water
infrastructure, and land use planning and investment. EPA will provide assistance with
environmental and economic analysis; planning for the assessment, cleanup, and sustainable
redevelopment of Brownfields sites.
Protecting America's Waters. EPA and its partners continued to make progress in protecting
America's waters. The Agency's Drinking Water State Revolving Fund (DWSRF) and Clean
Water State Revolving Fund (CWSRF) Programs received significant resources as part of the
American Recovery and Reinvestment Act of 2009 (ARRA) funds. CWSRF reported that 1,834
projects began construction; 235 were completed; and $1.13 billion (30 percent of the ARRA
resources) funded "green" projects. The DWSRF reported that 1,338 projects began
construction; 183 were completed; and $539 million (29 percent of the ARRA resources) funded
"green" projects, (http://water.epa.gov/aboutow/eparecovery/index.cfm)
In FY 2010, EPA proposed revisions to the Total Coliform Rule, which requires public water
systems to investigate and correct sanitary defects found when monitoring results indicate the
system may be vulnerable to contamination. The Agency initiated a national dialogue on a new
Drinking Water Strategy to identify better ways to address contaminants in groups, improve
Section I - Page 11
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drinking water technology, use multiple environmental statutes where appropriate, and foster a
more collaborative dialogue with States on sharing information.
EPA continued its comprehensive watershed protection programs for the Great Lakes and
Chesapeake Bay. The Great Lakes Restoration Initiative (GLRI) Action Plan, released in
February 2010, is driving progress, with goals, objectives, and targets in five focus areas linked
to planning and budget targets. At the close of FY 2010, more than $150 million was obligated
in over 250 grants and more than $240 million in 13 principal interagency agreements. Funding
was principally directed to on-the-ground Great Lakes restoration projects in the GLRI focus
areas.
In May 2010, EPA and its Chesapeake Bay partner agencies released the Strategy for
Protecting and Restoring the Chesapeake Bay Watershed, and in September 2010, an action
plan for implementation. The strategy includes using rigorous regulations to restore clean water,
implementing new conservation practices on four million acres of farms, conserving two million
acres of undeveloped land, and rebuilding oyster beds in 20 tributaries of the bay. To increase
accountability, federal agencies will establish milestones every two years to measure actions
taken to achieve longer-term environmental goals. To restore clean water, EPA will implement
the Chesapeake total maximum daily load (a pollution diet for the Chesapeake Bay and local
waterways), expand regulation of urban and suburban stormwater and concentrated animal
feeding operations, and increase enforcement activities and funding for state regulatory
programs.
Expanding the Conversation on Environmentalist!! and Working for Environmental
Justice. EPA significantly advanced its outreach and protection efforts for communities
historically underrepresented in the Agency's decision-making. In July 2010, EPA released for
public comment its draft Plan EJ 2014, a four-year roadmap to help the Agency develop
stronger community relationships and improve environmental and health conditions in
overburdened communities. EPA also issued interim guidance to give environmental justice
communities a voice in shaping environmental rules and regulations. The guidance outlines
steps the Agency can take to incorporate the needs of communities overburdened by pollution
into its decision-making, scientific analysis, and rule development. EPA and the White House
Council on Environmental Quality reconvened the Interagency Working Group on Environmental
Justice, comprising five cabinet agencies dedicated to ensuring that people have strong federal
protection from environmental and health hazards, and marking the Agency's recommitment to
advancing Executive Order 12898, "Federal Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations."
Building Strong State and Tribal Partnerships. In FY 2010, EPA worked in partnership with
states and tribes to develop and implement environmental programs and, where appropriate,
used its expertise to bolster state and tribal efforts. Many state governments are running large
deficits and implementing budget cuts due to the ongoing effects of the economic downturn. In
FY 2010, EPA increased its consultations with state officials on rulemaking, accelerated efforts
to identify opportunities for enhanced work sharing and resources and workload flexibility. The
Administrator also emphasized the continued need to provide strong funding to support state
governments in testimony to Congress. In addition, within eight months of the President's
memorandum on Tribal Consultation, EPA finalized a Tribal Consultation Plan, which will be
fully implemented in early FY 2011. The policy ensures consistent implementation of EPA's
1984 Indian Policy and Executive Order 13175 and will result in broad consultation and
coordination with tribes, and help to strengthen the partnership between tribes and EPA (see
www.epa.gov/indian/consultation/index.htm).
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Deepwater Horizon BP Oil Spill in the Gulf of Mexico
In FY 2010, the United States experienced one of the worst environmental disasters in its
history, the April 20, 2010 Deepwater Horizon BP oil spill in the Gulf of Mexico. EPA
immediately began monitoring the area to determine potential public health and environmental
concerns—primarily air quality concerns from the spill and controlled burn emissions—and
preparing for the immediate and long-term environmental fallout from the spill.
As of one of many agencies supporting the U.S. Coast Guard-led federal response, EPA vice-
chaired the National Response Team for the Deepwater Horizon BP Response, which provided
round the clock coordination among the involved federal agencies. Among its efforts, EPA:
• Collected and evaluated over 5,000 samples along the shoreline and beyond for chemicals
related to oil and dispersants in the air, water, sediment, waste. EPA's monitoring and
sampling activities provided the Coast Guard, other federal agencies, states, and local
government with data information to inform decisions about seafood safety, habitat impacts,
and beach closure issues.
• Supported and advised Coast Guard efforts to clean the reclaimed oil and waste from the
shoreline.
• Worked with the National Oceanic Atmospheric Administration to design a monitoring
strategy for subsea dispersant use, evaluated the toxicity of dispersants, and provided
oversight on the use of dispersants.
EPA mobilized its Headquarters and Regional Emergency Operations Center and established a
communications network to provide timely information to the public. The Agency's
www.epa.gov/BPspill site includes air, water, and sediment quality monitoring updates; Q&As
on pertinent issues; and links to additional response sites. EPA also used social media such as
Facebook and Twitter, to provide a continuous flow of information from major announcements to
notices of local developments and meetings.
In September 2010, the Administration outlined an aggressive Gulf Coast ecosystem restoration
plan which established the Gulf Coast Ecosystem Task Force to be led by EPA Administrator
Lisa Jackson. The task force, an intergovernmental advisory body, is charged with coordinating
restoration programs and projects in the Gulf region. It will focus on efforts to create more
resilient and healthy Gulf Coast ecosystems, while also encouraging support for economic
recovery and long-term health issues. As part of the restoration, EPA will work with federal,
state, and local partners and stakeholders to develop and implement science-based restoration
efforts.
Section I - Page 13
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FINANCIAL ANALYSIS AND STEWARDSHIP INFORMATION
EPA's Sound Financial Management: Good for the Environment, Good for the Nation
EPA continues to carry out its mission to protect human health and the environment with the
support of strong financial management. The accomplishments described in this section
demonstrate that EPA adheres to the highest standards for financial management.
• Audit opinion. For the 11th consecutive year, EPA's OIG issued an unqualified or "clean"
opinion on the Agency's financial statements. This means that EPA's financial statements
are presented fairly in all material respects and that they conform to generally accepted
accounting principles for the federal government. In simple terms, a clean opinion means
that the Agency's numbers are reliable.
• Compliance with federal financial systems requirements. EPA is compliant with the
Federal Financial Management Improvement Act. This means that the Agency's financial
systems comply substantially with federal system requirements and accounting standards.
EPA uses reliable and timely information in its financial system to make sound decisions on
the use of Agency resources.
• Deepwater Horizon BP Oil Spill. EPA developed a Stewardship Plan that modeled the
successful Recovery Act Stewardship Plan. This risk assessment and mitigation plan
stresses the importance of thorough cost documentation to support current and future
claims for reimbursement from responsible parties and to maintain accountability to
taxpayers for federal funds. EPA has tracked and accounted for all Agency resources for
Agency work supporting the oil spill response during FY 2010.
• Open Government. In response to the President's Open Government Directive, EPA
established an Open Government Plan to promote the three core values of Open
Government: transparency, participation, and collaboration with the public. In conjunction
with the Open Government Plan, EPA established its Open Government Data Quality Plan
to ensure the integrity of spending data published on USASpending.gov.
• Recovery Act. EPA is compliant with OMB guidance and Recovery Act requirements in its
financial reporting. This means the Agency submitted accurate and timely financial reports.
EPA also ensured its financial reporting was transparent to the public by posting data to the
EPA Recovery Act website and submitting data to the Recovery and Accountability
Transparency Board for posting to the government-wide website.
In addition to these accomplishments, EPA has made significant achievements in FY 2010, a
few of which are highlighted below:
• Balanced checkbook. EPA's checkbook is balanced—the Agency general ledger matches
the fund balance records maintained by the Department of the Treasury. This match
translates to greater integrity of financial reports and budget results.
• Indirect Rate on Interagency Agreements. During FY 2010, agreements under the Oil
Pollution Act, the Economy Act and Cooperation Authorities collected approximately $3.7
million in indirect costs, including approximately $426,000 in indirect costs associated with
EPA's work on the Deepwater Horizon BP oil spill cleanup effort.
Section I - Page 14
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• Timely payments. EPA paid 99.82 percent of its invoices on time and avoided late payment
penalties. The improper payment rate was less than 0.09 percent, which means that the
correct amount was paid to the right recipient in nearly every instance. Furthermore, EPA
paid 100 percent of its grant payments electronically and 99.6 percent of them on time.
• Innovative Financing. EPA continued to leverage federal funds through an Environmental
Finance Program that works to lower costs, increase investments, promote public-private
partnerships and build financial capacity. The Program's network of university-based centers
has provided educational, technical and analytical support in 48 states. For every dollar that
EPA has invested in the centers, the centers have invested more than three dollars toward
environmental improvement projects.
• Increased Outreach. EPA has launched a Financial Management Wiki Intranet site to
provide a forum for Agency finance and program staff to collaborate electronically in real
time in an era of transparency and accountability. This site allows staff to edit impending
financial policies, vet responses to Frequently Asked Questions, grants access to financial
reports and event calendar. This wiki was design as another tool to further foster the One
EPA concept.
EPA's Financial Statements for Fiscal Year 2010
EPA's Balance Sheet and Statement of Net Cost Highlight EPA's Overall Financial
Condition
Financial statements are formal financial records that document EPA's activities at the
transaction level, where a "financial event" occurs. A financial event is any occurrence having
financial consequences to the federal government related to the receipt of appropriations or
other financial resources; acquisition of goods or services; payments or collections; recognition
of guarantees, benefits to be provided, and other potential liabilities; or other reportable financial
activities.
EPA prepares four consolidated statements: 1) Balance Sheet, 2) Statement of Net Cost, 3)
Statement of Changes in Net Position, and 4) Statement of Custodial Activity, and one
combined statement: Statement of Budgetary Resources. Together, these statements with their
accompanying notes provide the complete picture of EPA's financial situation. Reviewers can
glean a snapshot of EPA's overall financial condition by examining key pieces of information
from these statements. The complete statements with accompanying notes, as well as the
auditor's opinion, are available in Section III of this report.
The Balance Sheet displays assets, liabilities, and net position as of September 30, 2010, and
September 30, 2009. The Statement of Net Cost shows EPA's gross cost to operate, minus
exchange revenue earned from its activities. Together, these two statements provide
information about key components of EPA's financial condition—assets, liabilities, net position,
and net cost of operations.
Section I - Page 15
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(Dollars in Thousands)
Total Assets
Total Liabilities
Net Position
Net Cost of Operations
FY2010
$ 23,456,385
$ 2,343,763
$ 21,112,622
$ 11,712,781
FY2009
$ 24,376,273
$ 2,170,782
$ 22,205,491
$ 8,147,351
Dollar Change
$ (919,888)
$ 172,981
$ (1 ,092,869)
$ 3,565,430
Percent Change
(4)%
8%
(5)%
44%
Assets—What EPA Owns and Manages
EPA's assets totaled $ 23 billion at the end of
FY 2010. More than 93 percent of EPA's
assets fall into two categories: 1) its Fund
balance with the Department of the Treasury,
the equivalent of the Agency's "checkbook"
balance available to pay expenses, and 2)
investments that will be used to pay for future
Superfund or leaking underground storage tank
cleanups. All of EPA's investments are backed
by U.S. government securities.
Accounting 101
Assets: What EPA owns and manages.
Liabilities: Amounts EPA owes as a result
of past transactions or events.
Net position: The difference between
assets and liabilities (similar to net worth).
Net cost of operations: The difference
between the costs incurred by EPA
programs and EPA's revenues.
Asset Balances by Year
$16
] Fund Balance
with Treasury
I Investments
DAM Other
2010 Balances
2009 Balances
Liabilities—What EPA Owes
EPA's liabilities were $2 billion at the end of FY 2010, an increase of $172 million from the FY
2009 level. EPA's largest liability, its combined accounts payable and accrued liabilities,
includes $1.08 billion and represents 46 percent of what the Agency owes. The next largest
category, representing 27 percent of EPA's liabilities, covers Superfund cashout advances
which include funds paid by EPA to fund cleanup of contaminated sites under the Superfund
program. The remaining two categories represent 27 percent of the Agency's liabilities. Payroll
and benefits payable include salaries, pensions, and other actuarial liabilities. Other liabilities
include EPA's debt due to Treasury, custodial liabilities that are necessary to maintain assets for
which EPA serves as custodian, environmental cleanup costs, and other miscellaneous
liabilities. The charts below compare FY 2010 and FY 2009 liabilities by major categories.
Section I - Page 16
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FY 2010 Liabilities by Type
Dollars In Thousands
AP&Actr.Llab.. ,
51.082.773,46% "\
FY 2009 Liabilities by Type
Do//ars in Thousands
Net Cost of Operations—How EPA Used Its Funds
The charts below show how EPA divided its funds among its five program goal areas in FY
2010 and FY 2009:
FY 2010 Net Cost by Goal
LAND
PRESERVATIONS
16%
Source: FY 2010 Statement of Net Cost by Goal
FY 2009 Net Cost by Goal
LAND
PRESERVATION
$1,525,964
19%
Source: FY 2009 Statement of Net Cost by Goal
Goal areas: clean air and global climate change, clean and safe water, land preservation and
restoration, healthy communities and ecosystems, and compliance and environmental
stewardship.
Responsible Financial Stewardship
EPA serves as a steward on behalf of the American people. The chart below presents two
categories of stewardship: RSI (Stewardship Land) and RSSI (Research and Development,
Infrastructure, and Human Capital). In FY 2010, EPA devoted a total of $2.5 billion to its
stewardship activities.
Per Federal Accounting Standards Advisory Board, stewardship investments consist of
expenditures made by the Agency for the long-term benefit of the nation that do not result in the
federal government acquiring tangible assets. As reflected in the graph below, the FY 2010 land
totals $0 as no Superfund Real Estate actions took place which involved the transfer of funds to
Section I - Page 17
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or from the agency. Two properties were transferred from the agency, while two properties were
acquired by the agency; however, all actions involved no acquisition or transfer costs.
Stewardship
(Dollars in Millions)
Research and
Development,
$662,748, 26%
Infrastructure,
$1,857,451,
73%
• Infrastructure efforts focus on clean water and drinking water facilities. EPA funds
construction of wastewater treatment projects and provides grants to states to support
wastewater and drinking water treatment facilities. EPA devoted nearly $1.85 billion in FY
2010 to projects to ensure that people have clean, safe drinking water.
• Research and development activities enable EPA to identify and assess important risks to
human health and the environment. This critical research investment provides the basis for
EPA's regulatory efforts including those to protect children's health and at-risk communities,
drinking water, and the nation's ecosystems.
• Human capital includes EPA's educational outreach and research fellowships, both
designed to enhance the nation's environmental capacity.
• Land includes contaminated sites to which EPA acquires title under the Superfund authority.
This land needs remediation and cleanup because its quality is well below any usable and
manageable standards. To gain access to contaminated sites, EPA acquires easements
that are in good and usable condition. These easements also serve to isolate the site and
restrict usage while the cleanup is taking place.
A detailed discussion of this information is available in the Required Supplementary
Stewardship Information located in Section III of this report.
Section I - Page 18
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Financial Management for the Future
As challenges to the environment grow, sound stewardship of EPA's financial resources
becomes increasingly critical to the Agency's ability to protect the environment and human
health locally, nationally, and internationally. Reliable, accurate, and timely financial information
is essential to inform decisions on how to address land, water, air, and ecosystem issues.
To strengthen EPA's financial stewardship capabilities, the Office of the Chief Financial Officer
(OCFO) has focused on the fundamental elements of financial management: people and
systems.
People: EPA leverages every available tool to recruit the best people with the necessary skills
to meet tomorrow's financial challenges:
• EPA trains its staff in financial analysis and forecasting, in addition to processes. Staff need
to understand the financial data and what the data means. EPA is integrating financial
information into everyday decision-making, so that the Agency maximizes the use of its
resources.
• EPA recruits financial managers and accounting students through its Student Career
Experience Program and Federal Career Intern Program. New recruits are technologically
savvy and utilize modern tools to drive financial decisions.
Systems: EPA's Integrated Financial Management System has served the Agency for 20 years,
but the technologies used by this legacy system are inadequate to meet EPA's financial
management objectives. In FY 2010, the Agency designed a component-based approach to
modernize its financial system. As approved by OMB through its Financial Systems Advisory
Board, EPA is moving forward with the development and deployment of a new core financial
system to improve the way that EPA manages its business while strengthening accountability
and financial controls.
The Core Financial System will be based on a Commercial-Off-the-Shelf software solution
(Momentum - a product of CGI Federal) that addresses EPA's most critical business needs,
including:
• General Ledger
• Accounts Payable
• Accounts Receivable
• Property
• Project Cost
• Intra-Governmental Transactions
• Budget Execution
• General Ledger
The Core Financial System component will be a Web-based, cloud-ready, open architecture
application managed at CGI's certified Phoenix Data Center, a shared service provider in
compliance with the Financial Management Line of Business (FMLoB).
The modernization strategy then builds upon the Core through implementation of five additional
components, which are subject to future review by OMB:
Section I - Page 19
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• Implementation of the Common Government-Wide Account Code Structure
• Human Resources and Time and Attendance
• Budget Formulation
• Superfund Cost Accounting
• Payment Systems
Each of these components will be complemented by corresponding incremental advances in
EPA's data warehousing and reporting capabilities. These components will be initiated through
a larger architecture that builds upon the Core Financial Component.
By positioning the Core Financial System as the centerpiece of EPA's modernization strategy,
the Agency plans to build future components incrementally upon the basis of the Core to
achieve a more unified and integrated infrastructure. This infrastructure will work towards the
consolidation of resources across systems to centralize the infrastructure footprint and reduce
financial management information silos across the organization.
The Agency is presently examining the sequencing of the remaining five components in the
implementation plan to ensure that these investments are strategically scheduled and effectively
resourced to build off the success of the Core Financial System.
Government-Wide Financial Performance Measurements
The U.S. Chief Financial Officers Council publishes government-wide performance measures
on the "Metric Tracking System" (MTS) website, www.fido.gov/mts/cfo/public. These measures
are a series of key financial management indicators that allow government financial managers,
Congress, and other stakeholders to assess the financial performance of each agency.
During FY 2010, the Agency continued to maintain its green status in seven of the nine
performance metrics. The yellow rating on the "Travel Card Delinquency Rates-lndividually
Billed Account" results from a new method that JPMorgan Chase is calculating based on the
OMB formula of 31+ days past due.1 The red rating on the "Delinquent Accounts Receivable
From the Public Over 180 Days" metric is a long-standing issue with EPA as it relates largely to
Superfund litigation issues which require an extended period of time to resolve and/or collect
and usually involves the assistance of the Department of Justice. Although improvement is
being realized through litigation debt collections made by the Department of Justice on EPA's
behalf, EPA plans to review internal debts with high dollar values or inactive collection activity to
determine and remedy obstacles that may be preventing collection.
In July 2010, JPMorgan Chase changed the methodology of calculating EPA's travel card delinquency rates for
individually billed accounts. The new method reports outstanding balances at 31+ days as past due. The previous
methodology used the formula of 61 + days to report the past due balance.
Section I - Page 20
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Government-Wide Financial Performance Metrics
Financial Management Indicator
• Fund Balance with Treasury, Net
• Amount in Suspense (Absolute) Greater Than 60 Days Old
• Electronic Payments
• Percent Non-Credit Invoices Paid On-Time
• Interest Penalties Paid
• Purchase Card Delinquency Rates
• Travel Card Delinquency Rates - Centrally Billed
• Travel Card Delinquency Rates - Individually Billed
• Delinquent Accounts Receivable from Public Over 1 80
Days
Rating
September
2010
V
X
Rating
September
2009
s
s
X
Limitations of the Principal Financial Statements
The principal financial statements have been prepared to report the financial position and
results of operations of EPA, pursuant to the requirements of 31 U.S.C. 3515 (b). While the
statements have been prepared from the books and records of the entity in accordance with
U.S. generally accepted accounting principles for federal entities and the formats prescribed by
OMB, the statements are in addition to the financial reports used to monitor and control
budgetary resources that are prepared from the same books and records. The statements
should be read with the realization that they are for a component of the U.S. government, a
sovereign entity.
Section I - Page 21
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IMPROVING MANAGEMENT AND RESULTS
Office of Inspector General Audits, Reviews, and Investigations
EPA's OIG contributes to the Agency's mission to improve human health and environmental
protection by assessing the efficiency and effectiveness of EPA's program management and
results; ensuring that Agency resources are used as intended; developing recommendations for
improvements and cost savings; and providing oversight and advisory assistance in helping
EPA carry out its Recovery Act objectives In FY 2010, OIG identified key management
challenges and internal control weaknesses and provided more than 940 recommendations
accounting for $20 million in potential savings and recoveries and more than 390 actions taken
for improvement from OIG recommendations.
OIG also contributes to the integrity of and public confidence in the Agency's programs and to
the security of its resources by preventing and detecting possible fraud, waste, and abuse and
pursuing judicial and administrative remedies. For example, in response to OIG
recommendations the Agency: established procedures for identifying and mitigating dietary
risks to consumers from pesticides that have never been registered; agreed to establish a
schedule to complete Federal Continuity Directive requirements, designate a lead office for
Continuity of Operations (COOP) planning, and identify Headquarters and regional
responsibilities and authorities; and developed a strategic plan, annual plan, and performance
measures for reporting its results in meeting the Agency's National Agenda to Protect Children's
Health from Environmental Threats. Additionally, OIG investigations accounted for 115 criminal,
civil, or administrative enforcement actions or allegations disproved including $3.4 million in
Recovery Act fund cost savings.
Grants Management
EPA has met or exceeded major performance metrics under its second long-term Grants
Management Plan (2009-2013), including grant closeout and competition goals. The Grants
Management Plan builds on the progress made over the past five years to prevent the
reoccurrence of a grants management weakness.
EPA Grants Management Performance Measures
Performance Measure
Percentage of eligible
grants closed out
Percentage of new grants
subject to the competition
policy that are competed
Target
99%
90%
90%
Progress in FY 2009
99.6% in 2007 and earlier
92.9% in 2008
97%
Progress in FY2010
99.6% in 2008 and earlier
95.6% in 2009
96.4%
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EPA HOLDS ITSELF ACCOUNTABLE: SYSTEMS, CONTROLS, AND
LEGAL COMPLIANCE
Federal Managers' Financial Integrity Act
The Federal Managers' Financial Integrity Act (FMFIA) requires agencies to conduct an annual
evaluation of their internal controls over programs (FMFIA Section 2) and financial systems
(FMFIA Section 4) and report the results to the President and Congress. In addition, agencies
are required to report on the effectiveness of internal controls over financial reporting, which
includes safeguarding of assets and compliance with applicable laws and regulations in
accordance with the requirements of Appendix A of OMB Circular A-123.
regional offices conduct assessments and submit
EPA's FY 2010 Key Management
Challenges Identified by the
Office of Inspector General
The Need fora National Environmental
Policy
Water and Wastewater Infrastructure
Oversight of Delegation of States
State Reuse of Contaminated Sites
Limited Capability to Respond to Cyber
Security
Reducing Domestic Greenhouse Gas
Emissions
EPA's Framework for Assessing and
Managing Chemical Risks
Every year, all of EPA's national program and
annual assurance letters attesting to the
soundness of the internal controls within
their organizations. These assurance letters
provide the basis for the Administrator's
annual statement of assurance on the
adequacy of EPA's internal controls over
programmatic operations and financial
systems. The Administrator's FY 2010
statement of assurance is provided below.
Based on the results of the Agency's FY
2010 evaluation, the Administrator can
provide reasonable assurance on the
adequacy and effectiveness of EPA's
internal controls over programs and
financial systems.
To evaluate its internal controls over
financial reporting (as required by OMB
Circular A-123, Appendix A), the Agency reviewed 10 key financial processes and 296 key
controls. Based on this evaluation, no new material weaknesses and one new significant
deficiency were identified and internal controls were found to be operating effectively and
efficiently.
Management Assurances
For FY 2010, no new material weaknesses were identified by the Agency or the OIG.
Additionally, the Agency removed three material weaknesses identified as part of the Agency's
FY 2009 audited financial statement process. Two material weaknesses—Understated
Unearned Revenue and Understated Accounts Receivable—were closed, and a third—
Improvements in Billings Cost and Reconciling Unearned Revenue for Superfund State
Contracts (SSC) Costs—was downgraded to a significant deficiency. The Agency continues to
review the SSC process as part of its review of internal controls over financial activities to
identify potential process issues and/or gaps in procedures. Section III of this report provides
additional information on EPA's internal control weaknesses.
Section I - Page 23
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Fiscal Year 2010 Annual Assurance Statement
The U.S. Environmental Protection Agency (EPA) conducted its FY 2010 assessment of the
effectiveness of internal controls over programmatic operations and financial activities, as well as
conformance of financial systems to government-wide standards. The assessment was conducted in
compliance with the Federal Managers' Financial Integrity Act (FMFIA), OMB Circular A-123,
Management's Responsibility for Internal Control, and other applicable laws and regulations.
Based on the results of EPA's assessment and no findings of material weaknesses, I am providing
reasonable assurance that the Agency's internal controls over programmatic operations were
operating effectively and financial systems conform to government-wide standards as of September
30,2010.
In addition, based on the results of EPA's assessment of the effectiveness of internal controls over
financial activities and no findings of material weaknesses as of June 30, 2010, I am providing
reasonable assurance that EPA's internal controls over financial activities were operating effectively.
Jo , '2-
o
Lisa P. Jackson
Administrator
'Date
Material and Agency Weaknesses
Remaining at Year End
(Rscal Years 2000-2010)
EPA is also addressing a number of less severe weaknesses. Corrective actions are underway
to address Agency-level weaknesses and significant deficiencies. In FY 2010, the Agency
closed one Agency-level weakness,
identified one new Agency-level
weakness and significant deficiency,
and is carrying over four Agency-level
weaknesses. Details about corrective
actions underway to rectify remaining
Agency-level weaknesses are
discussed under "Management
Challenges and Integrity Weaknesses"
in Section III of this report. EPA will
continue to monitor progress in
correcting these issues until they are
resolved. The accompanying graph
depicts EPA's progress in correcting its
material and Agency-level weaknesses
since 2000.
EPA continues to emphasize the
importance of maintaining effective
internal controls. In FY2010, the
Agency continued to conduct internal
program compliance reviews of program
and regional offices to help inform and
strengthen its FMFIA implementation. Additionally, the Agency is developing training, which will
include tools and materials to help Agency managers and staff in fulfilling their roles and
responsibilities for maintaining an effective internal controls program. EPA expects the training
to be available in FY2011.
Fiscal Year
Section I - Page 24
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Federal Financial Management Improvement Act
The Federal Financial Management Improvement Act (FFMIA) requires that agencies
implement and maintain financial management systems that comply with 1) federal financial
management system requirements, 2) applicable federal accounting standards, and 3) the U.S.
Government Standard General Ledger. Annually, agency heads are required to assess and
report on whether these systems comply with FFMIA.
EPA's FY 2010 assessment included the following:
• Validated the effectiveness of controls examined in the A-123 reviews.
• The OIG's report on the FY 2010 financial statement audit showed no material weaknesses
related to financial management systems.
• The Agency's annual Federal Information Security Management Act Report did not identify
any material weaknesses.
• The Agency conducted other systems-related activities, including:
o Annual recertification of user access to the Agency's accounting system.
o Completion of security self-assessments with the online Automated System Security
Evaluation and Remediation Tracking (ASSERT) tool for the accounting system.
Based on the assessment described above, the Agency is in compliance with the FFMIA for FY
2010.
Federal Information Security Management Act
The Federal Information Security Management Act (FISMA) directs federal agencies to evaluate
the effectiveness of their information security programs and practices annually and submit a
report—including an independent evaluation by the Inspector General—to the Department of
Homeland Security (DHS) and OMB. Agencies also report quarterly and annually to DHS and
OMB on the status of remediation of identified weaknesses.
EPA's Chief Information Officer, senior agency program officials, and the Inspector General's
FY 2010 FISMA Report cite no significant or material weakness in information security.
However, the Inspector General noted where EPA needs to make significant improvements in
establishing and maintaining an account and should identify a management program for user
accounts that reside on the Agency's network. The report presents the results of the Agency's
annual security program reviews and reflects EPA's continued efforts to ensure that information
assets are protected and secured in a manner consistent with the risk and magnitude of the
harm resulting from the loss, misuse, or unauthorized access to or modification of information.
The Agency plans to focus its FY 2011 efforts on improving the effectiveness of the Agency
Information Security Program by implementing risk-based improvements identified by a series of
metrics based on key performance indicators.
Inspector General Act Amendments of 1988
EPA uses the results of OIG audits and evaluations to assess its progress toward its strategic
goals and to make corrections and adjustments to improve program effectiveness and
efficiency. The Agency is continuing to strengthen its audit management, addressing audit
follow-up issues and working to complete corrective actions expeditiously and effectively to
improve environmental results. During FY 2010, for example, OCFO continued the effort started
Section I - Page 25
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in FY 2009 of conducting reviews of national program and regional offices to promote sound
audit management and increase Agency awareness of, accountability for, and completion of,
outstanding unimplemented OIG recommendations.
In FY 2010, EPA was responsible for addressing OIG recommendations and tracking follow-up
activities for 375 OIG reports. The Agency achieved final action (completing all corrective
actions associated with the audit) on 150 audits, which included program evaluation/program
performance, assistance agreement, and single audits. This total excludes Defense Contract
Audit Agency audits issued after January 1, 2009; these audits are discussed in a separate
section below. EPA's FY 2010 management activities for audits with associated dollars are
represented in the following table:
Category
A. Audits with management decisions but
without final action at the beginning of the period
B. Audits for which management decisions were
made during the period
(i) Management decisions with disallowed costs
(22) and with better use funds (2) (ii)
Management decisions with no disallowed costs
(84) and with no better use funds (41)
C. Total audits pending final action during the
period (A+B)
D. Final action taken during the period:
(i) Recoveries
a) Offsets
b) Collection
c) Value of Property
d) Other
(ii) Write-Offs
(iii) Reinstated Through Grantee Appeal
(iv) Value of recommendations completed
(v) Value of recommendations management
decided should/could not be completed
E. Audits without final action at end of period
(C-D)
Disallowed Costs
(Financial Audits)
Number Value
63 $65,382,172
106 $12,886,331
169 $ 78,268,503
105 $ 11,333,928
$ 157,151
$ 1,325,845
$ 0
$ 9,575,047
$ 275,885
$ 0
64 $ 69,934,575
Funds Put To Better
Use
(Performance Audits)
Number Value
76* $103,749,706
43 $ 7,148,965
119 $ 110,898,671
45 $ 30,828,106
$ 30,828,106
$ 0
74 $ 80,070,565
*This number includes all performance audits. Prior reports reflected only the number of performance audits with
better use funds. We have changed our methodology for reporting the number of performance audits In order to be
consistent with the way the financial audits are reported (total number of financial audits including those without
disallowed costs).
EPA's FY 2010 management activities for audits without final corrective action are summarized
below:
• Final Corrective Action Not Taken. Of the 375 audits that EPA tracked, a total of 224
audits—which include program evaluation/program performance, assistance agreement,
contracts, and single audits—were without final action and not yet fully resolved at the end
Section I - Page 26
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of FY 2010. (The 29 audits with management decisions under administrative appeal by the
grantee are not included in the 224 total; see discussion below.)
Final Corrective Action Not Taken Beyond One Year. Of the 224 audits, EPA officials
had not completed final action on 58 (four of which involve multiple offices) within one year
after the management decision (the point at which the OIG and the Action Official reach
agreement on the corrective action plan). Because the issues to be addressed may be
complex, Agency managers often require more than one year after management decisions
are reached with the OIG to complete the agreed-on corrective actions. These audits are
listed below by category—audits of program performance, single audits, and assistance
agreements—and identified by title and responsible office. Additional details are available on
EPA's website at www.epa.gov/ocfo/financialperformancereports.htm.
o Audits of Program Performance. Final action for program performance audits occurs
when all corrective actions have been implemented, which may require more than one
year when corrections are complex and lengthy. Some audits include recommendations
requiring action by more than one office. EPA is tracking 41 audits in this category
including one that was re-opened (four of which involve multiple offices):
Office of Administrator
2009-P00119+ Improved Management of Special Accounts Will Make More Funds Available
Office of Administration and Resources Management
9-P00087+ EPA Plans for Managing Counter Terrorism/Emergency Response Equipment
and Protecting Critical Assets
Office of Air and Radiation
2005-P00010 Evaluation of CAA Title V Operating Permit Quality
2008-P00206 Voluntary Greenhouse Gas Reduction Programs Have Limited Potential
9-P00061 Improvements Needed to Validate Reported ENERGY STAR Benefits
9-P00087+ EPA Plans for Managing Counter Terrorism/Emergency Response Equipment
and Protecting Critical Assets
Office of the Chief Financial Officer
2008-P00116 Superfund Expenditures at NPL TRI Sites
9-P00144 EPA Needs to Improve Internal Controls to Increase Cost Recovery
9-P00087+ EPA Plans for Managing Counter Terrorism/Emergency Response Equipment
and Protecting Critical Assets
Office of Enforcement & Compliance Assurance
2001-P00013 State Enforcement Effectiveness - National Audit
2005-P00024 Priority Enforcement and Compliance Assurance Universe
2007-P00027 Benchmarking Other Organizations Statistically Valid Compliance Practices
2008-P00141 EPA Needs to Track Compliance w/SF Clean-up Requirements
2009-P00119 Improved Management of Superfund Special Accounts Will Make More Funds
Available
9-P00092 EPA Can Improve Implementation of the Risk Management Program for Airborne
Chemical Releases
Office of Environmental Information
2005-P00011 Remote Access Servers & Configurations Management
2007-P00007 Managing Contractor Systems and Reporting Incidents
2007-P00008 EPA Could Improve Controls over Mainframe Software
2007-P00030 EPA's Implementation of Electronic Data Collection
Section I - Page 27
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2007-P00055 Results of Technical Vulnerability Assessment: EPA's Research Triangle Park
Campus
9-P00097 Results of Technical Network Vulnerability Assessment: EPA Headquarters
Office of Grants and Debarment
9-P00241 EPA Has Improved Efforts to Reduce Unliquidated Obligations in Superfund
Cooperative Agreements
Office of International and Tribal Affairs
2008-P00083 AA - Tribal Grants Results
Office of Chemical Safety and Pollution Prevention
2006-P00009 Impact of Data Gaps on EPA's Implementation of FQPA
Office of Research and Development
9-P00232 EPA's Office of Research and Development Could Better Use the Federal
Managers' Financial Integrity
Office of Solid
2006-P00013
2006-P00007+
2007-200003
2007-P00005
2007-P00002
2008-P00235
8-P00265
2009-P00119+
9-P00092+
9-P00176
Waste and Emergency Response
SF Mandate: Program Efficiencies
More Information Is Needed on Toxaphene Degradation Products
Superfund Cooperative Agreement Obligations
Review of RCRA Interim Status Permits
Asbestos Cleanup in Libby Montana
EPA Decisions to Delete SF Sites Should Undergo QA Review
EPA Should Continue Efforts to Reduce Unliquidated Obligations in Brownfields
Pilot Grants
Improved Management of Special Accounts Will Make More Funds Available
EPA Can Improve Implementation of the Risk Management Program for Airborne
Chemical Releases
Regional Public Liaison Program Needs Greater Focus on Results and Customer
Awareness
Office of Water
2002-P00012
2004-P00030
2006-P00007+
2007-P00036
Region 1
2009-P00119+
Region 2
2007-P00039
2007-P00016
Region 3
2007-P00031
2008-P00049
Region 6
2009-P00029
Region 9
2008-P00196
9-P00131
Controlling and Abating Combined Sewer Overflows
EPA's Pretreatment Program
More Information Is Needed On Toxaphene Degradation Products
Planning for Future TMDL Reviews
Improved Management of Special Accounts Will Make More Funds Available
OIG Congressional Request-Ringwood Mines/Landfill Superfund
Ringwood Mines/Landfill Superfund Site
Chesapeake Bay Land Use
Chesapeake Bay Point Sources
SF Site Sampling
Making Better Use of Stringfellow SF Special Accounts
Results of Hotline Complaint Review for California Superfund Site
Section I - Page 28
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o Re-opened audits. During a recent review, OIG identified one Program Performance
audit for which Final Action was taken, although all corrective actions had not been
completed. As a result, this audit has been reactivated:
Office of Environmental Information
2007-P-00017 EPA's Implementation of Database Security
+ Indicates audits involving more than one office
o Single audits. Final action for single audits occurs when non-monetary compliance
actions are completed. Achieving final action may require more than a year if the findings
are complex or the grantee does not have the resources to take corrective action. Single
audits of nonprofit organizations, universities, and state and local governments are
conducted. EPA is tracking completion of corrective action on 12 single audits for the period
beginning October 1, 2010.
Region 2
2007-300139 State of New York, FY 2006
Region 8
2008-P00213 Oglala Sioux Single Audits - Corrective Actions Taken but Improvements
Needed in Resolving Costs
Region 9
2006-300185 Guam Waterworks Authority FY 2004
Region 10
2002-300009 Iliama Village Council
2002-300042 Iliama Village Council
2003-300047 Stevens Village Council
2003-300117 Stevens Village Council
2003-300145 Circle Village Council
2004-300011 Northway Village Council
2006-300085 Stevens Village Council FY 2003
2006-300167 State of Alaska - FY 2003
2006-300168 State of Alaska - FY 2004
o Audits of Assistance Agreements. Reaching final action for assistance agreement audits
may require more than one year, as the grantee may appeal, refuse to repay, or be placed
on a repayment plan that spans several years. EPA is tracking five audits in this category:
Region 3
2001-100101 Center for Chesapeake Communities (CCC) Assist. Agreements
Region 5
2008-200039 Village of Laurelville, Ohio
Region 6
1998-200015 St. Bernard Parish
Office of Grants and Debarment
2004-400014 Consumer Federation of America Foundation- Costs Claimed
2007-400026 AA - International City County Management Association
Section I - Page 29
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o Re-opened audits. During a recent review, OIG identified one audit for which Final Action was
taken, although all corrective actions had not been completed. As a result, this audit has been
reactivated:
Office of Environmental Information
2007-P-00017 EPA's Implementation of Database Security
o Audits Awaiting Decision on Appeal. EPA regulations allow grantees to appeal
management decisions on financial assistance audits that seek monetary
reimbursement from the recipient. In the case of an appeal, EPA must not take action to
collect the accounts receivable until the Agency issues a decision on the appeal. At the
end of FY 2010, 29 audits were in administrative appeal. When these audits are out of
appeal and all issues have been resolved, they will be captured in audit follow-up data
reported in EPA's Agency Financial Report.
Defense Contract Audit Agency Audits
Prior to January 1, 2009, Defense Contract Audit Agency (DCAA) audits of EPA contracts were
requested by EPA's OIG and the results were included in the OIG's Semi-annual Report on
Audits. EPA will continue to track and report on these DCAA audits along with other OIG audits
until they are resolved and final action is taken; they are included in the summary above.
Beginning January 1, 2009, however, EPA's Office of Acquisition Management assumed
responsibility for requesting DCAA audits. Accordingly, these audits are now reported
separately from OIG audits. Following is an overview of DCAA audit activity for the period,
October 1, 2009 through September 30, 2010.
Summary of Audit Activities for the Period Ending September 30, 2010
During this reporting period, EPA management was accountable for monitoring 46 DCAA audits.
The Agency achieved final action on 20 audits. EPA's FY 2010 management activities for DCAA
audits with associated dollars are represented in the following table:
Section I - Page 30
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Category
A. Audits with management decisions but
without final action at the beginning of the period
B. Audits for which management decisions were
made during the period
(i) Management decisions with disallowed costs
(15)
(ii) Management decisions with no disallowed
costs (6)
C. Total audits pending final action during the
period (A+B)
D. Final action taken during the period:
(i) Recoveries
a) Offsets
b) Collection
c) Value of Property
d) Other
(ii) Write-Offs
(iii) Reinstated Through Grantee Appeal
(iv) Value of recommendations completed
(v) Value of recommendations management
decided should/could not be completed
E. Audits without final action at end of period
(C-D)
Disallowed Costs
(Financial Audits)
Number Value
0 $0
21 $1,290,161
21 $1,290,161
20 $ 558,396
$110,437
$0
$0
$ 0
$ 156,950
$0
$291,009
1 $0
Funds Put To Better Use
(Performance Audits)
Number Value
0 $0
0 $0
0 $0
0 $0
$0
$0
0 $0
Final Corrective Action Not Taken on DCAA Audit Reports: Of the 46 DCAA audits EPA
tracked, a total of 26 audits were without final action and not yet fully resolved at the end of FY
2010.
DCAA Audits Awaiting Decision on Appeal: As of September 30, 2010, there were no
management decisions in administrative appeal status.
Section I - Page 31
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ERA'S FY 2010
Agency Financial Report
Section II
Financial Section
This document is one chapter from the Fiscal Year 2010 Agency Financial Report, U.S.
Environmental Protection Agency (EPA- 190-R-10-003), published on November 15, 2010. This
document is available at: www.epa.gov/ocfo/financialperformancereports.htm. Printed copies of
EPA's FY 2010 Agency Financial Report are available from EPA's National Service Center for
Environmental Publications at 1-800-490-9198 or by e-mail at nscep@bps-lmit.com.
Section II - Page 1
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Message from the Chief Financial Officer
EPA's Agency Financial Report (APR) presents the performance and
financial results achieved by the Agency during fiscal year (FY) 2010. It provides
information on EPA's accomplishments and challenges in protecting human health
and the environment, use of the financial resources entrusted to us, and progress in
addressing key management challenges.
This year, the Agency faced new financial and management challenges as
we responded to one of the worst environmental disasters in our country's history,
the Deepwater Horizon BP oil spill in the Gulf of Mexico that began in April 2010. EPA's environmental
experts immediately began monitoring the area, responding to potential public health and environmental
concerns, and addressing the immediate and long-term environmental impacts of the spill. To ensure sound
financial management and safeguard taxpayers dollars entrusted to EPA, I am pleased to report that we
developed an Oil Spill Stewardship Plan for Agency resources supporting the response. This Plan builds on
lessons learned from previous emergency responses, such as Hurricane Katrina and Hurricane Rita and
mirrors similar efforts we undertook to manage financial resources under the American Reinvestment and
Recovery Act of 2009. The Stewardship Plan stresses solid cost documentation to support current and
future claims for reimbursement from responsible parties and maintains accountability to taxpayers for
federal funds.
In addition to EPA's implementation of the Oil Spill Stewardship Plan, the Agency continues to
manage its ongoing programs and resources effectively. For the 11th year in a row, EPA received a clean
opinion on its audited financial statements.
EPA remains compliant with guidance from the Office of Management and Budget (OMB) and
Recovery Act requirements in its financial reporting by submitting accurate and timely financial reports to
OMB. We continually ensure transparency in our financial reporting to the public by posting data to the EPA
Recovery Act website and submitting data to the Recovery and Accountability Transparency Board for
posting to Recovery.gov, a government-wide website.
As required by OMB Circular A-123, we conducted an annual assessment of the effectiveness of
internal controls over financial reporting. During the evaluation, the Agency reviewed 10 key financial
processes and tested 296 key internal controls. Based on the results of this evaluation and the steps the
Agency has taken to remedy its material weaknesses, the Administrator can provide reasonable assurance
that EPA's internal controls over financial reporting are operating effectively.
To strengthen EPA's financial stewardship and management capabilities, the Agency designed a
phase-based approach to modernize its IT financial systems. This OMB-approved approach includes
enhancements designed to improve the way the Agency manages its business while ensuring accountability
and financial controls. This approach makes good business sense, allowing us to focus our efforts and
better plan future project management. We are integrating financial information into everyday decision-
making to maximize the effective and efficient use of EPA's resources.
As Chief Financial Officer, I take seriously my responsibility to provide informed financial analysis to
Agency leaders and the public. As we start the new fiscal year, we will maintain our commitment to financial
excellence and ensure taxpayers' dollars are utilized effectively in fulfilling our mission to protect human
health and the environment. I look forward to continuing our collaboration with our partners and
stakeholders and implementing innovative, cross-cutting strategies to help meet the challenges ahead.
Barbara J. Bennett
Chief Financial Officer
November 15, 2010
Section II-Page 2
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Principal Financial Statements
Financial Statements
1. Consolidated Balance Sheet
2. Consolidated Statements of Net Cost
3. Consolidated Statements of Net Cost by Goal
4. Consolidating Statements of Changes in Net Position
5. Combined Statements of Budgetary Resources
6. Statements of Custodial Activity
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balance with Treasury (FBWT)
Note 3. Cash and Other Monetary Assets
Note 4. Investments
Note 5. Accounts Receivable, Net
Note 6. Other Assets
Note 7. Loans Receivable, Net
Note 8. Accounts Payable and Accrued Liabilities
Note 9. General Property, Plant and Equipment (PP&E)
Note 10. Debt Due to Treasury
Note 11. Stewardship Land
Note 12. Custodial Liability
Note 13. Other Liabilities
Note 14. Leases
Note 15. FECA Actuarial Liabilities
Note 16. Cashout Advances, Superfund
Note 17. Unexpended Appropriations - Other Funds
Note 18. Commitments and Contingencies
Note 19. Earmarked Funds
Note 20. Exchange Revenues, Statement of Net Cost
Note 21. Intragovernmental Costs and Exchange Revenue
Note 22. Cost of Stewardship Land
Note 23 Environmental Cleanup Costs
Note 24. State Credits
Note 25. Preauthorized Mixed Funding Agreements
Note 26. Custodial Revenues and Accounts Receivable
Note 27. Reconciliation of President's Budget to Statement of Budgetary Resources
Section II - Page 3
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Notes to Financial Statements (continued)
Note 28. Recoveries and Resources Not Available, Statement of Budgetary
Resources
Note 29. Unobligated Balances Available
Note 30. Undelivered Orders at the End of the Period
Note 31. Offsetting Receipts
Note 32. Transfers In and Out, Statement of Changes in Net Position
Note 33. Imputed Financing
Note 34. Payroll and Benefits Payable
Note 35. Other Adjustments, Statement of Changes in Net Position
Note 36. Non-exchange Revenue, Statement of Changes in Net Position
Note 37. Reconciliation of Net Cost of Operations to Budget
Note 38. Amounts Held By Treasury (Unaudited)
Note 39. 2004 Antideficiency Act (ADA) Violation Reported in 2010
Required Supplementary Information (Unaudited)
1. Deferred Maintenance
2. Stewardship Land
3. Supplemental Statement of Budgetary Resources
Required Supplementary Stewardship Information (Unaudited)
Supplemental Information and Other Reporting Requirements (Unaudited)
Superfund Financial Statements and Related Notes
Section II - Page 4
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Environmental Protection Agency
Consolidated Balance Sheets
As of September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments (Note 4)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intragovernmental
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net - Non-Federal (Note 7)
Property, Plant & Equipment, Net (Note 9)
Other (Note 6)
Total Assets
Stewardship PP& E (Note 11 )
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities (Note 8)
Debt Due to Treasury (Note 10)
Custodial Liability (Note 12)
Other (Note 13)
Total Intragovernmental
Accounts Payable & Accrued Liabilities (Note 8)
Pensions & Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 23)
Cashout Advances, Superfund (Note 16)
Commitments & Contingencies (Note 18)
Payroll & Benefits Payable (Note 34)
Other (Note 13)
Total Liabilities
NET POSITION
Unexpended Appropriations - Other Funds (Note 17)
Cumulative Results of Operations - Earmarked Funds (Note 19)
Cumulative Results of Operations - Other Funds
Total Net Position
Total Liabilities and Net Position
14,603,024
7,243,613
45,698
223,296
22,115,631
10
417,535
5,254
915,121
2,834
23,456,385 S
51,325
4,844
52,751
132,286
241,206
1,031,448
44,938
20,154
636,673
4,373
264,975
99,996
2,343,763
13,342,784
7,152,382
617,456
21,112,622
15,557,917
6,879,948
39,362
214,831
22,692,058
10
817,844
11,645
852,488
2,228
24,376,273
76,054
9,983
71,200
140,645
297,882
865,764
44,122
19,494
572,412
4,573
250,617
115,918
2,170,782
14,536,347
7,086,476
582,668
22,205,491
23,456,385 S
24,376,273
The accompanying notes are an integral part of these financial statements.
Section II - Page 5
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Environmental Protection Agency
Consolidated Statements of Net Cost
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010 FY2009
COSTS
Gross Costs (Note 21) $ 12,406,265 $ 8,920,963
Less:
Earned Revenue (Notes 20, 21) 693,484 773,612
NET COST OF OPERATIONS (Note 21) $ 11,712,781 $ 8,147,351
The accompanying notes are an integral part of these financial statements.
Section II - Page 6
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Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2010
(Dollars in Thousands)
Clean & Safe
Clean Air Water
Costs:
Intragovernmental $ 170,677 $ 193,456
With the Public 1,048,124 6,197,330
Total Costs (Note 21) 1,218,801 6,390,786
Less:
Earned Revenue, Federal 18,923 2,803
Earned Revenue, non Federal 5,906 2,524
Total Earned Revenue (Notes
20,21) 24,829 5,327
NET COST OF OPERATIONS
(Note 21) $ 1,193,972 $ 6,385,459
Land
Preservation &
Restoration
Healthy
Communities &
Ecosystems
342,734 $ 293,850
2,096,211 1,265,653
2,438,945
103,687
446,569
550,256
$ 1,888,689
1,559,503
64,034
44,144
108,178
$ 1,451,325
Compliance &
Environme ntal
Stewardship
$ 182,299
615,931
798,230
3,400
1,494
4,894
793,336
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF OPERATIONS
(Note 21)
Consolidated
Totals
$ 1,183,016
$ 11,223,249
12,406,265
192,847
500,637
693,484
$ 11,712,781
The accompanying notes are an integral part of these financial statements.
Section II - Page 7
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Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2009
(Dollars in Thousands)
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF
OPERATIONS (Note 21)
Costs:
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF
OPERATIONS (Note 21)
Healthy
Clean & Safe Land Preservation Communities &
Clean Air Water & Restoration Ecosystems
$ 187,484 $ 191,558 $ 386,549 $ 271,028
874,787 3,236,903 1,821,301 1,134,155
1,062,271 3,428,461 2,207,850 1,405,183
15,455 4,758 101,767 20,047
3,036 3,208 580,119 42,267
18,491 7,966 681,886 62,314
$ 1,043,780 $ 3,420,495 $ 1,525,964 $ 1,342,869
Consolidated
Totals
$ 1,244,279
$ 7,676,684
8,920,963
$ 146,098
$ 627,514
773,612
Compliance &
Environmental
Stewardship
S 207,660
609,538
817,198
4,071
(1,116)
2,955
$ 814,243
$ 8,147,351
The accompanying notes are an integral part of these financial statements.
Section II - Page 8
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Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Period Ending September 30, 2010
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
FY2010
Earmarked
Funds
FY2010
All Other
Funds
FY2010
Consolidated
Total
7,086,476
7,086,476 $
130,504
213,984
(20,789)
1,280,570
1,604,269
582,668
582,668 $
11,294,823
33,859
(1,280,570)
10,048,112
7,669,144
7,669,144
11,294,823
130,504
213,984
13,070
11,652,381
27,022
27,022 $
(1,565,385)
65,906
7,152,382 $
FY2010
Earmarked
Funds
(546)
134,618
134,072
(10,147,396)
34,788
617,456
FY2010
All Other
Funds
(546)
T 161,640
$ 161,094
(11,712,781)
100,694
$ 7,769,838
FY2010
Consolidated
Total
14,536,347
14,536,347
10,182,421
(17,000)
(65,989)
(11,292,995)
(1,193,563)
13,342,784
7,152,382 S 13,960,240 S
14,536,347
14,536,347
10,182,421
(17,000)
(65,989)
(11,292,995)
(1,193,563)
13,342,784
21,112,622
The accompanying notes are an integral part of these financial statements.
Section II - Page 9
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Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Periods Ending September 30, 2009
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted $
Budgetary Financing Sources:
Appropriations Used
Nonexehange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Total Budgetary Financing Sources $
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources $
Net Cost of Operations
Net Change
Cumulative Results of Operations S
FY2009
Earmarked
Funds
6,160,531
6,160,531
176,168
188,245
(39,705)
1,747,911
2,072,619
(84)
28,975
FY2009 All
Other Funds
555,766
555,766
8,504,157
57,392
(1,747,911)
6,813,638 $
694
184,356
FY2009
Consolidated
Total
6,716,297
6,716,297
8,504,157
176,168
188,245
17,687
8,886,257
610
213,331
28,891 $ 185,050 $ 213,941
(1,175,565) (6,971,786) (8,147,351)
925,945 26,902 952,847
7,086,476
582,668 $ 7,669,144
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
8,674,710
8,674,710
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
8,674,710
7,086,476 S 15,119,015 S
8,674,710
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
22,205,491
The accompanying notes are an integral part of these financial statements.
Section II-Page 10
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Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
BUDGETARY RES OURCES
Unobligated Balance, Brought Forward, October 1:
Adjusted Subtotal
Recoveries of Prior Year Unpaid Obligations (Note 28)
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections
Earned:
Collected
Change in Receivables from Federal Sources
Change in Unfilled Customer Orders:
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year, Without Advances
Previously Unavailable
Expenditure Transfers from Trust Funds
Total Spending Authority from Offsetting Collections
Nonexpenditure Transfers, Net, Anticipated and Actual (Note 32)
Temporarily Not Available Pursuant to Public Law (Note 28)
Permanently Not Available (Note 28)
Total Budgetary Resources (Note 27)
3,703,022
3,703,022
277,771
10,256,166
52
918,786
(1,746)
234,559
(132,489)
0
36,809
1,055,919
1,369,345
(11,800)
(73,453)
3,551,8
3,551,880
220,329
15,276,374
5
631,378
2,884
29,183
(93,701)
57,392
627,136
1,371,077
(32,732)
16,577,022
21,014,069
S TATUS OF BUDGETARY RES OURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred (Note 27)
Unobligated Balances:
Apportioned (Note 29)
Exempt from Apportionment
Total Unobligated Balances
Unobligated Balances Not Available (Note 29)
Total Status of Budgetary Resources
11,260,452
690,229
11,950,681
4,430,813
4,430,813
195,528
16,577,022 $
16,740,272
570,775
17,311,047
3,440,829
3,440,829
262,193
21,014,069
The accompanying notes are an integral part of these financial statements.
Section II - Page 11
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Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1
Adjusted Total
Less: Uncollected Customer Payments from Federal Sources,
Brought Forward, October 1
Total Unpaid Obligated Balance, Net
Obligations Incurred, Net (Note 27)
Less: Gross Outlays (Note 27)
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments fromFederal
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual (Note 28)
Change in Uncollected Customer Payments from Federal Sources
Total, Change in Obligated Balance
Obligated Balance, Net, End of Period:
Unpaid Obligations
Less: Uncollected Customer Payments from Federal Sources
Total, Unpaid Obligated Balance, Net, End of Period
15,788,389 $
15,788,389
(573,824)
15,214,565
11,950,681
(13,588,391)
(277,771)
133,869
13,432,953
13,872,909
(439,956)
9,368,094
9,368,094
(666,246)
8,701,848
17,311,047
(10,670,422)
13,432,953 $
(220,329)
92,421
15,214,565
15,788,389
(573,824)
15,214,565
NET OUTLAYS
Net Outlays:
Gross Outlays (Note 27)
Less: Offsetting Collections (Note 27)
Less: Distributed Offsetting Receipts (Notes 27 and 31)
Total, Net Outlays
13,588,391 $
(1,189,788)
(1,402,960)
10,995,643 $
10,670,422
(719,558)
(1,884,134)
8,066,730
The accompanying notes are an integral part of these financial statements.
Section II-Page 12
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Environmental Protection Agency
Statements of Custodial Activity
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
Other
Total Cash Collections
Accrual Adjustment
Total Custodial Revenue (Note 26)
Disposition of Collections:
Transferred to Others (General Fund)
Increases/Decreases in Amounts to be Transferred
Total Disposition of Collections
Net Custodial Revenue Activity (Note 26)
88,318
18,072
106,390
(16,763)
89,627
101,613
(14,079)
87,534
16,390
103,924
105,684
(16,057)
89,627
87,520
16,404
103,924
The accompanying notes are an integral part of these financial statements.
Section II-Page 13
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Environmental Protection Agency
Notes to the Financial Statements
Fiscal Year Ended September 30, 2010 and 2009
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Reporting Entities
The U. S. Environmental Protection Agency (EPA or the Agency) 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 FY 2010 financial statements are presented on a consolidated basis for the Balance
Sheet, Statements of Net Cost, Changes in Net Position and Custodial Activity and a
combined basis for the Statement of Budgetary Resources. These financial statements
include the accounts of all funds described in this note by their respective Treasury fund
group.
B. Basis of Presentation
These accompanying financial statements have been prepared to report the financial
position and results of operations of EPA 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
EPA accounting policies, which are summarized in this note. The Statement of Net Cost has
been prepared with cost segregated by the Agency's strategic goals.
1. General Fund Appropriations (Treasury Fund Groups 0000-3999)
a. State and Tribal Assistance Grants (STAG) Appropriation: The STAG
appropriation, Treasury fund group 0103, provides funds for environmental
programs and infrastructure assistance including capitalization grants for state
revolving funds and performance partnership grants. Environmental programs
and infrastructure supported are: Clean and Safe Water; capitalization grants for
the Drinking Water State Revolving Funds; Clean Air; direct grants for Water and
Wastewater Infrastructure needs; partnership grants to meet Health Standards,
Protect Watersheds, Decrease Wetland Loss, and Address Agricultural and
Urban Runoff and Stormwater; Better Waste Management; Preventing Pollution
and Reducing Risk in Communities, Homes, Workplaces and Ecosystems; and
Reduction of Global and Cross-Border Environmental Risks.
b. Science and Technology (S&T) Appropriation: The S&T appropriation,
Treasury fund group 0107, finances salaries, travel, science, technology,
research and development activities, including laboratory supplies, certain
operating expenses, grants, contracts, intergovernmental agreements, and
Section II - Page 14
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purchases of scientific equipment. These activities provide the scientific basis for
the Agency's regulatory actions. In FY 2010, Superfund research costs were
appropriated in Superfund and transferred to S&T to allow for proper accounting
of the costs. Environmental scientific and technological activities and programs
include Clean Air; Clean and Safe Water; Americans Right to Know About Their
Environment; Better Waste Management; Preventing Pollution and Reducing
Risk in Communities, Homes, Workplaces, and Ecosystems; and Safe Food.
c. Environmental Programs and Management (EPM) Appropriation: The EPM
appropriation, Treasury fund group 0108, includes funds for salaries; travel;
contracts; grants; and cooperative agreements for pollution abatement, control,
and compliance activities and administrative activities of the Agency's operating
programs. Areas supported from this appropriation include: Clean Air, Clean and
Safe Water, Land Preservation and Restoration, Healthy Communities and
Ecosystems, and Compliance and Environmental Stewardship.
d. Buildings and Facilities Appropriation (B&F): The B&F appropriation,
Treasury fund group 0110, provides for the construction, repair, improvement,
extension, alteration, and purchase of fixed equipment or facilities that are owned
or used by EPA.
e. Office of Inspector General (OIG) Appropriation: The OIG appropriation,
Treasury fund group 0112, provides funds for audit and investigative functions to
identify and recommend corrective actions on management and administrative
deficiencies that create the conditions for existing or potential instances of fraud,
waste and mismanagement. Additional funds for audit and investigative activities
associated with the Superfund and the LUST Trust Funds are appropriated under
those Trust Fund accounts and transferred to the Office of Inspector General
account. The audit function provides contract, internal controls and performance,
and financial and grant audit services. The appropriation includes expenses
incurred and reimbursed from the appropriated trust funds accounted for under
Treasury fund group 8145 and 8153.
f. Payments to the Hazardous Substance Superfund Appropriation: The
Payment to the Hazardous Substance Superfund appropriation, Treasury fund
group 0250, authorizes appropriations from the General Fund of the Treasury to
finance activities conducted through the Hazardous Substance Superfund
Program.
g. Payments to Leaking Underground Storage Tank Appropriation: The
Payment to the Leaking Underground Storage Tank appropriation, Treasury fund
group 0251, authorizes appropriations from the General Fund of the Treasury to
finance activities conducted through the Leaking Underground Storage Tank
Program.
h. Asbestos Loan Program: The Asbestos Loan Program is accounted for under
Treasury fund group 0118, Program Account, for interest subsidy and
administrative support; under Treasury fund group 4322, Financing Account, for
loan disbursements, loans receivable and loan collections on post-FY 1991
loans.
Section II - Page 15
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The Asbestos Loan Program was authorized by the Asbestos School Hazard
Abatement Act of 1986 to finance control of asbestos building materials in
schools. The Program Account 0118 disburses the subsidy to the Financing
Fund for increases in the subsidy. The Financing Account 4322 receives the
subsidy payment, borrows from Treasury and collects the asbestos loans.
/'. Allocations and Appropriations Transferred to the Agency: EPA receives
allocations or appropriations transferred from other federal agencies.
j. Treasury Clearing Accounts: The EPA Department of the Treasury Clearing
Accounts include: 1) the Budgetary Suspense Account, 2) the Unavailable Check
Cancellations and Overpayments Account, and 3) the Undistributed Intra-agency
Payments and Collections (IPAC) Account. These are accounted for under
Treasury fund groups 3875, 3880, and 3885, respectively.
k. General Fund Receipt Accounts: General Fund Receipt Accounts include:
Hazardous Waste Permits; Miscellaneous Fines, Penalties and Forfeitures;
General Fund Interest; Interest from Credit Reform Financing Accounts;
Downward Re-estimates of Subsidies; Fees and Other Charges for
Administrative and Professional Services; Miscellaneous Recoveries and
Refunds; and Proceeds of Sales, Personal Property. These accounts are
accounted for under Treasury fund groups 0895, 1099, 1435, 1499, 2753.003,
3200, 3220 and 3845, respectively.
/. Allocation of Budget Authority: EPA is an allocation budget transfer parent to
five federal agencies: Department of Interior, Department of Labor, Centers for
Disease Control, Department of Commerce, and Federal Emergency
Management Agency. EPA has an Interagency Agreement or a Memorandum of
Understanding (MOU) with each child agency to provide an annual work plan and
quarterly progress report containing an accounting of funds obligated in each
budget category within 15 days after the end of each quarter. This allows EPA to
properly report the financial activity. The allocation transfers are reported in the
net cost of operations, changes in net position, balance sheet and budgetary
resources where activity is being performed by the receiving federal entity. In
addition, EPA receives allocation transfers, as a child, from the Bureau of Land
Management.
2. Revolving Funds (Treasury Fund Group 4000-4999)
a. Reregistration and Expedited Processing Fund: The Revolving Fund,
Treasury fund group 4310, was authorized by the FIFRA of 1972, as
amended by the FIFRA Amendments of 1988 and as amended by the Food
Quality Protection Act of 1996. Pesticide Maintenance fees are paid by
industry to offset the costs of pesticide re-registration and reassessment of
tolerances for pesticides used in or on food and animal feed, as required by
law.
b. Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund
group 4311, was authorized in 1963 for the deposit of tolerance fees. Fees
are paid by industry for federal services to set pesticide chemical residue
limits in or on food and animal feed. The fees collected prior to January 2,
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1997 were accounted for under this fund. Presently these fees are being
deposited in the FIFRA fund (see above).
c. Asbestos Loan Program: The Asbestos Loan Program is accounted for
under Treasury fund group 4322, Financing Account for loan disbursements,
loans receivable and loan collections on post-FY 1991 loans. Refer to
General Fund Appropriations paragraph h. for details.
d. Working Capital Fund (WCF): The WCF, Treasury fund group, 4565,
includes four activities: computer support services, financial system services,
employee relocation services, and postage. The WCF derives revenue from
these activities based upon a fee for services. The WCF's customers
currently consist primarily of EPA program offices, with a small portion from
other federal agencies. Accordingly, those revenues generated by the WCF
from services provided to EPA program offices and expenses recorded by the
program offices for use of such services, along with the related
advances/liabilities, are eliminated on consolidation of the financial
statements.
3. Special Funds (Treasury Fund Group 5000-5999)
Environmental Services Receipt Account: The Environmental Services Receipt
Account authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549),"
Treasury fund group 5295, 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.
Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by
a 1992 act, "Making appropriations for the Department of Veterans Affairs and
Housing and Urban Development, and for sundry independent agencies, boards,
commissions corporations, and offices for the fiscal year ending September 30, 1993
(P.L. 102-389)," Treasury fund group 5297, has funds available to carry out
authorized environmental restoration activities. Funding is derived from the collection
of reimbursements under the Exxon Valdez settlement as a result of an oil spill.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by the
"Consolidated Appropriations Act, 2004 (P.L. 108-199)," Treasury fund group 5374,
was authorized for the expedited processing of certain registration petitions and
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.
4. Deposit Funds (Treasury Fund Group 6000-6999)
Deposits include: Fees for Ocean Dumping; Nonconformance Penalties; Clean Air
Allowance Auction and Sale; Advances Wthout Orders; Suspense and Payroll
Deposits for Savings Bonds; State, City Income Taxes Wthheld; and Other Federal
Section II - Page 17
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Payroll Withholding Allotments. These funds are accounted for under Treasury fund
groups 6264, 6265, 6266, 6500, 6050, 6275, and 6276, respectively.
5. Trust Funds (Treasury Fund Group 8000-8999)
a. Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group
8145, was established by the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA) to provide resources needed
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. EPA allocates
funds from its appropriation to other federal agencies 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 EPA, private parties, or other federal agencies.
The Superfund Trust Fund includes Treasury's collections and investment
activity.
b. Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust
Fund, Treasury fund group 8153, was authorized by the Superfund Amendments
and Reauthorization Act of 1986 (SARA) as amended by the Omnibus Budget
Reconciliation Act of 1990. The LUST appropriation provides funding to 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 to 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. The program is financed by a one
cent a gallon tax on motor fuels, which will expire in 2011.
c. Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury
fund group 8221, was authorized by the Oil Pollution Act of 1990 (OPA). Monies
were appropriated to the Oil Spill Response Trust Fund in 1993. 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 (SPCC) 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 oil
spill cleanup actions is provided through the U.S. Coast Guard under the Oil Spill
Liability Trust Fund and reimbursable funding from other federal agencies.
d. Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed
Funds Trust Fund authorized in the Federal Water Pollution Control Act (Clean
Water Act) as amended by (P.L. 92-500, The Federal Water Pollution Control Act
Amendments of 1972), Treasury fund group 8741, includes gifts for pollution
control programs that are usually designated for a specific use by donors and/or
Section II-Page 18
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deposits from pesticide registrants to cover the costs of petition hearings when
such hearings result in unfavorable decisions to the petitioner.
C. Budgets and Budgetary Accounting
1. General Funds
Congress adopts an annual appropriation for STAG, B&F, and for Payments to the
Hazardous Substance Superfund to be available until expended, as well as annual
appropriations for S&T, EPM and for the OIG to be available for two fiscal years.
When the appropriations for the General Funds are enacted, Treasury issues a
warrant to the respective appropriations. As the Agency disburses obligated
amounts, the balance of funds available to the appropriation is reduced at Treasury.
The Asbestos Loan Program is a commercial activity financed from a combination of
two sources, one for the long-term costs of the loans and another for the remaining
nonsubsidized portion of the loans. Congress adopted a one-year appropriation,
available for obligation in the fiscal year for which it was appropriated, to cover the
estimated long-term cost of the Asbestos loans. The long-term costs are defined as
the net present value of the estimated cash flows associated with the loans. The
portion of each loan disbursement that did not represent long-term cost is financed
under permanent indefinite borrowing authority established with the Treasury. A
permanent indefinite appropriation is available to finance the costs of subsidy re-
estimates that occur in subsequent years after the loans were disbursed.
Funds transferred from other federal agencies are processed as non-expenditure
transfers. As the Agency disburses the obligated amounts, the balance of funding
available to the appropriation is reduced at Treasury.
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.
2. Revolving Funds
Funding of the FIFRA and Pesticide Registration Funds 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 WCF is provided by fees collected from other Agency appropriations
and other federal agencies to offset costs incurred for providing Agency
administrative support for computer and telecommunication services, financial
system services, employee relocation services, and postage.
3. Special Funds
The Environmental Services Receipt Account obtains fees associated with
environmental programs.
Section II-Page 19
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Exxon Valdez uses funding collected from reimbursement from the Exxon Valdez
settlement.
4. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the
deposit accounts pending further disposition. These are not EPA's funds.
5. Trust Funds
Congress adopts an annual appropriation amount for the Superfund, LUST, and Oil
Spill Response Trust Funds to remain available until expended. A transfer account
for the Superfund and LUST Trust Funds has been established for the purpose of
carrying out the program activities. As the Agency disburses obligated amounts from
the transfer account, it draws down monies from the Superfund and LUST Trust
Funds 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 adopts the appropriation amount.
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. The financial statements are
prepared in accordance with GAAP for federal entities.
Transactions are recorded on an accrual accounting basis and on a budgetary basis
(where budgets are issued). Under the accrual method, revenues are recognized when
earned and expenses are recognized when a liability is incurred, without regard to
receipt or payment of cash. Budgetary accounting facilitates compliance with legal
constraints and controls over the use of federal funds.
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 Statement of Federal Financial Accounting
Standards (SFFAS) No. 7, "Accounting for Revenues and Other Financing Sources."
The Superfund program receives most of its funding through appropriations, which may
be used within specific statutory limits for operating and capital expenditures (primarily
equipment). Additional financing for the Superfund program is obtained through:
reimbursements from other federal agencies, state cost share payments under
Superfund State Contracts (SSCs), and settlement proceeds from Potentially
Responsible Parties (PRPs) under CERCLA Section 122(b)(3), placed in special
accounts. Cost recovery settlements that are not placed in special accounts continue to
be deposited in the Trust Fund.
Most of the other funds receive funding needed to support programs through
appropriations, which may be used within statutory limits for operating and capital
expenditures. However, under Credit Reform provisions, the Asbestos Loan Program
receives funding to support the subsidy cost of loans through appropriations, which may
be used within statutory limits. The Asbestos Direct Loan Financing fund 4322, an off-
Section II-Page 20
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budget fund, receives additional funding to support the outstanding loans through
collections from the Program fund 0118 for the subsidized portion of the loan.
The FIFRA and Pesticide Registration funds receive funding through fees collected for
services provided and interest on invested funds. The WCF receives revenue through
fees collected for services provided to Agency program offices. Such revenue is
eliminated with related Agency program expenses upon consolidation of the Agency's
financial statements. The Exxon Valdez Settlement Fund receives funding through
reimbursements.
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
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
Appropriated 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
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. No provision is made for unrealized
gains or losses on these securities because, in the majority of cases, they are held to
maturity (see Note 4).
H. Notes Receivable
The Agency records notes receivable at their face value and any accrued interest as of
the date of receipt.
I. Marketable Securities
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 (see Note 4).
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J. Accounts Receivable and Interest Receivable
The majority of receivables for non-Superfund funds represent penalties and interest
receivable for general fund receipt accounts, unbilled intragovernmental reimbursements
receivable, allocations receivable from Superfund (eliminated in consolidated totals), and
refunds receivable for the STAG appropriation.
Superfund accounts receivable represent recovery of costs from PRPs as provided
under CERCLA, as amended by SARA. As there are no assurances that these funds will
be recovered, cost recovery expenditures are expensed when incurred (see Note 5).
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 or 50 percent of site remedial action costs, depending on who has the lead 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.
K. Advances and Prepayments
Advances and prepayments represent funds advanced or prepaid to other entities both
internal and external to the Agency for which a budgetary expenditure has not yet
occurred.
L. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans
receivable resulting from obligations on or before September 30, 1991, are reduced by
the allowance for uncollectible loans. 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.
M. Appropriated Amounts Held by Treasury
For the Superfund and LUST Trust Funds and for amounts appropriated from the
Superfund Trust Fund to the OIG, cash available to the Agency that is not needed
immediately for current disbursements remains in the respective Trust Funds managed
by Treasury.
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N. Property, Plant, and Equipment
EPA accounts for its personal and real property accounting records in accordance with
SFFAS No. 6, "Accounting for Property, Plant and Equipment." For EPA-held property,
the Fixed Assets Subsystem (FAS) automatically generates depreciation entries monthly
based on acquisition dates.
A purchase of EPA-held or contract personal property is capitalized if it is valued at
$25,000 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. Detailed records are maintained and accounted for in contractor systems,
not in FAS for contractor held property. Acquisitions of EPA-held personal property are
depreciated using the straight-line method over the specific asset's useful life, ranging
from two to 15 years.
Personal property also consists of capital leases. To be defined as a capital lease, it
must, at its inception, have a lease term of two or more years and the lower of the fair or
present value of the minimum lease payments must be $75,000 or more. Capital leases
may also contain real property (therefore considered in the real property category as
well), but these need to meet an $85,000 capitalization threshold. In addition, the lease
must meet one of the following criteria: transfers ownership to EPA, contains a bargain
purchase option, the lease term is equal to 75 percent or more of the estimated service
life, or the present value of the lease and other minimum lease payments equal or
exceed 90 percent of the fair value.
Superfund contract property used as part of the remedy for site-specific response
actions 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, EPA
retains control of the property (e.g., 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 EPA's 10-year retention period,
depreciation for this property is based on a 10-year 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 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 FAS and depreciated utilizing the straight-line
method based on the asset's acquisition date and useful life.
Real property consists of land, buildings, capital and leasehold improvements, and
capital leases. Real property, other than land, is capitalized when the value is $85,000 or
more. 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 during and after FY 1997 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 102 years. Leasehold improvements are amortized over
the lesser of their useful life or the unexpired lease term. Additions to property and
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improvements not meeting the capitalization criteria, expenditures for minor alterations,
and repairs and maintenance are expensed when incurred.
Software for the WCF—a revenue generating activity—is capitalized if the purchase
price is $100,000 or more with an estimated useful life of two years or more. All other
funds capitalize software if those investments are considered Capital Planning and
Investment Control (CPIC) or CPIC Lite systems with the provisions of SFFAS No. 10,
"Accounting for Internal Use Software." Once software enters the production life cycle
phase, it is depreciated using the straight-line method over the specific asset's useful life
ranging from two to 10 years.
O. 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 unfunded liabilities, and there is no
certainty that the appropriations will be enacted. Liabilities of the Agency arising from
anything other than contracts can be abrogated by the Government acting in its
sovereign capacity.
P. Borrowing Payable to the Treasury
Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos
direct loans described in parts B and C of this note. Periodic principal payments are
made to Treasury based on the collections of loans receivable.
Q. Interest Payable to Treasury
The Asbestos Loan Program makes periodic interest payments to Treasury based on its
debt.
R. 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. Annual leave earned but not taken as
of the end of the fiscal year is accrued as an unfunded liability. Accrued unfunded annual
leave is included in Note 34 as a component of "Payroll and Benefits Payable."
Section II-Page 24
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S. 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, 1984, the Federal Employees Retirement System (FERS) went into effect,
pursuant to Public Law 99-335. Most employees hired after December 31, 1983, are
automatically covered by FERS and Social Security. Employees hired prior to January 1,
1984, elected to either join FERS and Social Security or remain in CSRS. A primary
feature of FERS is that it offers a savings plan to 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.
T. 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.
U. Recovery Act Funds
On February 17, 2009, President Obama signed the American Recovery and
Reinvestment Act of 2009 (Recovery Act). The Act was enacted to create jobs in the
United States, encourage technical advances, assist in modernizing the nation's
infrastructure, and enhance energy independence. EPA was charged with the task of
distributing funds to invest in various projects aimed at creating advances in science,
health, and environmental protection that will provide long-term economic benefits.
EPA manages almost $7.22 billion in Recovery Act-funded projects and programs that
will help achieve these goals, offer resources to help other "green" agencies, and
administer environmental laws that will govern Recovery activities. As of September 30,
2010, EPA has paid out $3.71 billion.
EPA, in collaboration with states, tribes, local governments, territories and other
partners, is administering the funds it received under the Recovery Act through four
appropriations. The funds include:
Section II-Page 25
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State and Tribal Assistance Grants (STAG), which in turn include: $4 billion for
assistance to help communities with water quality and wastewater infrastructure needs
and $2 billion for drinking water infrastructure needs (Water SRF programs and Water
Quality Planning program); $100 million for competitive grants to evaluate and clean up
former industrial and commercial sites (Brownfields program); $300 million for grants
and loans to help regional, state and local governments, tribal agencies, and nonprofit
organizations with projects that reduce diesel emissions (Clean Diesel programs); $600
million for the cleanup of hazardous sites (Superfund program); $200 million for the
cleanup of petroleum leaks from underground storage tanks (LUST Fund program); and
$20 million for audits and investigations conducted by the Inspector General (IG).
EPA has committed to focusing on the following areas: Clean Diesel Emissions,
Superfund Hazardous Waste Cleanup, Cleaner Underground Storage Tank Sites,
Revitalized Neighborhoods from Brownfields, and Cleaner Water and Drinking Water
Infrastructures.
The vast majority of the contracts awarded under the Recovery Act will be entered into
using competitive contracts. EPA is committed fully to ensuring transparency and
accountability throughout the Agency in spending Recovery Act funds in accordance
with OMB guidance.
EPA has set up a Stimulus Steering Committee that meets to review and report on the
status of the distribution of the Recovery Act funds to ensure transparency and
accuracy. EPA has also developed a Stewardship Plan, which is an Agency-level risk
mitigation plan that sets out the Agency's Recovery Act risk assessment, internal
controls, and monitoring activities. The Stewardship Plan is divided into seven functional
areas: grants, interagency agreements, contracts, human capital/payroll, budget
execution, performance reporting, and financial reporting. The Stewardship Plan was
developed around Government Accountability Office (GAO) standards for internal
control. Under each functional area, risks are assessed and related control,
communication, and monitoring activities are identified for each impacted program. The
Plan is a dynamic document and will be updated as revised OMB guidance is issued or
additional risks are uncovered.
EPA has the three-year EPM treasury symbol 689/10108 that is under the Recovery Act.
EPA's two-year EPM treasury symbol 689/00108 is a "regular" program. EPA's other
Recovery Act programs are the following: Office of Inspector General, treasury symbol
689/20113; State and Tribal Assistance Grants, treasury symbol 689/00102; Payment to
the Superfund, treasury symbol 689/00249; Superfund, treasury symbol 689/08195; and
Leaking Underground Storage Tank, treasury symbol 689/08196.
V. Deepwater Horizon BP Oil Spill
On April 20, 2010 the Deepwater Horizon drilling rig exploded, releasing large volumes
of oil into the Gulf of Mexico. As a responsible party, BP is required by the 1990 Oil
Pollution Act to fund the cost of the response and cleanup operations. EPA has been
working in conjunction with the Coast Guard, who was named the lead on the effort to
fund the immediate oil spill cleanup.
Section II-Page 26
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W. 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 and the
reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Note 2. Fund Balance with Treasury (FBWT)
Fund Balance with Treasury as of September 30, 2010 and 2009, consists of the following:
Trust Funds:
Superfund
LUST
Oil Spill & Misc.
Revolving Funds:
FIFRA/Tolerance
Working Capital
Cr. Reform Finan.
Appropriated
Other Fund Types
Total
Fjitity
Assets
$ 106,247 $
55,132
9,644
4,204
80,485
390
14,049,511
289,149
FY2010
Non-Fjitity
Assets
- $
-
-
_
-
-
-
8,262
Total
106,247 $
55,132
9,644
4,204
80,485
390
14,049,511
297,411
Fjitity
Assets
62,631 $
25,169
2,441
7,153
80,293
390
15,122,481
247,877
FY2009
Non-Fjitity
Assets
- $
-
-
_
-
-
-
9,482
Total
62,631
25,169
2,441
7,153
80,293
390
15,122,481
257,359
14,594,762
8,262 $ 14,603,024 $ 15,548,435
9,482
15,557,917
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 EPA for other entities.
Status of Fund Balances:
FY2010
FY2009
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund (Note 38)
Obligated Balance not yet Disbursed
Non-Budgetary FBWT
Totals
$
4,430,813
195,529
(3,736,818)
(1,115)
13,432,954
281,661
14,603,024 $
3,440,831
262,971
(3,583,119)
(18,334)
15,214,555
241,013
15,557,917
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 mostly balances
in expired funds, which are available only for adjustments of existing obligations. For FY
2010 and FY 2009 no differences existed between Treasury's accounts and EPA's
statements for fund balances with Treasury.
Section II-Page 27
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Note 3. Cash and Other Monetary Assets
As of September 30, 2010 and 2009, the balance in the imprest fund was $10,000.
Note 4. Investments
As of September 30, 2010 and 2009 investments related to Superfund and LUST consist of
the following:
Amortized mi*
Interest Investments, Market
Cost (Premium) .
Receivable Net Value
Discount
Intragovernmental Securities:
Non-Marketable FY2010 $ 7,079,053 $ (139,302) $ 25,258 $ 7,243,613 $ 7,243,613
Non-Marketable FY2009 $ 6,641,708 $ (195,777)$ 42,463 $ 6,879,948 $ 6,879,948
CERCLA, as amended by SARA, authorizes EPA to recover monies to clean up Superfund
sites from responsible parties (RPs). Some RPs file for bankruptcy under Title 11 of the U.S.
Code. In bankruptcy settlements, 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 (see Note 6). All investments in Treasury securities are earmarked
funds (see Note 19).
The federal government does not set aside assets to pay future benefits or other
expenditures associated with earmarked funds. The cash receipts collected from the public
for an earmarked fund are deposited in the U.S. Treasury, which uses the cash for general
government purposes. Treasury securities are issued to EPA as evidence of its receipts.
Treasury securities are an asset to EPA and a liability to the U.S. Treasury. Because 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 EPA with authority to draw upon the U.S. Treasury to make
future benefit payments or other expenditures. When 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, borrowing from the public or
repaying less debt, or curtailing other expenditures. This is the same way that the
government finances all other expenditures.
Section II-Page 28
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Note 5. Accounts Receivable, Net
The Accounts Receivable as of September 30, 2010 and 2009 consist of the following:
FY2010 FY2009
$ 45,698 $ 39,362
Intragovernmental:
Accounts & Interest Receivable
Total
Non-Federal:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance forUncollectibles
Total
45,698
143,444
1,958,981
(1,684,890)
39,362
137,593
1,376,831
(696,580)
417,535 $
817,844
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 6. Other Assets
Other Assets as of September 30, 2010 and 2009 consist of the following:
Intragovernmental: FY2010 FY2009
Advances to Federal Agencies
Advances for Postage
Total
223,165 $
131
223,296 $
214,654
177
214,831
Non-Federal:
Travel Advances
Letter of Credit Advances
Other Advances
Operating Materials and Supplies
Inventory for Sale
Total
432 $
9
2,105
149
139
2,834 $
(183)
8
2,146
147
110
2,228
Note 7. Loans Receivable, Net
Loans Receivable consist of Asbestos Loan Program loans disbursed from obligations made
prior to FY 1992 and are presented net of allowances for estimated uncollectible loans, if an
allowance was considered necessary. Loans 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 an expense in
the year the loan is made. The net loan present value is the gross loan receivable less the
subsidy present value. The amounts as of September 30, 2010 and 2009 are as follows:
Section II-Page 29
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FY2010 FY2009
Loans Value of Assets Loans Value of Assets
Receivable, Allowance* Related to Receivable, Allowance* Related to
Gross Direct Loans Gross Direct Loans
Direct Loans
Obligated Prior to $ 545 $ - $ 545 $ 2,003 $ - $ 2,003
FY1992
Direct Loans
Obligated After FY 4>931 (222) 4'709 10'590 (948) 9>642
1991
Total $ 5,476 $ (222) $ 5,254 $ 12,593 $ (948) $ 11,645
* Allowance for Pre-Credit Reform loans (prior to FY 1992) is the Allowance for Estimated
Uncollectible Loans, and the Allowance for Post Credit Reform Loans (after FY 1991) is the
Allowance for Subsidy Cost (present value).
During FY 2008, EPA made a payment within the U.S. Treasury for the Asbestos Loan
Program based on an upward re-estimate of $33,000 for increased loan financing costs. It
was believed that the payment only consisted of "interest" costs and, as such, an automatic
apportionment, per OMB Circular A-11, Section 120.83, was deemed appropriate. However,
approximately one-third ($12,000) of the $33,000 re-estimate was for increased "subsidy"
costs, which required an approved apportionment by OMB before any payment could be
made. Therefore, the payment resulted in a minor technical Antideficiency Act (ADA)
violation. On October 13, 2009, EPA transmitted, as required by OMB Circular A-11, Section
145, written notifications to the 1) President, 2) President of the Senate, 3) Speaker of the
House of Representatives, 4) Comptroller General, and 5) Director of OMB.
Subsidy Expenses for Credit Reform Loans (reported on a cash basis):
Interest Rate Technical Total
Re-estimate Re-estimate
Upward Subsidy Reestimate-FY2010 $ 5 $ 2 $ 7
Downward Subsidy Reestimate - FY2010 (35) (16) (51)
FY2010 Totals $ (30) $ (14) $ (44)
Upward Subsidy Reestimate-FY2009 $ - $ - $
Downward Subsidy Reestimate - FY2009 (3) (2) (5)
FY2009 Totals $ (3) $ (2) $ (5)
Section II-Page 30
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Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
FY2010
FY2009
Beginning balance of the subsidy cost allowance
Add: subsidy expense for direct loans disbursed during the
reporting years by component:
Interest rate differential costs
Default costs (net of recoveries)
Fees and other collections
Othersubsidy costs
(948) S
(1,752)
Total of the above subsidy e^>ense components
Adjustments :
Loan Modification
Fees received
Foreclos ed property acquired
Loans written off
Subs idy allowance amortization
Other
Fjid balance of the subsidy cost allowance before reestimates
Add orsubtract subsidy reestimates by component:
(a) Interest rate reestimate
(b) Technical/default reestimate
Total of the above reestimate components
Ending Balance of the subsidy cost allowance
FJAhas not disbursed Direct Loans since 1993.
$ - $
i
477 752
477 753
176 36
73 15
249 51
$ (222) $ (948)
Note 8. Accounts Payable and Accrued Liabilities
The Accounts Payable and Accrued Liabilities are current liabilities and consist of the
following amounts as of September 30, 2010 and 2009:
FY2010
FY2009
Intragovernmental:
Accounts Payable
Accrued Liabilities
Total
Non-Federal:
Accounts Payable
Advances Payable
Interest Payable
Grant Liabilities
Other Accrued Liabilities
Total
1,466 $
49,859
51,325 $
FY2010
118,033 $
8
7
650,526
262,874
1,031,448 $
2,230
73,824
76,054
FY2009
116,799
9
6
521,188
227,762
865,764
Other Accrued Liabilities primarily relate to contractor accruals.
Section II-Page 31
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Note 9. General Property, Plant, and Equipment, Net
General property, plant, and equipment (PP&E) consists of software, real property, EPA and
contractor-held personal property, and capital leases.
As of September 30, 2010 and 2009, General PP&E consists of the following:
EPA-Held Equipment $
Software
Contractor Held Equip.
Land and Buildings
Capital Leas es
Total $
Acquisition
Value
252,920 $
443,847
95,494
630,252
35,440
1,457,953 $
FY2010
Accumulated
Depreciation
(145,672) $
(158,034)
(39,225)
(177,654)
(22,247)
(542,832) $
Net Book Value
107,248 $
285,813
56,269
452,598
13,193
915,121 $
Acquisition
Value
246,999 $
373,964
79,855
607,131
41,068
1^49,017 $
FY2009
Accumulated
Depreciation
(138,385) $
(118,115)
(47,207)
(166,316)
(26,506)
(496,529) $
Net Book
Value
108,614
255,849
32,648
440,815
14,562
852,488
Note 10. Debt Due
to Treasury
The debt due to Treasury consists of borrowings to finance the Asbestos Loan Program.
The debt to Treasury as of September 30, 2010 and 2009 is as follows:
All Other Funds
IntragoMjrnmental:
Debt to Treasury
FY2010 FY2009
Beginning Net Ending Beginning Net Ending
Balance Borrowing Balance Balance Borrowing Balance
9,983 $
(5,139) $ 4,844
13,158 $
(3,175) $
9,983
Note 11. Stewardship Land
The Agency acquires title to certain property and property rights under the authorities
provided in CERCLA Section 104(j) related to remedial cleanup sites. The property rights
are in the form of fee interests (ownership) and easements to allow access to cleanup 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 cleanup. 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).
As of September 30, 2010, the Agency possesses the following land and land rights:
Section II-Page 32
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FY 2010 FY 2009
Superfund Sites with
Easements
Beginning Balance 33 32
Additions 2 2
Withdrawals 0 !_
Ending Balance 35_ 33_
Superfund Sites with
Land Acquired
Beginning Balance 30 31
Additions 2 0
Withdrawals 0 !_
Ending Balance 32_ 30_
Note 12. Custodial Liability
Custodial Liability 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, 2010 and 2009, custodial
liability is approximately $53 million and $71 million, respectively.
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2010:
Section II-Page 33
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Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Intragovernmental
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal
Liability for Deposit Funds, Non-Federal
Contract Holdbacks
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal
Covered by
Budgetary
Resources
22,585 3
1,706
52,596
20,431
1,831
649
256
-
100,054 $
Not Cove red by
Budgetary
Resources
5 - $
-
-
-
_
-
10,232
22,000
! 32,232 $
Total
22,585
1,706
52,596
20,431
1,831
649
256
10,232
22,000
132,286
65,314
8,128
155
73,597 $
- $
-
200
26,199
26,399 $
65,314
8,128
155
200
26,199
99,996
Section II-Page 34
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Other Liabilities consist of the following as of September 30, 2009:
Other Liabilities - Intragowrnmental
Current
Employer Contributions & Payroll Ta?es
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Intragowrnmental
Other Liabilities - Non-Federal
Current
Unearned Advances
Liability for Deposit Funds
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal
Cow red by
Budgetary
Resources
19,875
960
60,043
27,642
3
54
79,490
8,330
Not Covered by
Budgetary
Resources
108,577 $
10,068
22,000
32,068 $
230
27,868
Total
19,875
960
60,043
27,642
3
54
10,068
22,000
140,645
79,490
8,330
230
27,868
87,820 $
28,098 $
115,918
Note 14. Leases
Capital Leases:
The value of assets held under Capital Leases as of September 30, 2010 and 2009 are as
follows:
Summary of Assets Under Capital Leas e: FY 201Q
Real Property
Personal Property
Software License
Total
Accumulated Amortization
FY 2009
$
$
$
35,285 $
155
35,440 $
22,246 $
40,913
155
41,068
26,506
EPA had three capital leases for land and buildings housing scientific laboratories and
computer facilities. All of these leases include 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
Section II - Page 35
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the Bureau of Labor Statistics, U.S. Department of Labor. One capital lease expired during
FY 2010 and the others leases terminate in FY 2013 and FY 2025.
The total future minimum capital lease payments are listed below.
Future Payments Due:
Fiscal Year Capital Leases
2011 $ 5,714
2012 5,714
2013 5,714
2014 4,215
After 5 years 43,558
Total Future Minimum Lease Payments 64,915
Less: Imputed Interest $ (38,716)
Net Capital Lease Liability 26,199
Liabilities not Cow red by Budgetary Resources $ 26,199
(See Note 13)
Operating Leases:
The General Services Administration (GSA) provides leased real property (land and
buildings) as office space for EPA employees. GSA charges a Standard Level User Charge
that approximates the commercial rental rates for similar properties.
EPA had four direct operating leases for land and buildings housing scientific laboratories
and computer facilities. The leases include 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. Two leases expired in FY 2010 and the other two expire in
FY 2017 and FY 2020. These charges are expended from the EPM appropriation.
The total minimum future operating lease costs are listed below:
Operating Leases, Land and
Buildings
Fiscal Year
2011 $ 89
2012 89
2013 89
2014 89
Beyond 2014 374
Total Future Minimum Lease Payments $ 730
Section II-Page 36
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Note 15. FECA Actuarial Liabilities
The Federal Employees' Compensation Act (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, EPA is allocated 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 FECA Actuarial Liability as of September 30, 2010 and 2009 was $44.9 million and
$44.1 million, respectively. The FY2010 present value of these estimated outflows is
calculated using a discount rate of 3.653 percent in the first year and 4.3 percent in the
years thereafter. The estimated future costs are recorded as an unfunded liability.
Note 16. Cashout Advances, Superfund
Cashout advances are funds received by EPA, a state, or another PRP under the terms of a
settlement agreement (e.g., consent decree) to finance response actions at a specified
Superfund site. Under CERCLA Section 122(b)(3), cashout funds received by EPA are
placed in site-specific, interest-bearing accounts known as special accounts and are used
for potential future work at such sites in accordance with the terms of the settlement
agreement. Funds placed in special accounts may be disbursed to PRPs, to states that take
responsibility for the site, or to other federal agencies to conduct or finance response actions
in lieu of EPA without further appropriation by Congress. As of September 30, 2010 and
2009, cashouts are approximately $637 million and $572 million, respectively.
Note 17. Unexpended Appropriations- Other Funds
As of September 30, 2010 and 2009, the Unexpended Appropriations consist of the
following:
Unexpended Appropriations: FY2010 FY2009
Unobligated
Available $ 184,815 $ 1,652,461
Unavailable 275,592 70,053
Undelivered Orders 12,882,377 12,813,833
Total $ 13,342,784 $ 14,536,347
Note 18. Commitments and Contingencies
EPA may be a party in various administrative proceedings, actions, and claims brought by or
against it. These include:
• Various personnel actions, suits, or claims brought against the Agency by employees
and others.
Section II-Page 37
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• Various contract and assistance program claims brought against the Agency by vendors,
grantees, and others.
• The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to
include the collection of fines and penalties from RPs.
• Claims against recipients for improperly spent assistance funds, which may be settled by
a reduction of future EPA funding to the grantee or the provision of additional grantee
matching funds.
As of September 30, 2010 and 2009 total accrued liabilities for commitments and potential
loss contingencies is $4.37 million and $4.57 million, respectively. Further discussion of the
cases and claims that give rise to this accrued liability are discussed immediately below.
Litigation Claims and Assessments
There is currently one legal claim that has been asserted against EPA pursuant to the
Federal Tort Claims and Fair Labor Standards Acts. This loss has been deemed probable,
and the unfavorable outcome is estimated to be between $2 million and $8 million. EPA has
accrued the higher conservative amount as of September 30, 2010. The maximum amount
of exposure under the claim could reach as much as $8 million in the aggregate.
Superfund
Under CERCLA Section 106(a), 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 EPA for reimbursement from the fund 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, 2010, there is one CERCLA Section 106(b) administrative claim that
has been asserted and for which an unfavorable outcome has been deemed probable. It is
estimated that the potential loss could be approximately $2.37 million and this amount has
been accrued as of September 30, 2010.
Judgment Fund
In cases that are paid by the U.S. Treasury Judgment Fund, 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 and 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."
As of September 30, 2010, there are no material claims pending in the Treasury's Judgment
Fund. However, EPA has a $22 million liability to the Treasury Judgment Fund for a
payment made by the Fund to settle a contract dispute claim.
Section II-Page 38
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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 Governments 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. For the
periods ended September 30, 2010 and 2009, EPA paid $3 million to the CEC for each
period. A payment of $3 million was made in FY 2010.
EPA has a legal commitment under a non-cancellable agreement, subject to the availability
of funds, with the United Nations Environment Program (UNEP). This agreement enables
EPA to provide funding to the Multilateral Fund for the Implementation of the Montreal
Protocol. EPA made payments totaling $10.5 million in FY 2010. Future payments totaling
$9.6 million have been deemed reasonably possible and are anticipated to be paid in fiscal
years 2011 through 2013.
Note 19. Earmarked Funds
Balance sheet as of September 30,2010
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
TotalAssets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Changes in Net Cost for the
Period Bided September 30,2010
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Fjnironmental
Senices
LUST
273,420 $
273,420
4 $
273,416 $
273,420 $
3,558,311
Superfund
55,132 $
3,502,913
19,094 $
19,094 $
181,870 $
4,354,064
181,870 $ 1,844,712
- 484,165
Other Earmarked
Funds
106,247 $
3,740,700
391,388
115,729
1,013,566 $
1,013,566 $
Total Earmarked
Funds
3,340,498 $
4,354,064 $
1,360,547 $
29,578 $
7,697
6,199
43,474
44,223 $
44,223 $
121,214
98,246
22,968
8,229,269
1,076,887
1,076,887
2,147,796
582,411
1,565,385
Statement of Changes in Net Position for the
Period ended September 30,2010
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
231,820 $ 3,436,303 $ 3,416,536 $
115,523 14,968
41,596 168,990 3,396
1,241,402
271 24,743
(181,870) (1,360,547)
273,416 $
41,596 $ ' 102,914 $ ' (76,038) $
3,539,217 $ 3,340,498 $
1,817 $
13
2
18,379
2,008
(22,968)
(2.566) $
(749) $
7,086,476
130,504
213,984
1,259,781
27,022
(1,565,385)
7,152,382
Section II-Page 39
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Balance sheet as of September 30,2009
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Net Cost for the
Period Ended September 30,2009
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Emironmental
LIST
231,821 $
231,821
1 $
1 $
Superfund
3,447,996
11,693 $
11,693 $
98,901
79
4,394,236
Other Earmarked
Funds
977,700 $
977,700 $
$ 231,820 $ 3,436,303 $ 3,416,536 $
$ 231,821 $ 3,447,996 $ 4,394,236 $
1,672,246 $
615,577
1,056,669 $
4,157
4,827
34,635
Total Earmarked
Funds
345,271
6,879,948
773,688
109,780
8,108,687
32,817 $
1,817 $
34,634 $
75,485
55,411
20,074 $
1,022,211
7,086,476
8,108,687
1,846,632
671,067
1,175,565
Statement of Changes in Net Position for the
Period ended September 30,2009
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
$
$r
211,282 $
-
20,538
-
20,538 $ '
3,244,497 $
124,088
169,186
(3,000)
354
(98,822)
191,806 $ '
2,702,763 $
52,065
(1,479)
1,693,519
26,338
(1,056,669)
713,774 $ '
1,989 $
15
17,687
2,199
(20,074)
(173) $
6,160,531
176,168
188,245
1,708,206
28,891
(1,175,565)
925,945
$
231,820 $
3,436,303 $
3,416,537 $
1,816 $
7,086,476
Earmarked funds are as follows:
Environmental Services Receipt Account: The Environmental Services Receipt Account
authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549)," Treasury fund group
5295, 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.
Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust Fund, Treasury
fund group 8153, was authorized by SARA, as amended by the Omnibus Budget
Reconciliation Act of 1990. The LUST appropriation provides funding to 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 to 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 RCRA. The program is financed by a one cent per gallon tax on
motor fuels, which will expire in 2011.
Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group 8145, was
established by CERCLA to provide resources to respond to and clean up hazardous
Section II-Page 40
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substance emergencies and abandoned, uncontrolled hazardous waste sites. The
Superfund Trust Fund financing is shared by federal and state governments as well as
industry. EPA allocates funds from its appropriation to other federal agencies to carry out
CERCLA. Risks to public health and the environment at uncontrolled hazardous waste sites
qualifying for the Agency's 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 EPA, private parties, or other federal
agencies. The Superfund Trust Fund includes Treasury's collections, special account
receipts from settlement agreements, and investment activity.
Other Earmarked Funds:
Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury fund group
8221, was authorized by OPA. Monies were appropriated to the Oil Spill Response Trust
Fund in 1993. 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 SPCC
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 oil spill
cleanup actions is provided through the U.S. Coast Guard under the Oil Spill Liability Trust
Fund and reimbursable funding from other federal agencies.
Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed Funds
Trust Fund authorized in the Federal Water Pollution Control Act (Clean Water Act), as
amended, P.L. 92-500 (The Federal Water Pollution Control Act Amendments of 1972),
Treasury fund group 8741, includes gifts for pollution control programs that are usually
designated for a specific use by donors and/or deposits from pesticide registrants to cover
the costs of petition hearings when such hearings result in unfavorable decisions to the
petitioner.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by a 2004 Act,
"Consolidated Appropriations Act (P.L. 108-199)," Treasury fund group 5374, was
authorized in 2004 for the expedited processing of certain registration petitions and
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.
Reregistration and Expedited Processing Fund: The Revolving Fund, Treasury fund
group 4310, was authorized by the FIFRA of 1972, as amended by the FIFRA Amendments
of 1988 and the Food Quality Protection Act of 1996. Pesticide maintenance fees are paid
by industry to offset the costs of pesticide re-registration and reassessment of tolerances for
pesticides used in or on food and animal feed, as required by law.
Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund group 4311,
was authorized in 1963 for the deposit of tolerance fees. Fees are paid by industry for
federal services to set pesticide chemical residue limits in or on food and animal feed. The
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).
Section II - Page 41
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Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund, authorized by P.L.
102-389, "Making appropriations for the Department of Veterans Affairs and Housing and
Urban Development, and for sundry independent agencies, boards, commissions,
corporations, and offices for the fiscal year ending September 30, 1993," Treasury fund
group 5297, has funds available to carry out authorized environmental restoration activities.
Funding is derived from the collection of reimbursements under the Exxon Valdez
settlement as a result of an oil spill.
Note 20. Exchange Revenues, Statement of Net Cost
Exchange, or earned revenues on the Statement of Net Cost include income from services
provided, interest revenue (with the exception of interest earned on trust fund investments),
and miscellaneous earned revenue. As of September 30, 2010 and 2009, exchange
revenues are $693.4 million and $773.6 million, respectively.
Note 21.1ntragovernmental Costs and Exchange Revenue
FY2010
FY2009
Clean Air
Program Costs
Earned Revenue
NET COST
Clean and Safe Water
Program Costs
Earned Revenue
NET COSTS
Land Preservation &
Restoration
Program Costs
Earned Revenue
NET COSTS
Healthy Communities &
Ecosystems
Program Costs
Earned Revenue
NET COSTS
Compliance &
Environmental
Stewardship
Pro gram Costs
Earned Revenue
NET COSTS
Total
Pro gram Costs
Earned Revenue
NET COSTS
Intragovernm
ental
170,677
18,923
151,754
193,456
2,803
190,653
With the
Public
Total
239,047
293,850
64,034
229,816
182,299
3,400
178,899
1,183,016
192,847
990,169
1,048,124 $
5,906
1,042,218 $
6,197,330 $
2,524
6,194,806 $
2,096,211 $
446,569
1,649,642 $
1,265,653 $
44,144
1,218,801
24,829
1,193,972
6,390,786
5,327
6,385,459
2,438,945
550,256
1,888,689
1,559,503
108,178
1,221,509 $
615,931 $ 798,230
1,494 4,894
614,437 $
11,223,249 $ 12,406,265
500,637 693,484
10,722,612 $ 11,712,781
Intragovern
mental
187,484
15,455
172,029
191,558
4,758
186,800
386,549
101,767
284,782
271,028
20,047
250,981
207,660
4,071
203,589
1,244,279
146,098
1,098,181
With the
Public
874,787
3,036
871,751
3,236,903
3,208
3,233,695
1,821,301
580,119
1,241,182
1,134,155
42,267
1,091,888
609,538 $
(1,116)
610,654 $
7,676,684
627,514
7,049,170
Total
1,062,271
18,491
1,043,780
3,428,461
7,966
3,420,495
2,207,850
681,886
1,525,964
1,405,183
62,314
1,342,869
817,198
2,955
814,243
8,920,963
773,612
8,147,351
Intragovernmental costs relate to the source of goods or services not the classification of the
related revenue.
Section II-Page 42
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Note 22. Cost of Stewardship Land
There were no costs related to the acquisition of stewardship land for September 30, 2010
and approximately $323,000 for September 30, 2009. These costs are included in the
Statement of Net Cost.
Note 23. Environmental Cleanup Costs
As of September 30, 2010, EPA has one site that requires cleanup stemming from its
activities. For sites that had previously been listed, it was determined by EPA's Office of
General Counsel to discontinue reporting the potential environmental liabilities for the
following reasons: 1) although EPA has been put on notice that it is subject to a contribution
claim under CERCLA, no direct demand for compensation has been made to EPA; 2) any
demand against EPA will be resolved only after the Superfund cleanup work is completed,
which may be years in the future; and 3) there was no legal activity on these matters in FY
2009 or in FY 2010. During FY 2009, costs amounting to approximately $53,000 were paid
out by the Treasury Judgment Fund for another site, and no further action is warranted.
EPA also holds title to a site in Edison, New Jersey which was formerly an Army Depot.
While EPA did not cause the contamination, the Agency could potentially be liable for a
portion of the cleanup costs, an unfunded environmental liability of $200,000.
Accrued Cleanup Cost:
EPA has 15 sites that will require permanent closure, and EPA is responsible to fund the
environmental cleanup of those sites. As of September 30, 2010 and 2009, the estimated
costs for site cleanup were $20.15 million and $19.49 million, respectively. Since the
cleanup costs associated with permanent closure were not primarily recovered through user
fees, EPA has elected to recognize the estimated total cleanup cost as a liability and record
changes to the estimate in subsequent years.
Note 24. State Credits
Authorizing statutory language for Superfund and related federal regulations requires states
to enter into SSCs when 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 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 EPA has determined to be reasonable, documented, direct out-of-pocket
expenditures of non-federal funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply
the credit at the site where it was earned. The state may apply any excess/remaining credit
to another site when approved by EPA. As of September 30, 2010 and 2009, the total
remaining state credits have been estimated at $21.0 million and $21.9 million, respectively.
Section II-Page 43
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Note 25. Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform
response actions at their sites with the understanding that EPA will reimburse them a certain
percentage of their total response action costs. 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, 2010, EPA had six
outstanding preauthorized mixed funding agreements with obligations totaling $15.6 million,
and as of September 30, 2009, EPA had nine agreements with obligations totaling $19.9
million. A liability is not recognized for these amounts until all work has been performed by
the PRP and been approved by EPA for payment. Furthermore, 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 EPA.
Note 26. Custodial Revenues and Accounts Receivable
FY2010 FY2009
Fines, Penalties and Other Miscellaneous Receipts $ 89,627 $ 103,924
Accounts Receivable for Fines, Penalties and Other
Miscellaneous Receipts:
Accounts Receivable $ 229,658 $ 238,957
Less: Allowance for Uncollectible Accounts (181,153) (174,411)
Total $ 48,505 $ 64,546
EPA uses the accrual basis of accounting for the collection of fines, penalties, and
miscellaneous receipts. Collectibility by EPA of the fines and penalties is based on the
PRPs' willingness and ability to pay.
Note 27. Reconciliation of President's Budget to the Statement of Budgetary
Resources
Budgetary resources, obligations incurred, and outlays, as presented in the audited
FY 2010 Statement of Budgetary Resources will be reconciled to the amounts included in
the FY 2011 Budget of the U.S. Government when they become available. The Budget,
with actual numbers for FY 2010, has not yet been published. We expect it to be published
by early 2011, and it will be available on the OMB website at www.whitehouse.gov/.
Section II - Page 44
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The actual amounts published for the year ended September 30, 2009 are listed below:
PY2QQ9 Budgetary Offsetting
Resources Obligations Receipts Net Outlays
Statement of Budgetary Resources $ 21,014,069 $ 17,311,047 $ 1,884,134 $ 9,950,864
Adjustments to Undelivered Orders and Others 844 (404) (2)
E^ired and Immaterial Funds* (251,035) (37) 5
Rounding Differences** (8,878) (5,606) (134) 133
Reported in Budget of the U. S. Government S 20,755,000 S 17,305,000 S 1,884,000 S 9,951,000
* Expired funds are not included in Budgetary Resources Available for Obligation and Total
New Obligations in the Budget Appendix (lines 23.90 and 10.00). Also, minor funds are not
included in the Budget Appendix.
** Balances are rounded to millions in the Budget Appendix.
Note 28. 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 for
September 30, 2010 and 2009:
FY2010 FY2009
Recoveries of Prior Year Obligations -Downward
adjustments of prioryears'obligations $ 277,771 $ 220,329
Temporarily Not Available - Rescinded Authority (11,800)
Permanently Not Available:
Payments to Treasury (5,191) (3,180)
Rescinded authority (52,897) (10,000)
Canceled authority (15,365) (19,552)
Total Permanently Not Available $ (73,453) $ (32,732)
Note 29. 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 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.
Section II - Page 45
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The unobligated balances available consist of the following as of September 30, 2010 and
2009:
FY2010 FY2009
Une^ired Unobligated Balance $ 4,441,115 $ 3,452,750
Expired Unobligated Balance 185,226 250,272
Total $ 4,626,341 $ 3,703,022
Note 30. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at September 30, 2010 and 2009
were $12.63 billion and $14.69 billion, respectively.
Note 31. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt
accounts offset gross outlays. For FY 2010 and 2009, the following receipts were generated
from these activities:
FY2010 FY2009
Trust Fund Recoveries $ 53,247 $ 96,782
Special Fund Environmental Service 41,599 20,539
Downward Re-estimates of Subsidies 51 5
Trust Fund Appropriation 1,280,570 1,747,911
Special Fund Receipt Account and Treasury
Miscellaneous Receipt and Clearing Accounts 27,493 18,897
Total $ 1,402,960 $ 1,884,134
Note 32. Transfers In and Out, Statement of Changes in Net Position
Appropriation Transfers, In/Out:
For FY 2010 and 2009, the Appropriation Transfers Under Budgetary Financing Sources on
the Statement of Changes in Net Position comprise 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 follows for September 30, 2010 and 2009:
Section II-Page 46
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Transfers In/Out Without Reimbursement, Budgetary:
Fund/Type of Account FY2010 FY2009
Army Corps of Engineers $ (9,000) $
U.S. Navy (8,000) (8,000)
Small Business Administration ^^^^^^^^^_ (2,953)
Total Appropriation Transfers (Other (17,000) (10,953)
Funds)
Net Transfers from In vested Funds 1,386,345 1,382,030
Transfers to Another Agency (17,000) (10,953)
Allocations Rescinded $ $ -_
Total of Net Transfers on Statement of
Budgetary Resources $ 1,369,345 $ 1,371,077
For FY 2010 and 2009, Transfers In/Out Under Budgetary Financing Sources on the
Statement of Changes in Net Position consist of transfers to or from other federal agencies
and 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, 2010 and 2009:
Type of Transfer/Funds FY2010 FY2009
Earmarked Other Funds Earmarked Other Funds
Transfers-in (out) nonexpenditure,
Earmark to S&T and OIG funds $ (39,168) $ 33,859 $ (57,392) $ 57,392
Transfer-in nonexpenditure recovery
from CDC
Transfers-in nonexpenditure, Oil Spill 18,379 17,687
Transfer-in (out) cancelled funds -_ -_
Total Transfer in (out) without
Reimbursement, Budgetary $ (20,789) $ 33,859 $ (39,705) $ 57,392
Transfers In/Out Without Reimbursement, Other Financing Sources:
For FY 2010 and 2009, Transfers In/Out Without Reimbursement Under Other Financing
Sources on the Statement of Changes in Net Position comprise negative subsidy to a
special receipt fund for the credit reform funds.
Section II - Page 47
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The amounts reported on the Statement of Changes in Net Position are as follows for
September 30, 2010 and 2009:
Type of Transfer/Funds FY2010 FY2009
Earmark Other Funds Earmark Other Funds
Transfers-in by allocation transfer
agency $ $ $ 84 $
Transfers-in property 341 - 46
Transfers (out) of prior year negative
subsidy to be paid following year 205 -_ (740)
Total Transfer in (out) without
Reimbursement, Budgetary $ - $ 546 $ 84 $ (694)
Note 33. 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 2010 were $146.8 million ($23.7 million from
Earmarked Funds and $123.1 million from Other Funds). For FY 2009, the estimates were
$197.8 million ($25.1 million from Earmarked Funds and $172.7 million from Other Funds).
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.
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. EPA
applies its Headquarters General and Administrative indirect cost rate to expenses incurred
for inter-entity transactions for which other federal agencies did not include indirect costs to
estimate the amount of unreimbursed (i.e., imputed) costs. For FY 2010 total imputed costs
were $10.8 million ($3.3 million from Earmarked Funds and $7.5 million from Other Funds).
In addition to the pension and retirement benefits described above, 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 2010, entries for Judgment Fund payments totaled $4.0 million (Other Funds). For FY
2009, entries for Judgment Fund payments totaled $3.7 million (Other Funds).
The combined totals of imputed financing sources for FY 2010 and FY 2009 are $161.6
million and $213.3 million, respectively.
Section II-Page 48
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Note 34. Payroll and Benefits Payable
Payroll and benefits payable to EPA employees for the years ending September 30, 2010
and 2009 consist of the following:
FY2010 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
Covered by
Budgetary
Resources
66,677 $
31,298
3,588
101,563 $
Not Covered
by Budgetary
Resources
163,412
163,412 $
Total
66,677
31,298
3,588
163,412
264,975
FY2009 Payroll & Benefits Payable
Accrued Funded Payroll and Benefits
Withholdings Payable
Fjnployer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
57,004 $
31,307
3,177
91,488 $
159,129
159,129 $
57,004
31,307
3,177
159,129
250,617
Note 35. 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 five years earlier. These amounts affect Unexpended Appropriations.
Rescissions to General
Appropriations $
Canceled General Authority
Total Other Adjustments $
Other Funds
FY2010
50,623 $
15,366
65,989 $
Other Funds
FY2009
29,551
29,551
Section II-Page 49
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Note 36. Non-exchange Revenue, Statement of Changes in Net Position
Non-exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in
Net Position as of September 30, 2010 and 2009 consists of the following items:
Earmarked Funds Ear marked Funds
FY2010 FY2009
Interest on Trust Fund $ 130,504$ 176,168
TaxRevenue, Net of Refunds 172,127 169,186
Fines and Penalties Revenue 261 (1,479)
Special Receipt Fund Revenue 41,596 20,538
Total Nonexchange Revenue $ 344,488 $ 364,413
Section II - Page 50
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Note 37. Reconciliation of Net Cost of Operations to Budget
FY2010
FY2009
RESOURCES USED TO FINANCE ACTIVITIES
Budgetary Resources Obligated
Obligations Incurred
Less: Spending Athority from Offsetting Collections and Recoveries
Obligations, Net of Offsetting Collections
Less: Offsetting Reciepts
Net Obligations
Other Resources
Transfers In/Out without Reimbursement, Property
Imputed Financing Sources
Net Other Resources Used to Finance Activities
Total Resources Used to Finance Activities
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NEST COST OF OPERATIONS:
Change in Budgetary Resources Obligated
Resources that Fund Prior Periods Expenses
Budgetary Offsetting Collections and Receipts that
Do Not Affect Net Cost of Operations:
Credit Program Collections Increasing Loan Liabilities for
Guarantees or Subsidy Allowances:
Offsetting Reciepts Not Affecting Net Cost
Resources that Finance Asset Acquition
Total Resources Used to Finance Items Not Part of the Net Cost of Operations
Total Resources Used to Finance the Net Cost of Operations
COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL
NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD:
Components Requiring or Generating Resources in Future Periods:
Increase in Annual Leave Liability
Increase in Environmental and Disposal Liability
Increase in Unfunded Contingencies
Upward/ Downward Reestimates of Credit Subsidy Expense
Increase in Public Exchange Revenue Receivables
Increase in Workers Compensation Costs
Other
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods
Components Not Requiring/ Generating Resources:
Depreciation and Amortization
Expenses Not Requiring Budgetary Resources
Total Components of Net Cost that Will Not Require or Generate Resources
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period
11,950,681
(1,333,690)
10,616,991
(1,375,422)
9,241,569
(341)
161,640
161,299
9,402,868
2,166,944
5,681
94,852
(213,953)
2,053,524
11,456,392
FY2010
4,232
630
(200)
(207)
7,375
979
(3,077)
9,732
85,741
160,916
246,657
256,389
17,311,047
(847,465)
16,463,582
(1,884,134)
14,579,448
656
213,331
213,987
14,793,435
(6,440,873)
(381)
3,943
136,222
(138,030)
(6,439,119)
8,354,316
FY2009
6,461
83
4,529
(337,008)
(3,232)
(329,167)
71,550
50,652
122,202
(206,965)
Net Cost of Operations
11,712,781
8,147,351
Section II - Page 51
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Note 38. Amounts Held by Treasury (UNAUDITED)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship
by Treasury in the Superfund and LUST Trust Funds.
Superfund
Superfund is supported by general revenues, cost recoveries of funds spent to clean up
hazardous waste sites, interest income, and fines and penalties.
The following reflects the Superfund Trust Fund maintained by Treasury as of September
30, 2010 and 2009. The amounts contained in these notes have been provided by Treasury.
As indicated, a portion of the outlays represents amounts received by EPA's Superfund
Trust Fund; such funds are eliminated upon consolidation with the Superfund Trust Fund
maintained by Treasury.
SUPERFUND FY2010
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total As sets
Liabilities & Equity
Equity
Total Liabilities and Equity
Receipts
Corporate Environmental
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury
Combined
- $
3,526,671,825
3,526,671,825 $
3,526,671,825 $
3,526,671,825 $
-
-
- $
1,308,704,084 $
1,308,704,084
1,308,704,084 $
4,234,294 3
4,234,294
4,442,724
209,585,595
218,262,613 3
218,262,613 3
218,262,613 3
3,137,141
53,246,618
3,451,837
59,835,596
1,280,570,288
14,967,685
1,355,373,569 3
(1,308,704,084) 3
(1,308,704,084)
46,669,485 3
5 4,234,294
r 4,234,294
4,442,724
3,736,257,420
5 3,744,934,438
5 3,744,934,438
5 3,744,934,438
3,137,141
53,246,618
3,451,837
59,835,596
1,280,570,288
14,967,685
5 1,355,373,569
>
5 1,355,373,569
In FY2010, EPA received an appropriation of $1.28 billion for Superfund. Treasury's Bureau
of Public Debt (BPD)—the manager of the Superfund Trust Fund assets—records a liability
to EPA for the amount of the appropriation. BPD 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, 2010 and 2009, the Treasury Trust Fund has a liability to EPA for previously
appropriated funds of $3.53 billion and $3.28 billion, respectively.
Section II-Page 52
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SUPERFUNDFY2009
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Receipts and Outlays
Equity
Total Liabilities and Equity
Receipts
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
3,277,721
3,277,721
3,277,721
3,277,721
1,905,845
1,905,845
1,905,845
Treasury
(7,975) $
(7,975)
19,624
159,991
171,640
171,640
171,640
96,782
1,374
98,156
1,747,911
52,064
1,898,131
(1,905,845)
(1,905,845)
(7,714)
Combined
(7,975)
(7,975)
19,624
3,437,712
3,449,361
3,449,361
3,449,361
96,782
1,374
98,156
1,747,911
52,064
1,898,131
1,898,131
LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In
FY 2010 and 2009, there were no fund receipts from cost recoveries. The following
represents the LUST Trust Fund as maintained by Treasury. The amounts contained in
these notes are provided by Treasury. Outlays represent appropriations received by EPA's
LUST Trust Fund; such funds are eliminated upon consolidation with the LUST Trust Fund
maintained by Treasury.
Section II - Page 53
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LUST FY 2010
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
EPA
Treasury
Combined
210,146,189
210,146,189
210,146,189
(5,349,000) $
(5,349,000)
20,815,275
3,271,951,525
3,287,417,800
3,287,417,800
(5,349,000)
(5,349,000)
20,815,275
3,482,097,714
3,497,563,989
3,497,563,989
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
158,254,000
10,685,000
51,000
168,990,000
115,523,147
284,513,147
103,901,000 $ (103,901,000) $
103,901,000 (103,901,000)
103,901,000 $
158,254,000
10,685,000
51,000
168,990,000
115,523,147
284,513,147
180,612,147
284,513,147
Section II - Page 54
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LUST FY 2009
Undistributed Balances
EPA
Treasury
Combined
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
305,445
305,445
305,445
(10,359) $
(10,359)
22,838
3,094,325
3,106,804 $
3,106,804
(10,359)
(10,359)
22,838
3,399,770
3,412,249
3,412,249
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
312,577
312,577
312,577
159,719
9,454
13
169,186
124,087
293,273
(312,577)
(312,577)
(19,304)
159,719
9,454
13
169,186
124,087
293,273
293,273
Note 39. Antideficiency Act (ADA) Violation Reported in 2010
During FY 2004, EPA awarded a contract in the amount of $194,000 for the analysis of
drinking-water. The funding was available for FY 2004 and FY 2005. The contract
performance period crossed three fiscal years: FY 2004, FY 2005, and FY 2006. As a result,
the obligation of funds went beyond the appropriation, resulting in an ADA violation. On July
14, 2010, EPA transmitted, as required by OMB Circular A-11, Section 145, written
notifications to the 1) President, 2) President of the Senate, 3) Speaker of the House of
Representatives, 4) Comptroller General, and 5) Director of OMB.
Section II - Page 55
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Environmental Protection Agency
As of September 30, 2010
(Dollars in Thousands)
1. 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 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.
EPA classifies tangible PP&E as follows: 1) EPA-Held Equipment, 2) Contractor-Held
Equipment, 3) Land and Buildings, and, 4) Capital Leases. The condition assessment survey
method of measuring deferred maintenance is utilized. The Agency adopts requirements or
standards for acceptable operating condition in conformance with industry practices. No
deferred maintenance was reported for any of the four categories.
2. Stewardship Land
Stewardship land is acquired as contaminated sites in need of remediation and cleanup; thus,
the quality of the land is far below the standard for usable and manageable land. Easements on
stewardship lands are in good and usable condition but were acquired to gain access to
contaminated sites.
Section II - Page 56
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Environmental Protection Agency
As of September 30, 2010
(Dollars in Thousands)
3. Supplemental Combined Statement of Budgetary Resources
For the Period Ending September 30, 2010
BUDGETARY RESOURCE
Unobligated Balance Brought Forward, October 1
Recoveries of prior year unpaid obligations
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections:
Collected
Change in receivables from Federal sources
Advance received
Without advance from Federal source
Expenditure Transfers from trust funds
Nonexpenditure transers, net anticipated and actual
Temporarily not available pursuant to Public Law
Permanently not available
Total Budgetary Resources
EPM
FIFRA
LUST
S&T
STAG
OTHER
TOTAL
596,033$ 4,163$ 13,113$
32,763 7,137
2,993,779
98,534
(2,786)
(6,687)
(174,170)
(9,070)
(17,715)
23,237 36
(1,151)
113,101
(9,200)
230,607$ 1,135,800$ 1,723,306$ 3,703,022
5,155 55,779 176,938 277,771
848,049
12,260
(116)
(5,677)
(947)
26,834
4,978,223
4,719
(7,930)
(38,796)
1,436,115 10,256,166
52 52
918,786
(1,746)
234,559
(132,489)
36,809
1,369,345
(11,800)
(73,453)
3,510,680 $ 26,249 $ 124,186 $ 1,109,028 $ 6,127,795 $ 5,679,083 $ 16,577,022
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Unobligated funds apportioned
Unobligated balance not available
Total Status of Budgetary Resources
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net
Unpaid obligations brought forward, October 1
Less: Uncollected customer payments from Federal
sources brought forward, October 1
Total unpaid obligation balance, net
Obligations incurred net
Less: Gross outlays
Less: Recoveries of prior year unpaid obligations, actual
Change in uncollected customer payments from Federal
sources
Total
2,996,093$ -$ 117,024$ 846,166$ 4,410,501$ 2,890,669$ 11,260,452
33,158 24,473 - 9,663 - 622,935 690,229
3,029,250
342,894
138,536
3,510,680 $
24,473
1,776
0
26,249 $
117,024
7,058
105
124,186 $
855,829
202,007
51,191
1,109,028 $
4,410,501
1,717,294
(0)
6,127,795 $
3,513,604
2,159,783
5,697
5,679,083 $
11,950,681
4,430,813
195,528
16,577,022
878,039$ 2,990$ 327,859$ 423,294$ 12,136,931$ 2,019,276$ 15,788,389
(333,906) - (36,245) - (203,673) (573,824)
544,133 2,990 327,859
3,029,250 24,473 117,024
(2,655,567) (25,036) (174,282)
(32,763) (7,137)
176,957
1,062,011 2,427
387,048 12,136,931 1,815,603 15,214,565
855,829 4,410,501 3,513,604 11,950,681
(862,403) (6,410,218) (3,460,886) (13,588,391)
(5,155) (55,779) (176,938) (277,771)
263,464
1,181
376,500 10,081,435
(44,268) 133,869
1,647,114 13,432,953
Obligated Balance, net, end of period:
Unpaid obligations
Less: Uncollected customer payments from Federal
sources
Total, unpaid obligated balance, net, end of period
NET OUTLAYS
Gross outlays
Less: Offsetting collections
Less: Distributed Offsetting Receipts
Total, Net Outlays
1,218,961 2,427 263,464 411,565 10,081,435 1,895,056 13,872,909
(156,949) - (35,065)
(439,956)
1,062,012$ 2,427$ 263,464$ 376,500$ 10,081,435$ 1,647,114$ 13,432,953
2,655,567 $ 25,036 $ 174,282 $ 862,403 $ 6,410,218 $ 3,460,886 $ 13,588,391
(91,847) (22,086) (36) (33,534) (4,719) (1,037,566) (1,189,788)
(1,402,960) (1,402,960)
2,563,720 $ 2,950 $ 174,247 $ 828,869 $ 6,405,499 $ 1,020,359 $ 10,995,643
Section II - Page 57
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Environmental Protection Agency
Required Supplemental Stewardship Information
For the Year Ended September 30, 2010
(Dollars in Thousands)
INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT:
EPA's Office of Research and Development provides the scientific basis for EPA decision-
making by conducting cutting-edge science and technical analysis to assist in the development
of sustainable solutions to our environmental problems and more innovative and effective
approaches to reducing environmental risks. EPA is unique among scientific institutions in
combining research, analysis, and the integration of scientific information across the full
spectrum of health and ecological issues and across the risk assessment and risk management
paradigm. Research enables us to assess and identify the most important sources of risk to
human health and the environment, and by so doing, informs our priority-setting, ensures
credibility of our policies, and guides our deployment of resources.
Among the Agency's highest priorities are research programs that address the development of
alternative techniques for prioritizing chemicals for further testing through computational
toxicology; the environmental effects on children's health; the potential risks and effects of
manufactured nanomaterials on human health and the environment; the impacts of global
change and providing information to policymakers to help them adapt to a changing climate; the
potential risks of unregulated contaminants in drinking water; the development of recreational
water quality criteria; the health effects of air pollutants such as particulate matter; the protection
of the nation's ecosystems; and the provision of near-term, appropriate, affordable, reliable,
tested, and effective technologies and guidance for potential threats to homeland security. EPA
also supports regulatory decision-making with chemical risk assessments.
For FY 2010, the full cost of the Agency's Research and Development activities totaled more
than $663 million. Below is a breakout of the expenses (dollars in thousands):
FY 2006 FY2007 FY2008 FY2009 FY2010
Programmatic $630,438 $624,088 $597,080 $600,552 $590,790
Expenses
Allocated Expenses $104,167$100,553$103,773$119,630 $71,958
Each of EPA's strategic goals has a Science and Research Objective.
INVESTMENT IN THE NATION'S INFRASTRUCTURE.
The Agency makes significant investments in the nation's drinking water and clean water
infrastructure. The investments are the result of three programs: the Construction Grants
Program, which is being phased out, and two SRF programs.
Construction Grants Program: During the 1970s and 1980s, the Construction Grants Program
was a source of federal funds, providing more than $60 billion of direct grants for the
construction of public wastewater treatment projects. These projects, which constituted a
significant contribution to the nation's water infrastructure, included sewage treatment plants,
pumping stations, and collection and intercept sewers; rehabilitation of sewer systems; and the
Section II - Page 58
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control of combined sewer overflows. The construction grants led to the improvement of water
quality in thousands of municipalities nationwide.
Congress set 1990 as the last year that funds would be appropriated for Construction Grants.
Projects funded in 1990 and prior will continue until completion. After 1990, EPA shifted the
focus of municipal financial assistance from grants to loans that are provided by SRFs.
State Revolving Funds: EPA provides capital, in the form of capitalization grants, to SRFs,
which state governments use to make loans to individuals, businesses, and governmental
entities for the construction of wastewater and drinking water treatment infrastructure. When the
loans are repaid to the SRF, the collections are used to finance loans for new construction
projects. The capital is reused by the states and is not returned to the federal government.
The Agency also is appropriated funds to finance the construction of infrastructure outside the
SRFs. These are reported below as Other Infrastructure Grants.
The Agency's expenses related to investments in the nation's Water Infrastructure are outlined
below (dollars in thousands):
FY 2006 FY 2007 FY 2008 FY 2009 FY2010
Construction Grants $39,193 $9,975 $11,517 $30,950 $13,009
Clean Water SRF $1,339,702 $1,399,616 $1,063,825 $835,446 $679,332
Safe Drinking Water SRF $910,032 $962,903 $816,038 $906,803 $733,804
Other Infrastructure Grants $411,023 $381,481 $388,555 $306,366 $229,632
Allocated Expenses $446,113 $443,716 $396,253 $414,249 $201,674
HUMAN CAPITAL
Agencies are required to report expenses incurred to train the public with the intent of increasing
or maintaining the nation's economic productive capacity. Training, public awareness, and
research fellowships are components of many of the Agency's programs and are effective in
achieving the Agency's mission of protecting public health and the environment, but the focus is
on enhancing the nation's environmental, not economic, capacity.
The Agency's expenses related to investments in the Human Capital are outlined below (dollars
in thousands):
FY 2006 FY 2007 FY 2008 FY 2009 FY2010
Training and Awareness Grants $43,765 $32,845 $30,768 $37,981 $25,714
Fellowships $12,639 $12,185 $9,650 $6,818 $6,905
Allocated Expenses $9,320 $7,255 $7,025 $8,924 $3,973
Section II - Page 59
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Balance Sheet for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010
ASSETS
Intrago vernmental:
Fund Balance With Treasury (Note SI)
Investments
Accounts Receivable, Net
Other
Total Intragovernmental
Accounts Receivable, Net
Property, Plant & Equipment, Net
Other
Total Assets
106,247
3,740,700
27,323
12,941
3,887,211
364,065
101,714
1,075
FY2009
62,631
3,457,338
20,694
23,100
3,563,763
748,838
81,216
419
4,354,065 S
4,394,236
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
Custodial Liability
Other
Total Intragovernmental
Accounts Payable & Accrued Liabilities
Pensions & Other Actuarial Liabilities
Cashout Advances, Superfund (Note S2)
Payroll & Benefits Payable
Other
Total Liabilities
NET POSITION
Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
45,641
62,260
107,901 $
178,045 $
6,420
636,673
45,792
38,736
1,013,566
3,340,498
3,340,498
47,787
187
76,051
124,025
183,477
7,829
572,412
44,604
45,353
977,700
3,416,536
3,416,536
4,354,065 S
4,394,236
The accompanying notes are an integral part of these financial statements.
Section II - Page 60
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Net Cost for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010 FY2009
COSTS
Gross Costs $ 1,844,712 $ 1,672,246
Expenses from Other Appropriations 30,349 130,931
Total Costs 1,875,061 1,803,177
Less:
Earned Revenue 484,165 615,577
NET COST OF OPERATIONS $ 1,390,896 $ 1,187,600
The accompanying notes are an integral part of these financial statements.
Section II - Page 61
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Changes in Net Position for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Nonexchange Revenue - Securities Investment
Nonexchange Revenue - Other
Transfers In/Out
Trust Fund Appropriations
Income from Other Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out
Imputed Financing Sources
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
FY2010
Earmarked
Funds
3,416,536
3,416,536
14,968
3,396
(39,168)
1,280,570
30,349
1,290,115
FY2009
Earmarked
Funds
2,702,763
2,702,763
52,065
(1,479)
(54,393)
1,747,911
130,931
1,875,035
-
24,743
24,743 $
(1,390,896)
(76,038)
(84)
26,422
26,338
(1,187,600)
713,773
3,340,498
3,416,536
The accompanying notes are an integral part of these financial statements.
Section II - Page 62
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010
FY2009
BUDGETARY RES OURCES
Unobligated Balance, Brought Forward, October 1:
Adjusted Subtotal
Recoveries of Prior Year Unpaid Obligations
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections
Earned:
Collected
Change in Receivables from Federal Sources
Change in Unfilled Customer Orders:
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year, Without Advances
Previously Unavailable
Expenditure Transfers from Trust Funds
Total Spending Authority from Offsetting Collections
Nonexpenditure Transfers, Net, Anticipated and Actual
Temporarily Not Available Pursuant to Public Law
Permanently Not Available
Total Budgetary Resources
1,605,363
1,605,363
171,423
36,809
518,936
47
244,146
4,423
767,552
1,273,244
(2,600)
(4,102)
1,513,176
1,513,176
118,278
636,392
292,403
1,401
12,032
4,574
310,410
1,269,453
3,847,690
3,847,709
STATUS OF BUDGETARY RES OURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Apportioned
Exempt from Apportionment
Total Unobligated Balances
Unobligated Balances Not Available
Total Status of Budgetary Resources (Note S6)
1,475,861
312,141
1,788,002
2,058,813
2,058,813
874
3,847,690 $
1,996,048
246,297
2,242,345
1,593,443
1,593,443
11,921
3,847,709
The accompanying notes are an integral part of these financial statements.
Section II - Page 63
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010
FY2009
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1
Adjusted Total
Less: Uncollected Customer Payments from Federal Sources,
Brought Forward, October 1
Total Unpaid Obligated Balance, Net
Obligations Incurred, Net
Less: Gross Outlays
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments fromFederal
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual
Change in Uncollected Customer Payments fromFederal Sources
Total, Change in Obligated Balance
Obligated Balance, Net, End of Period:
Unpaid Obligations
Less: Uncollected Customer Payments fromFederal Sources
Total, Unpaid Obligated Balance, Net, End of Period
1,861,908 $
1,861,908
(118,896)
1,743,012
1,788,002
(1,785,572)
(171,423)
(4,471)
1,569,549
1,692,915
(123,366)
1,392,311
1,392,311
(112,921)
1,279,390
2,242,345
(1,654,470)
(118,278)
(5,975)
1,743,012
1,861,908
(118,896)
1,569,549
1,743,012
NET OUTLAYS
Net Outlays:
Gross Outlays (Note S6)
Less: Offsetting Collections (Note S6)
Less: Distributed Offsetting Receipts* (Note S6)
Total, Net Outlays
1,785,572
(763,081)
(53,247)
969,244
1,654,470
(304,434)
(1,244,694)
105,342
Offsetting receipts line includes the amount in 68X0250 (payment to trust fund) from Treasury
The payment cannot be made directly through the trust fund, but must go through a "pass-through" fund
The accompanying notes are an integral part of these financial statements.
Section II - Page 64
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Related Notes to Superfund Trust Financial Statements
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
Note S1. Fund Balance with Treasury for Superfund Trust
Fund Balances with Treasury for the Superfund as of September 30, 2010 and 2009 are $106.2
million and $62.63 million, respectively. Fund balances are available to pay current liabilities and
to finance authorized purchase commitments (see Status of Fund Balances below).
Status of Fund Balances:
FY2010
FY2009
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund
Obligated Balance not yet Disbursed
Totals
2,058,813
874
(3,526,672)
(1,115)
1,574,347
106,247 $
1,593,443
11,824
(3,277,674)
(7,975)
1,743,013
62,631
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 mostly balances in
expired funds, which are available only for adjustments of existing obligations.
Note S2. Cashout Advances, Superfund
Cashout Advances are funds received by EPA, a state, or another PRP under the terms of a
settlement agreement (e.g., consent decree) to finance response actions at a specified
Superfund site. Under CERCLA Section 122(b)(3), cashout funds received by EPA are placed in
site-specific, interest-bearing accounts known as special accounts and are used for potential
future work at such sites in accordance with the terms of the settlement agreement. Funds
placed in special accounts may be disbursed to PRPs, states that take responsibility for the site,
or other federal agencies to conduct or finance response actions in lieu of EPA without further
appropriation by Congress. As of September 30, 2010 and 2009, cashout advances are $637
million and $572 million, respectively.
Section II - Page 65
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Note S3. Superfund State Credits
Authorizing statutory language for Superfund and related federal regulations requires states to
enter into SSCs when 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 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. Credit is limited to state site-specific expenses EPA has
determined to be reasonable, documented, direct out-of-pocket expenditures of non-federal
funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply the
credit at the site where it was earned. The state may apply any excess/remaining credit to
another site when approved by EPA. As of September 30, 2010, the total remaining state
credits were estimated at $20.9 million. The estimated ending credit balance on September 30,
2009 was $21.9 million.
Note S4. Superfund Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
actions at their sites with the understanding that EPA will reimburse them a certain percentage
of their total response action costs. 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, 2010, EPA had six outstanding preauthorized mixed
funding agreements with obligations totaling $15.6 million, and as of September 30, 2009, EPA
had nine agreements with obligations totaling $19.9 million. A liability is not recognized for these
amounts until all work has been performed by the PRP and approved by EPA for payment.
Furthermore, 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 EPA.
Section II - Page 66
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Note S5. Income and Expenses from other Appropriations; General Support Services
Charged to Superfund
The Statement of Net Cost reports costs that represent the full costs of the program outputs.
These costs 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 2010 and 2009, the EPM appropriation funded a variety of programmatic and
nonprogrammatic activities across the Agency, subject to statutory requirements. This
appropriation was created to fund personnel compensation and benefits, travel, procurement,
and contract activities. This distribution is calculated using a combination of specific
identification of expenses to Reporting Entities, and a weighted average that distributes
expenses proportionately to total programmatic expenses. As illustrated below, this estimate
does not impact the consolidated totals of the Statement of Net Cost or the Statement of
Changes in Net Position.
FY2010
FY 2009
Superfund
All Others
Total
Income from
Other
Appropriations
30,349
(30,349)
Expenses from
Other
Appropriations
(30,349) J
30,349
Net
Effect
1
-
* «
- q> q>
Income from
Other
Appropriations
130,931
(130,931)
Expenses from
Other Net
Appropriations Effect
(130,931) $
130,931
- $ - $
In addition, the related general support services costs allocated to the Superfund Trust Fund
from the S&T and EPM funds are $194,000 for FY 2010 and $234,000 for FY 2009.
Note S6. Reconciliation of the Statement of Budgetary Resources to the President's
Budget
Budgetary resources, obligations incurred, and outlays, as presented in the audited FY 2009
Statement of Budgetary Resources, will be reconciled to the amounts included in the Budget of
the U.S. Government when they become available. The Budget, with actual numbers for FY
2010, has not yet been published. We expect it to be published by March 2011, and it will be
available on the OMB website at www.whitehouse.gov. The actual amounts published for the
year ended September 30, 2009, are included in EPA's FY 2009 financial statement
disclosures.
FY2009
Statement of Budgetary Resources
Rounding Differences * *
Reported in Budget of the U. S. Government
Balances are rounded to millions in the Budget Appendix.
Budgetary
Resources
3,847,709 $
(709)
3,847,000 $
Obligations
2,242,345 $
(345)
2,242,000 $
Offsetting
Receipts
1,244,694 $
(694)
1,244,000 $
Net Outlays
1,350,036
(36)
1,350,000
Section II - Page 67
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Note S7. Superfund Eliminations
The Superfund Trust Fund has intra-agency activities with other EPA funds, which are
eliminated on the consolidated Balance Sheet and the Statement of Net Cost. These are listed
below:
FY 2010 FY 2009
Advances $9,265 $14,327
Expenditure Transfers Payable $25,555 $25,189
Accrued Liabilities $2,214 $2,991
Expenses $33,419 $29,100
Transfers $38,016 $54,392
Section II - Page 68
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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Audit of EPA's
Fiscal 2010 and 2009
Consolidated Financial Statements
Report No. 11-1-0015
November 15, 2010
Section II - Page 69
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Abbreviations
CFC Cincinnati Finance Center
EPA U.S. Environmental Protection Agency
FFMIA Federal Financial Management Improvement Act of 1996
FMFIA Federal Managers' Financial Integrity Act of 1982
GAO U.S. Government Accountability Office
IFMS Integrated Financial Management System
OIG Office of Inspector General
OMB Office of Management and Budget
RSSI Required Supplementary Stewardship Information
SSC Superfund State Contract
US AID U.S. Agency for International Development
WCF Working Capital Fund
Section II - Page 70
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I STa
j
55
\
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
11-1-0015
November 15, 2010
Catalyst for Improving the Environment
Why We Did This Audit
We performed this audit in
accordance with the Government
Management Reform Act, which
requires the U.S. Environmental
Protection Agency (EPA) to
prepare, and the Office of
Inspector General to audit, the
Agency's financial statements
each year. Our primary objectives
were to determine whether:
• EPA's consolidated financial
statements were fairly stated
in all material respects.
• EPA's internal controls over
financial reporting were in
place.
• EPA management complied
with applicable laws and
regulations.
Background
The requirement for audited
financial statements was enacted
to help bring about improvements
in agencies' financial
management practices, systems,
and controls so that timely,
reliable information is available
for managing federal programs.
For further information, contact
our Office of Congressional,
Public Affairs and Management
at (202) 566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/20117
Audit of EPA's Fiscal 2010 and 2009
Consolidated Financial Statements
EPA Receives Unqualified Opinion
We rendered an unqualified opinion on EPA's Consolidated Financial
Statements for fiscal 2010 and 2009, meaning that they were fairly presented
and free of material misstatement.
Internal Control Significant Deficiencies Noted
We noted the following four significant deficiencies:
• Further improvements are needed in reviewing the Superfund state
contract unearned revenue spreadsheets.
• EPA should assess collectability of federal receivables and record
allowances for doubtful accounts as needed.
• EPA needs to improve its controls for headquarters personal property.
• EPA needs to properly close the Fund Balance with Treasury when
cancelling treasury symbols.
Noncompliance With Laws and Regulations Noted
We noted one noncompliance issue involving EPA's need to continue efforts to
reconcile intragovernmental transactions.
Agency Comments and Office of Inspector General Evaluation
In a memorandum received on November 9, 2010, from the Chief Financial
Officer, the Agency generally concurred with the issues raised and indicated it
will take corrective actions. The Agency did not concur with two of our draft
report recommendations. We have modified these recommendations to reflect
information provided by the Chief Financial Officer in response to the draft
report. The Agency's full response is included in Appendix II, and our analysis
of the Agency's response is included in the body of the report.
20101115-11-1-0015.pdf
Section II - Page 71
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\ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
° WASHINGTON' D'C' 2046°
THE INSPECTOR GENERAL
November 15,2010
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal 2010 and 2009 Consolidated Financial Statements
Report No. 11-1-0015
FROM: Arthur A. Elkins, Jr.
Inspector General
TO: Barbara J. Bennett
Chief Financial Officer
Craig Hooks
Assistant Administrator for Administration and Resources Management
Attached is our report on the U.S. Environmental Protection Agency's (EPA's) fiscal 2010 and
2009 consolidated financial statements. We are reporting four significant deficiencies. We also
identified an instance of noncompliance with laws and regulations related to reporting
intragovernmental transactions. Attachment 3 contains the status of recommendations related to
the material weaknesses, significant deficiencies, and noncompliances with laws and regulations
reported in prior years' reports. The significant deficiencies and noncompliances included in
Attachment 3 also apply for fiscal 2010.
The estimated cost of this report—calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time—is $2,618,923.
This audit report represents the opinion of the Office of Inspector General, and the findings in
this report do not necessarily represent the final EPA position. EPA managers, in accordance
with established EPA audit resolution procedures, will make final determinations on the findings
in this audit report. Accordingly, the findings described in this audit report are not binding upon
EPA in any enforcement proceeding brought by EPA or the Department of Justice. We have no
objections to the further release of this report to the public. This report will be available at
http://www.epa.gov/oig.
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days of the final report date. The response should address all issues and
recommendations contained in Attachments 1 and 2. For corrective actions planned but not
completed by the response date, reference to specific milestone dates will assist us in deciding
Section II - Page 72
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whether or not to close this report in our audit tracking system. Your response will be posted on
the OIG's public website, along with our memorandum commenting on your response. Your
response should be provided as an Adobe PDF file that complies with the accessibility
requirements of section 508 of the Rehabilitation Act of 1973, as amended. The final response
should not contain data that you do not want to be released to the public; if your response
contains such data, you should identify the data for redaction or removal.
Should you or your staff have any questions about the report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899; or Paul Curtis, Director, Financial
Statement Audits, at (202) 566-2523.
Attachments
cc: See Appendix III, Distribution
Section II - Page 73
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11-1-0015 1
Audit of EPA's Fiscal 2010 and 2009 11-1 -0015
Consolidated Financial Statements
Table of Contents
Inspector General's Report on EPA's Fiscal 2010
and 2009 Consolidated Financial Statements 1
Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis 2
Evaluation of Internal Controls 2
Tests of Compliance With Laws and Regulations 5
Prior Audit Coverage 6
Agency Comments and OIG Evaluation 7
Attachments 8
1. Internal Control Significant Deficiencies 8
Further Improvements Needed in Reviewing the Superfund
State Contract Unearned Revenue Spreadsheets 9
EPA Should Assess Collectability of Federal Receivables and
Record Any Needed Allowances for Doubtful Accounts 11
Improvements Needed in Controls for Headquarters Personal Property 13
EPA Improperly Closed Accounts When Cancelling Treasury Symbols 14
2. Compliance Wth Laws and Regulations 16
EPA Should Continue Efforts to Reconcile Intragovernmental Transactions.... 17
3. Status of Prior Audit Report Recommendations 19
4. Status of Current Recommendations and Potential Monetary Benefits 21
Appendices 23
I. EPA's Fiscal 2010 and 2009 Consolidated Financial Statements 23
II. Agency's Response to Draft Report 95
III. Distribution 104
Section II-Page 75
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11-1-0015
Inspector General's Report on EPA's Fiscal 2010
and 2009 Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
We have audited the consolidated balance sheet of the U.S. Environmental Protection Agency
(EPA) as of September 30, 2010 and 2009, and the related consolidated statements of net cost,
net cost by goal, changes in net position, and custodial activity; and the combined statement of
budgetary resources for the years then ended. These financial statements are the responsibility of
EPA's management. Our responsibility is to express an opinion on these financial statements
based upon our audit.
We conducted our audit in accordance with generally accepted government auditing standards;
the standards applicable to financial statements contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and Office of Management and Budget
(OMB) Bulletin 07-04, Audit Requirements for Federal Financial Statements, as Amended
September 23, 2009. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatements.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
The financial statements include expenses of grantees, contractors, and other federal agencies.
Our audit work pertaining to these expenses included testing only within EPA. Audits of grants,
contracts, and interagency agreements performed at a later date may disclose questioned costs of
an amount undeterminable at this time. The U.S. Treasury collects and accounts for excise taxes
that are deposited into the Superfund and Leaking Underground Storage Tank Trust Funds. The
U.S. Treasury is also responsible for investing amounts not needed for current disbursements and
transferring funds to EPA as authorized in legislation. Since the U.S. Treasury, and not EPA, is
responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General (OIG) 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 EPA's financial statements. The OIG is organizationally independent with
respect to all other aspects of the Agency's activities.
In our opinion, the consolidated financial statements present fairly, including the accompanying
notes, in all material respects, the consolidated assets, liabilities, net position, net cost, net cost
by goal, changes in net position, custodial activity, and combined budgetary resources of EPA as
of and for the years ended September 30, 2010 and 2009, in conformity with accounting
principles generally accepted in the United States of America.
Section II-Page 76
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11-1-0015
Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis
We obtained information from EPA management about its methods for preparing Required
Supplementary Stewardship Information (RSSI), Required Supplementary Information,
Supplemental Information, and Management's Discussion and Analysis, and reviewed this
information for consistency with the financial statements. The Supplemental Information
includes the unaudited Superfund Trust Fund financial statements for fiscal 2010 and 2009,
which are being presented for additional analysis and are not a required part of the basic financial
statements. However, our audit was not designed to express an opinion and, accordingly, we do
not express an opinion on EPA's RSSI, Required Supplementary Information, Supplemental
Information, and Management's Discussion and Analysis.
We did not identify any material inconsistencies between the information presented in EPA's
consolidated financial statements and the information presented in EPA's RSSI, Required
Supplementary Information, Supplemental Information, and Management's Discussion and
Analysis.
Evaluation of Internal Controls
As defined by OMB, internal control, as it relates to the financial statements, is a process,
affected by the Agency's management and other personnel that is designed to provide reasonable
assurance that the following objectives are met:
Reliability of financial reporting—Transactions are properly recorded, processed, and
summarized to permit the preparation of the financial statements in accordance with
generally accepted accounting principles, and assets are safeguarded against loss from
unauthorized acquisition, use, or disposition.
Compliance with applicable laws, regulations, and government-wide policies—
Transactions are executed in accordance with laws governing the use of budget authority,
government-wide policies, laws identified by OMB, and other laws and regulations that
could have a direct and material effect on the financial statements.
In planning and performing our audit, we considered EPA's internal controls over financial
reporting by obtaining an understanding of the Agency's internal controls, determining whether
internal controls had been placed in operation, assessing control risk, and performing tests of
controls. We did this as a basis for designing our auditing procedures for the purpose of
expressing an opinion on the financial statements and to comply with OMB audit guidance, not
to express an opinion on internal control. Accordingly, we do not express an opinion on internal
control over financial reporting nor on management's assertion on internal controls included in
Management's Discussion and Analysis. We limited our internal control testing to those controls
necessary to achieve the objectives described in OMB Bulletin No. 07-04, Audit Requirements
for Federal Financial Statements, as Amended September 23, 2009. We did not test all internal
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controls relevant to operating objectives as broadly defined by the Federal Managers' Financial
Integrity Act of 1982 (FMFIA), such as those controls relevant to ensuring efficient operations.
Our consideration of the internal controls over financial reporting would not necessarily disclose
all matters in the internal control over financial reporting that might be significant deficiencies.
Under standards issued by the American Institute of Certified Public Accountants, a significant
deficiency is a deficiency, or combination of deficiencies, that is less severe than a material
weakness, yet important enough to merit attention by those charged with governance. A material
weakness is a deficiency, or combination of deficiencies, 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. Because of inherent limitations in internal controls,
misstatements, losses, or noncompliance may nevertheless occur and not be detected. We noted
certain matters discussed below involving the internal control and its operation that we consider
to be significant deficiencies, none of which are considered to be material weaknesses.
We noted four significant deficiencies, which are summarized below and detailed in
Attachment 1.
Further Improvements Needed in Reviewing the Superfund State Contract
Unearned Revenue Spreadsheets
Although the Cincinnati Finance Center (CFC) worked with the regions in fiscal 2010 to
improve the accuracy of the Superfund state contract (SSC) unearned revenue accrual,
further improvements are needed. CFC and the regions did not thoroughly review the
SSC spreadsheets and detect data errors that we found during our test work. The Chief
Financial Officers Act requires that the integrated agency accounting and financial
management system include complete and reliable information. By not performing a
thorough review, EPA misstated the unearned revenue accrual in the fiscal 2010 financial
statements.
EPA Should Assess Collectability of Federal Receivables and Record Any
Needed Allowances for Doubtful Accounts
EPA did not establish a federal allowance for doubtful accounts for receivables that were
not billed timely and now may be uncollectible. Federal accounting standards require
agencies to recognize receivables at their net realizable value. EPA considered federal
debts to be fully collectible and did not have a policy to establish federal doubtful
accounts until October 2010. By not timely reviewing debts, assessing the collectability
of federal receivables, and establishing a federal allowance for doubtful accounts for
uncollectible debt, EPA could be understating the uncollectible debt expense and
overstating receivables in the financial statements.
Improvements Needed in Controls for Headquarters Personal Property
EPA headquarters could not account for certain personal property items in fiscal 2010 as
required by EPA's Personal Property and Procedures Manual. The primary cause is that
headquarters mid-level management is not knowledgeable about Agency property
management procedures. Because EPA could not account for these property items, it is
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not exercising proper control over $2.5 million of accountable personal property. As of
May 28, 2010, EPA headquarters could not account for 2,272 accountable personal
property items. Through subsequent searches, the number of missing items as of
September 30, 2010, fell to 1,134. EPA headquarters determined that the acquisition cost
of these missing items is $2,543,360. This is the second consecutive year we have
reported this problem. In fiscal 2009, EPA headquarters did not inventory 1,804 items
with an acquisition value of $6.3 million.
EPA Improperly Closed Accounts When Cancelling Treasury Symbols
EPA did not properly close the Fund Balance with Treasury when cancelling treasury
symbols on September 30, 2010. Treasury Financial Manual Bulletin No. 2009-04 states
that agencies must cancel any remaining balances (whether obligated or unobligated) in
the account being cancelled. Valid receivables and payables associated with the cancelled
Treasury Appropriation Fund Symbol still need to be included for financial reporting.
EPA advanced funds to its Working Capital Fund (WCF) in fiscal 2002 and 2003. The
WCF billed against those advances for all but $933,299. When the Treasury funds
expired at the end of fiscal 2003, the WCF had not repaid the advance to the
Environmental Program and Management Fund (treasury symbol 682/30108). The funds
should have been repaid by the WCF when the funds originally expired. Subsequently,
the treasury symbol 682/30108 became cancelled on September 30, 2010, and the
advance still had not been repaid. EPA processed an entry to close out the treasury
symbol, improperly expensing the advance as well as removing other liabilities. EPA
stated that it followed its cancellation procedures and Year End Closing Instructions.
The closing instructions state, "All open advances (GL 1400 account series) for
appropriations being cancelled must be cleared by September 30." The instructions
required EPA to remove any balance in an advance or liability account, and recognize
expense and earned revenue in the current year. By doing so, EPA improperly eliminated
advances and liabilities, and recognized current year expenditures and revenue.
Attachment 3 contains the status of issues reported in prior years' reports. The issues included in
attachment 3 should be included in considering EPA's significant deficiencies for fiscal 2010.
We reported less significant matters regarding internal controls in the form of position papers
during the course of the audit. We will not issue a separate management letter.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as Amended
September 23, 2009, requires us to compare material weaknesses disclosed during the audit with
those material weaknesses reported in the Agency's FMFIA report that relate to the financial
statements and identify material weaknesses disclosed by the audit that were not reported in the
Agency's FMFIA report.
For financial statement audit and financial reporting purposes, OMB defines material weaknesses
in internal control as a deficiency, or combination of deficiencies in internal control, such that
there is a reasonable possibility that a material misstatement of the financial statements will not
be prevented, or detected and corrected on a timely basis.
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The Agency reported that no material weaknesses had been found in the design or operation of
internal controls over financial reporting as of June 30, 2010. We did not identify any material
weaknesses during the course of our audit. Details concerning our findings on significant
deficiencies can be found in Attachment 1.
Tests of Compliance With Laws and Regulations
EPA management is responsible for complying with laws and regulations applicable to the
Agency. As part of obtaining reasonable assurance about whether the Agency's financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws and regulations, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts, and certain other laws and
regulations specified in OMB Bulletin No. 07-04, Audit Requirements for Federal Financial
Statements, as Amended September 23, 2009. The OMB guidance requires that we evaluate
compliance with federal financial management system requirements, including the requirements
referred to in the Federal Financial Management Improvement Act of 1996 (FFMIA). We limited
our tests of compliance to these provisions and did not test compliance with all laws and
regulations applicable to EPA.
Providing an opinion on compliance with certain provisions of laws and regulations was not an
objective of our audit and, accordingly, we do not express such an opinion. A number of ongoing
investigations involving EPA's grantees and contractors could disclose violations of laws and
regulations, but a determination about these cases has not been made.
EPA Should Continue Efforts to Reconcile Intragovernmental Transactions
As of September 30, 2010, EPA reported $378 million in unreconciled differences with
48 trading partners for intragovernmental transactions. Of that amount, $271 million was
reported by Treasury to be material differences. The remaining $107 million represents
amounts reported for nonverifying agencies, accruals, timing differences, and other
agencies whose differences were not reported as material. According to the Treasury
Financial Manual, verifying agencies are those that are required to report in the
Governmentwide Financial Report System. These include the 24 major Chief Financial
Officers Act agencies and 11 other agencies material to the Financial Report of the
United States Government. Any agency not required is a nonverifying agency. Treasury
policy requires verifying agencies to confirm and reconcile intragovernmental
transactions with their trading partners. Based on our review of correspondence with
other agencies, EPA had difficulty reconciling these differences primarily because of
differing accounting treatments and accrual methodologies among federal agencies, and
because of a large reporting error made by one of EPA's trading partners. EPA's inability
to reconcile its intragovernmental transactions contributes to a long-standing
government-wide problem that hinders the ability of the U.S. Government Accountability
Office to (GAO) render an opinion on the Consolidated Financial Statements of the
Federal Government. Further details on this noncompliance issue are in Attachment 2.
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Federal Financial Management Improvement Act 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 the
OMB guidance, Memorandum M-09-06, Implementation Guidance for the Federal
Financial Management Improvement Act dated January 9, 2009, for determining
substantial noncompliance with FFMIA. The results of our tests did not disclose any
instances in which the Agency's financial management systems did not substantially
comply with FFMIA requirements.
No other significant matters involving compliance with laws and regulations came to our
attention during the course of the audit. We will not be issuing a separate management letter.
Our audit work was also performed to meet the requirements in Title 42, U.S. Code, section
961 l(k), with respect to the Hazardous Substance Superfund Trust Fund, to conduct an annual
audit of payments, obligations, reimbursements, or other uses of the fund. The material
weaknesses and significant deficiencies reported above also relate to Superfund.
Prior Audit Coverage
During previous financial or financial-related audits, we reported weaknesses that impacted our
audit objectives in the following areas:
• Billing costs and reconciling unearned revenue for Superfund state contracts
• Misstated uncollectible debt
• Headquarters property items not inventoried
• Deobligating unneeded funds
• Integrated Financial Management System User Account Management
• Physical access controls at the Las Vegas Finance Center
• Security planning for Customer Technology Solutions equipment
• Reconciling and reporting intragovernmental transactions
• Financial database security oversight
• Assessing automated application processing controls for the Integrated Financial
Management System
Attachment 3, Status of Prior Audit Report Recommendations, summarizes the current status of
corrective actions taken on prior audit report recommendations related to these issues.
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Agency Comments and OIG Evaluation
In a memorandum dated November 9, 2010, the Office of the Chief Financial Officer responded
to our draft report.
The rationale for our conclusions and a summary of the Agency comments are included in
the appropriate sections of this report, and the Agency's complete response is included as
Appendix II to this report.
This report is intended solely for the information and use of the management of EPA, OMB, and
Congress, and is not intended to be and should not be used by anyone other than these specified
parties.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
November 15,2010
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Attachment 1
Internal Control
Significant Deficiencies
Table of Contents
1 - Further Improvements Needed in Reviewing the
Superfund State Contract Unearned Revenue Spreadsheets 9
2 - EPA Should Assess Collectability of Federal Receivables and
Record Any Needed Allowances for Doubtful Accounts 11
3 - Improvements Needed in Controls for Headquarters Personal Property 13
4 - EPA Improperly Closed Accounts When Cancelling Treasury Symbols 14
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1 - Further Improvements Needed in Reviewing the Superfund
State Contract Unearned Revenue Spreadsheets
Although CFC worked with the regions in fiscal 2010 to improve the accuracy of the SSC
unearned revenue accrual, further improvements are needed. CFC and the regions did not
thoroughly review the SSC spreadsheets and detect data errors that we found during our test
work. The Chief Financial Officers Act requires that the integrated agency accounting and
financial management system include complete and reliable information. By not performing a
thorough review, EPA misstated the unearned revenue accrual in the fiscal 2010 financial
statements.
CFC uses the SSC spreadsheets to calculate earned and unearned revenue for SSCs and to
prepare quarterly accounting entries to adjust for quarterly activity. EPA overstated its fiscal
2010 fourth quarter SSC unearned revenue accrual by $3,630,833 and its unbilled costs by
$858,100. We found errors in the fiscal 2010 third and fourth quarter SSC spreadsheet data,
including errors in state cost estimates, state cost shares, credits, billings, and disbursements. We
also identified several sites with questionable data that will require EPA's followup.
During our third quarter testing, we reviewed a sample of 20 SSC sites with unearned revenue of
$13,546,608 from a universe of 480 sites totaling $45,061,760. We found 10 sites with errors
that understated account 2312, Unearned Advances Non-Federal, by $375,338, and understated
account 13PB, Unbilled SSC Work in Progress, by $410,498. By statistical projection of the
errors, the most likely net overstatement or understatement of unearned revenue would be
$5,650,742.
CFC corrected the 10 errors in the fourth quarter spreadsheet. The errors included:
• A site with SSC billings of $255,186 that were not entered on the SSC spreadsheet.
• Nine sites with incorrect disbursement amounts in the Hazardous Substance Superfund
appropriation, fund code "T," entered on the spreadsheets that understated the
spreadsheet disbursements by $4.6 million.
We also reviewed the data for all 480 sites on the spreadsheet for reasonableness. We identified
60 sites with (1) questionable data in credits, billings, or unearned revenue in excess of the state
cost share; (2) no billings; and (3) no estimated site costs. Additionally, some of the 60 sites were
closed sites with accrued unbilled costs. One site had a negative billing, and one site had
negative credits and disbursements. The regions' responses to our questions indicated that the
data for several sites were not current. For example, the regions did not always:
• Update the estimated site costs and state cost share for amended SSCs.
• Adjust the spreadsheet estimated costs and state cost share, credits, billings, and
reimbursable disbursements for the effect of closed sites and refunds to the states.
• Use the correct transaction code for older refunds to properly reduce SSC billings.
• Transfer unused credits to other SSC sites when EPA completes the SSC work on a site.
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From our analysis of the site data and the regions' responses, we identified 33 errors that
overstated account 2312 by $5,166,394 and account 13PB by $1,753,032. CFC corrected 15 of
the errors in the fourth quarter, leaving account 2312 overstated by $3,630,833 and account
13PB overstated by $858,100 at year-end. CFC stated that it will make the remaining corrections
in the first quarter of fiscal 2011.
During fiscal 2010, CFC performed quarterly reviews of spreadsheet billings and disbursements
to improve data accuracy. CFC also directed Superfund regional offices to verify that billings
and disbursements in the spreadsheets were accurate and that closed sites were financially closed
in the spreadsheets. However, CFC and the regions did not thoroughly review the SSC
spreadsheet data to ensure that they were accurate prior to recording the accrual accounting
entries in EPA's Integrated Financial Management System (IFMS). EPA should further improve
the spreadsheet data accuracy.
FMFIA requires agencies to establish controls that reasonably assure that "revenues and
expenditures applicable to agency operations are properly recorded and accounted for to permit
the preparation of accounts and reliable financial and statistical reports." The Chief Financial
Officers Act also requires the Agency to include financial reporting and internal controls that
provide complete, reliable, consistent, and timely information in the integrated agency
accounting and financial management system. EPA should have adequate internal controls to
ensure that it properly records accruals for the SSC unearned revenue.
Recommendations
We recommend that the Office of the Chief Financial Officer:
1. Work with the regions to review prior years' fund code "T" disbursements data on the
SSC spreadsheets.
2. Work with the regions to review the spreadsheet data for the estimated site costs, state
cost share, credits, and billings.
3. Require regions to report to CFC the SSC site closeout amounts, including the final
actual site costs separated by "T" and "TR1" disbursements, final state share, and the
amount of refund paid or final billing.
4. Review the quarterly SSC spreadsheets to determine whether the site data are reasonable
and the resulting site calculations are logical. Specifically, review the data for billings,
credits, or unearned revenue in excess of state cost shares; no estimated site costs; no
billings; reimbursable "TR1" expenses in excess of billings; and closed sites with accrued
unbilled costs or unearned revenue.
Agency Comments and OIG Evaluation
The Agency concurred with our findings and recommendations.
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2 - EPA Should Assess Collectability of Federal Receivables and
Record Any Needed Allowances for Doubtful Accounts
EPA did not establish a federal allowance for doubtful accounts for receivables that were not
billed timely and now may be uncollectible. Federal accounting standards require agencies to
recognize receivables at their net realizable value. EPA considered federal debts to be fully
collectible and until October 2010 did not have a policy to establish federal doubtful accounts.
By not timely reviewing federal debts, assessing the collectability of federal receivables, and
establishing a federal allowance for doubtful accounts for uncollectible debt, EPA could be
understating the uncollectible debt expense and overstating receivables in the financial
statements.
Historically, EPA did not establish allowances for delinquent federal debts because it considered
all federal debts to be collectible. However, in October 2010, EPA issued a new policy to address
delinquent federal receivables, Resources Management Directives System, 2540-12-P1,
Intragovernmental Business Rules - Delinquent Federal Accounts Receivable. This policy states
that CFC is responsible for managing federal receivables and exercising due diligence to collect
amounts due to EPA from other federal agencies. Also, CFC is to conduct quarterly reviews of
federal debt that is delinquent for a period of at least 3 years to determine whether to pursue
collections efforts. The policy also states that if further collection efforts are not warranted, CFC
should record an allowance for doubtful accounts in the accounting records. The debt is to be
written off for those receivables deemed uncollectible.
As of September 2010, EPA's financial system had 45 open federal receivables totaling
$22.8 million that were past their due date. Of this amount, $12.9 million represents
12 delinquent Superfund federal receivables established in February 1995 with the U.S.
Department of Defense (Army) for the Twin City Army Ammunition Dump Site. Currently,
EPA is working with OMB to obtain funding for the Twin Cities site for cleanup costs. The
funding request of $6.3 million is 49 percent of the total receivables for Twin Cities. According
to EPA, the Department of Defense included the entire $12.9 million in its books as a payable
subsequent to September 30, 2010. As a result, EPA believes the entire receivable is now
collectible. Because the receivable has been in doubt for so long and OMB has indicated that the
funding request would be only $6.3 million, we believe EPA should establish an allowance for
doubtful accounts for the remaining balance of the receivable and write off the negotiated
amount when collected.
Of the remaining 33 delinquent federal receivables, totaling $9.8 million, we found that EPA did
not timely bill or collect for 21 of the receivables totaling $9.5 million. EPA billed three federal
agencies after those agencies had already deobligated the funds. One agency noted that EPA took
more than 2 years after the performance period ended to submit a bill. We also identified nine
other receivables totaling $8.7 million with which EPA had not taken adequate collection action.
Another $7,000 was rejected by the billed agency because the interagency agreement was closed
and the billing charges were over 9 years old. Other reasons cited as impacting collection efforts
include other agencies' lack of congressional appropriation authority, waiting for additional
funds to be included in other agencies' appropriations, and costs billed that exceeded the
authorized amount on a Military Interdepartmental Purchase Request.
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Statement of Federal Financial Accounting Standards Number 1 states that an allowance for
estimated uncollectible amounts should be recognized to reduce the gross amount of receivables
to its net realizable value. Loss estimation should be based on (a) the debtor's ability to pay,
(b) the debtor's payment record and willingness to pay, and (c) the probable recovery of amounts
from secondary sources.
In light of EPA's newly issued policy and the age of some outstanding federal receivables, we
believe EPA should determine the collectability of all delinquent federal receivables and record
any necessary accounting entries in the financial system to ensure that receivables are properly
stated in the financial statements.
Recommendations
We recommend that the Office of the Chief Financial Officer require the Office of Financial
Services to:
5. Establish a federal allowance for $6.6 million, which remains on the Twin Cities site
receivable, unless the Agency can obtain additional evidence from the Department of
Defense that it intends to pay the debt.
6. Review collectability of open federal accounts receivables and establish an allowance
and/or write-off.
7. Establish procedures to ensure that CFC timely bills federal agencies within their
authorized appropriation period.
Agency Comments and OIG Evaluation
The Agency considers the entire $12.9 million receivable from the Department of Defense
collectible because the Department of Defense recorded a liability and has sought funding to
partially pay the liability. However, negotiations with OMB and the Department of Defense have
led to a funding request of only $6.3 million. Unless the Agency can provide additional evidence
that the receivable is fully collectible, the Agency should establish an allowance for this
receivable. The Agency concurred with our remaining findings and recommendations.
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3 - Improvements Needed in Controls for Headquarters
Personal Property
EPA headquarters could not account for some personal property items in fiscal 2010 as required
by EPA's Personal Property and Procedures Manual. The primary cause was that headquarters
mid-level management is not knowledgeable about Agency property management procedures.
Because EPA could not account for these property items, it was not exercising proper control
over $2.5 million of accountable personal property. As of May 28, 2010, EPA headquarters
could not account for 2,272 accountable personal property items. Through subsequent searches,
the number of missing items as of September 30, 2010, fell to 1,134. EPA headquarters
determined that the acquisition cost of these missing items is $2,543,360. This is the second
consecutive year we have reported this problem. In fiscal 2009, EPA headquarters did not
inventory 1,804 items with an acquisition value of $6.3 million.
The Facilities Management Services Division is responsible for administering the EPA Personal
Property Management Program. EPA defines accountable personal property "as non-expendable
personal property with an acquisition cost of $5,000 or greater, EPA-leased personal property, or
property identified as a sensitive item." EPA's Personal Property and Procedures Manual,
section 3.1.1, states that each accountable area's personal property record must be maintained in
IFMS, thus providing all needed data for effective personal property management (e.g., location,
procurement, utilization, and disposal). The 1,134 missing items indicate that accurate personal
property records are not being maintained. Inaccurate personal property records compromise
EPA's property control system and can lead to the loss or misappropriation of Agency assets.
Recommendations
We recommend that the Assistant Administrator for Administration and Resources Management
require the Director, Facilities Management and Services Division, to:
8. Develop a management-level property management training course and require
completion of the course by all EPA managers.
9. Adequately address and resolve the issue and determine why personal property items are
missing.
Agency Comments and OIG Evaluation
The Agency concurred with our findings and recommendations and offered additional
information.
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4 - EPA Improperly Closed Accounts
When Cancelling Treasury Symbols
EPA did not properly close the Fund Balance with Treasury when cancelling treasury symbols
on September 30, 2010. Treasury Financial Manual Bulletin No. 2009-04 states that agencies
must cancel any remaining balances (whether obligated or unobligated) in the account being
cancelled. Valid receivables and payables associated with the cancelled Treasury Appropriation
Fund Symbol still need to be included for financial reporting. EPA advanced funds to its WCF in
fiscal 2002 and 2003. The WCF billed against those advances for all but $933,299. When the
Treasury funds expired at the end of fiscal 2003, the WCF had not repaid the advance to the
Environmental Program and Management Fund (treasury symbol 682/30108). The funds should
have been repaid by WCF when the funds originally expired. Subsequently, the treasury symbol
682/30108 became cancelled on September 30, 2010, and the advance still had not been repaid.
EPA processed an entry to close out the treasury symbol, improperly expensing the advance as
well as removing other liabilities. EPA stated that it followed its Cancellation Procedures and
Year End Closing Instructions. The closing instructions state, "All open advances (GL 1400
account series) for appropriations being cancelled must be cleared by September 30." The
instructions required EPA to remove any balance in an advance or liability account, and
recognize expense and earned revenue in the current year. By doing so, EPA improperly
eliminated advances and liabilities, and recognized current year expenditures and revenue.
Treasury Financial Manual, Bulletin No. 2009-04 states:
Agencies must close appropriation accounts available for obligation during a
definite period after the account's obligation availability ends. Cancel any
remaining balances (whether obligated or unobligated) in the account. These
balances are unavailable for obligation or expenditure . . . Assets purchased by an
[Agency] are not relieved from financial reporting simply because budget
authority is cancelled. Also, agencies may have payables for which funding is
cancelled, but the liability is still valid and the agency needs to report these
payables for financial reporting.
EPA's WCF is a revolving fund authorized by law to finance a cycle of operations in which the
costs for goods or services provided are charged to the users. The WCF operates like a
commercial business within EPA; internal and external customers pay for services received,
thereby generating revenue. WCF customers determine their WCF service requirements and
provide advance funding to WCF, which is drawn down as WCF incurs costs for services
provided.
EPA's cancellation procedures state:
Once a seven-year period is lapsed, the fund is then cancelled. Cancelled funds
can no longer disburse or collect money, nor can they adjust existing obligations
(31 U.SC. 1552(a), 1555). All remaining funds must be returned to the Treasury
general fund, and any subsequent collections should go to a general funds receipt
account.
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EPA did not properly close two cancelling treasury symbols at the end of fiscal 2010. EPA
improperly eliminated advances to its WCF of $933,299, as well as other smaller advances and
liabilities. EPA's WCF also improperly reduced its work-in-process account for the $933,299
and the liability for the advance. Our review of the WCF work-in-process account indicates that
there were no unbilled amounts still outstanding from fiscal 2002/2003. EPA followed its
incorrect cancellation procedures, which require eliminating the cancelled funds by closing out
all payable (except expenditure transfers payable), liability, and all advance accounts to expense
accounts, and closing out unearned advance account to earned revenue accounts. EPA's Year
End Closing Instructions state, "All open advance (GL 1400 account series) for appropriations
being cancelled must be cleared by September 30." By following the cancelling procedures, EPA
improperly eliminated those balances and enabled the WCF to retain and possibly use funds for
services that were never rendered and should be returned to Treasury.
The procedures that EPA used to remove the balances from the cancelled funds in the advance or
liability account and to recognize them as an expense or revenue in the current year caused
various general ledger accounts to be misstated. Consequently, the financial statements were
misstated, although not materially as a whole.
Recommendations
We recommend that the Office of the Chief Financial Officer:
10. Research and refund to Treasury cancelled funds as necessary.
11. Revise its cancellation procedures for the elimination of the balances from the cancelled
treasury symbols.
12. Make appropriate adjustments to properly reflect balances.
Agency Comments and OIG Evaluation
The Agency responded that it found that the $933,299 advance funds provided to the WCF for
services were improperly reflected as drawn down from treasury symbol 683/40108 instead of
682/30108 and, therefore, does not believe the funds need to be returned to Treasury. The
Agency recognized that an error occurred in reporting advance funds and it needs to make
adjusting entries in fiscal 2011. The Agency was not able to fully support its claim in time for
this report and, accordingly, we were not able to audit or determine the impact of the misposting
on the treasury symbols involved. We revised our recommendation to suggest that the Agency
research and refund cancelled funds as necessary. The Agency concurred with our remaining
findings and recommendations.
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Attachment 2
Compliance With Laws and Regulations
Table of Contents
5 - EPA Should Continue Efforts to Reconcile Intragovernmental Transactions 17
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5 - EPA Should Continue Efforts to Reconcile
Intragovernmental Transactions
As of September 30, 2010, EPA reported $378 million in unreconciled differences with 48
trading partners for intragovernmental transactions. Of that amount, $271 million was reported
by Treasury to be material differences. The remaining $107 million represents amounts reported
for nonverifying agencies, accruals, timing differences, and other agencies whose differences
were not reported as material. According to the Treasury Financial Manual, verifying agencies
are those that are required to report in the Governmentwide Financial Report System. These
include the 24 major Chief Financial Officers Act agencies and 11 other agencies material to the
Financial Report of the United States Government. Any agency not required is a nonverifying
agency. Treasury policy requires verifying agencies to confirm and reconcile intragovernmental
transactions with their trading partners. Based on our review of correspondence with other
agencies, EPA had difficulty reconciling these differences primarily because of differing
accounting treatments and accrual methodologies among federal agencies, and because of a large
reporting error made by one of EPA's trading partners. EPA's inability to reconcile its
intragovernmental transactions contributes to a long-standing government-wide problem that
hinders the ability of GAO to render an opinion on the Consolidated Financial Statements of the
Federal Government.
Treasury's fiscal 2010 fourth quarter Intragovernmental Activity Detail Report and Material
Differences Report showed the following material differences for EPA:
Federal agency Difference Category of difference
U.S. Department of the Treasury $30,285,230 Accounts Receivable/Payable
U.S. Department of Homeland Security 33,343,985 Buy/Sell Costs/Revenue
U.S. Agency for International Development 207,659,275 Buy/Sell Costs/Revenue
Total $271,288,490
While the Agency has actively worked with its trading partners to reduce differences, differences
continued to exist. The material differences reported with the U.S. Agency for International
Development (USAID) were due to errors in reporting by USAID. USAID recognized the errors
and stated that it would be making adjustments for these errors for the Government-wide
Financial Report System closing package reporting. The difference with U.S. Department of
Homeland Security stems mostly from activity related to timing differences in recording
expenses related to working with the Coast Guard on the Gulf Oil spill. The Coast Guard has
responded that it would adjust its expenses for the differences for the Government-wide
Financial Report System closing package reporting. The remaining material difference with
Treasury is due primarily to Treasury providing for an allowance on a $22 million judgment fund
liability that EPA reports as the full amount, and $7.45 million for federal Superfund cost
recovery settlements that Treasury will pay from the Judgment fund.
During fiscal 2010, EPA made significant efforts to reconcile its intragovernmental activity on a
quarterly basis with its partners and has been able to identify the causes of material differences
and work with other agencies to resolve them. However, unreconciled differences persist.
According to GAO's Auditor's Report on the Fiscal Year 2009 Financial Report of the U.S.
Government, the federal government's inability to adequately account for and reconcile
Section II-Page 92
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11-1-0015 19
intragovernmental activity and balances between federal entities is a major impediment
preventing GAO from rendering an opinion on the accrual-based consolidated financial
statements of the federal government.
Recommendation
We recommend that the Office of the Chief Financial Officer:
13. Continue efforts to reconcile EPA's intragovernmental transactions and make appropriate
adjustments to comply with federal financial reporting requirements.
Agency Comments and OIG Evaluation
The Agency concurred with our findings and recommendation.
Section II-Page 93
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11-1-0015 20
Attachment 3
Status of Prior Audit Report
Recommendations
EPA is continuing to strengthen its audit management to address audit followup issues and
complete corrective actions expeditiously and effectively to improve environmental results. The
Chief Financial Officer is the Agency followup official and is responsible for ensuring that
corrective actions are implemented. During fiscal 2010, the Office of the Chief Financial Officer
continued to conduct the onsite reviews of national and program offices, which it initiated in
fiscal 2009. The reviews focus on offices' audit followup procedures and their use of the
Management Audit Tracking System, or MATS. The reviews are designed to promote sound
audit management; increase Agency awareness of, accountability for, and completion of
unimplemented corrective actions; and ensure that audit followup data are accurate and
complete. The Office of the Chief Financial Officer completed seven of these on-site reviews in
fiscal 2010, including three regional offices and four national program offices. These reviews
will be performed on an ongoing, rotating basis.
The Agency has continued to make progress in completing corrective actions from prior years.
The status of issues from prior financial statement audits and other audits with findings and
recommendations that could have a material effect on financial statements and have corrective
actions in process are listed in the following tables.
Significant deficiencies - Corrective actions in process
Automated Application Processing Controls for IFMS
EPA has taken additional steps to correct this open issue by undertaking a project to replace its core
financial application. The new EPA Financial System is anticipated to "go live" in October 2012. We
will continue to report a reportable condition concerning our inability to test application controls due to
insufficient system documentation until the new system is implemented.
EPA Needs to Strengthen Financial Database Security Oversight and Monitor Compliance
(Report No. 2007-P-00017)
EPA did not complete all corrective actions related to reviewing the effectiveness of its followup
procedures and update the procedures accordingly. The critical patch reports being shared and
monitored as a part of the process did not include all operating systems and databases used by the
Agency. EPA also has neither implemented procedures to escalate critical patch issues to
appropriate management for resolution nor agreed to a course of action for when offices must
mitigate the identified vulnerability. EPA indicated that it plans to complete these remaining corrective
actions by July 2011.
EPA Needs to Improve Billing and Reconciling of Costs Under Superfund State Contracts
During fiscal 2010, the Agency took corrective actions to reconcile SSC funds and credits in the
general ledger to subsidiary accounts. EPA's corrective actions reduced the significance of the SSC
internal control weakness from a material weakness to a significant deficiency. As described in
Attachment 1, Significant Deficiencies, further improvements are needed in reviewing the SSC
unearned revenue accrual spreadsheets. EPA still needs to work with regions to review spreadsheet
data for prior years' fund code "T" disbursements, estimated site costs, state cost share, credits, and
billings. EPA also needs to review the quarterly SSC accrual spreadsheet site data for
reasonableness and require regions to report to the CFC the SSC site closeout amounts.
Section II-Page 94
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11-1-0015 21
Significant deficiencies - Corrective actions in process
• EPA Misstated Uncollectible Debt and Other Related Accounts
In fiscal 2009, we recommended that EPA review and update the accounting model for fiscal 2010.
In response to our recommendation, EPA noted that it would review the impact of accounting entries,
including standard vouchers for billing documents, provide account models as needed, and provide
technical advice as appropriate. EPA did not change the model in 2010, which resulted in an
improper credit balance in the uncollectible debt expense account. EPA should address the causes
for the credit balance in the uncollectible debt expense account and update the accounting model.
• Headquarters Property Items Not Inventoried
The Agency has not taken sufficient action to address the weakness we noted in the headquarters
annual personal property inventory. As described in Attachment 1, Significant Deficiencies, EPA
headquarters could not account for 1,134 personal property items in fiscal 2010.
Unneeded Funds Not Deobligated Timely
While the Agency made significant efforts to complete two corrective actions to address last year's
finding recommendation, it did not finish implementing the actions. Specifically, the Agency has not
implemented training to ensure the effectiveness of its new policy on unliquidated obligations. We
identified $1.4 million in inactive funds that are no longer needed and can be deobligated.
Integrated Financial Management System User Account Management Needs Improvement
EPA is making progress on completing the agreed-upon corrective actions. To date, EPA has
updated its processes to require the security administrator to work with requesting officials to ensure
users are given the appropriate system access. EPA also implemented detective controls to correct
instances in which access rights did not match rights requested and to check the system for
terminated personnel. EPA submitted a Separation of Duties Policy and Procedure for formal Agency
approval. The recommendations associated with the implementation of these documents should
remain open until they are implemented. EPA plans to complete actions to remove access rights for
personnel with incompatible duties and implement a system control to prevent assignment of
incompatible duties by December 30, 2010. EPA has not established milestone dates for when it will
implement a policy to notify financial systems owners of transferred/terminated personnel or review
reports of terminated employees to remove them from the finance systems due to potential changes
needed in the Human Resources System that may affect this process.
EPA Needs to Improve Physical Security at Its Offices in Las Vegas, Nevada (Report No.
10-P-0059)
The Agency indicated that it is in the process of implementing the agreed-upon corrective actions
associated with the recommendations in this report. The Agency's corrective action plan indicates
that the final corrective action associated with this report will be completed by September 30, 2011.
As a part of the agreed-upon corrective action plan, after all of the other corrective actions have been
completed, EPA will conduct an assessment to ensure that the procedures are implemented and
working as management intends by September 30, 2011.
Improved Security Planning Needed for the Customer Technology Solutions Project (Report
No. 10-P-0028)
EPA indicated that it had not yet completed the corrective actions associated with this audit and is in
the process of updating the associated corrective action plan. EPA has not provided a milestone date
for when it plans to complete the corrective actions associated with this report's recommendations.
Source: OIG analysis.
Compliance with laws and regulations - Corrective actions in process
• EPA needs to improve reconciliation of differences with trading partners
The Agency has actively worked with its trading partners to reduce unreconciled differences.
However, as described in Attachment 2, EPA reported $378 million in unreconciled differences for
intragovernmental transactions with 48 trading partners.
Source: OIG analysis.
Section II-Page 95
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22
Attachment 4
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Planned
Completion
Action Official Date
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed To
Amount Amount
10 Work with the regions to review prior years' fund
code "T" disbursements data on the SSC
spreadsheets.
10 Work with the regions to review the spreadsheet
data for the estimated site costs, state cost share,
credits, and billings.
10 Require regions to report to CFC the SSC site
closeout amounts, including the final actual site
costs separated by "T" and "TR1" disbursements,
final state share, and the amount of refund paid or
final billing.
10 Review the quarterly SSC spreadsheets to
determine whether the site data are reasonable
and the resulting site calculations are logical.
Specifically, review the data for billings, credits, or
unearned revenue in excess of state cost shares;
no estimated site costs; no billings; reimbursable
"TR1" expenses in excess of billings; and closed
sites with accrued unbilled costs or unearned
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
5 12 Require the Office of Financial Services to
establish a federal allowance for $6.6 million, which
remains on the Twin Cities site receivable, unless
the Agency can obtain additional evidence from the
Department of Defense that it intends to pay the
debt.
6 12 Require the Office of Financial Services to review
collectability of open federal accounts receivables
and establish an allowance and/or write-off.
7 12 Require the Office of Financial Services to
establish procedures to ensure that CFC timely
bills federal agencies within their authorized
appropriation period.
8 13 Require the Director, Facilities Management and
Services Division, to develop a management-level
property management training course and require
completion of the course by all EPA managers.
9 13 Require the Director, Facilities Management and
Services Division, to adequately address and
resolve the issue and determine why personal
property items are missing.
10 15 Research and refund to Treasury cancelled funds
as necessary.
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Office of the
Chief Financial Officer
Section II-Page 96
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11-1-0015 23
POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in SOOOs)
Planned
Rec. Page Completion Claimed Agreed To
No. No. Subject Status1 Action Official Date Amount Amount
11 15 Revise its cancellation procedures for the Office of the
elimination of the balances from the cancelled Chief Financial Officer
treasury symbols.
12 15 Make appropriate adjustments to properly reflect Office of the
balances. Chief Financial Officer
13 18 Continue efforts to reconcile EPA's Office of the
intragovernmental transactions and make Chief Financial Officer
appropriate adjustments to comply with federal
financial reporting requirements.
Note: We identified $1.4 million in inactive funds $1,400.0
that are no longer needed and can be deobligated.
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
Section II-Page 97
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24
Appendix I
EPA's Fiscal 2010 and 2009
Consolidated Financial Statements
SECTION II
FINANCIAL SECTION
Section II-Page 98
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11-1-0015 25
Principal Financial Statements
Financial Statements
1. Consolidated Balance Sheet
2. Consolidated Statement of Net Cost
3. Consolidated Statement of Net Cost by Goal
4. Consolidating Statement of Changes in Net Position
5. Combined Statement of Budgetary Resources
6. Statement of Custodial Activity
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balance with Treasury (FBWT)
Note 3. Cash and Other Monetary Assets
Note 4. Investments
Note 5. Accounts Receivable, Net
Note 6. Other Assets
Note 7. Loans Receivable, Net
Note 8. Accounts Payable and Accrued Liabilities
Note 9. General Property, Plant and Equipment (PP& E)
Note 10. Debt Due to Treasury
Note 11. Stewardship Land
Note 12. Custodial Liability
Note 13. Other Liabilities
Note 14. Leases
Note 15. FECA Actuarial Liabilities
Note 16. Cashout Advances, Superfund
Note 17. Unexpended Appropriations - Other Funds
Note 18. Commitments and Contingencies
Note 19. Earmarked Funds
Note 20. Exchange Revenues, Statement of Net Cost
Note 21. Intragovernmental Costs and Exchange Revenue
Note 22. Cost of Stewardship Land
Note 23 Environmental Cleanup Costs
Note 24. State Credits
Note 25. Preauthorized Mixed Funding Agreements
Note 26. Custodial Revenues and Accounts Receivable
Note 27. Reconciliation of President's Budget to Statement of Budgetary Resources
Section II-Page 99
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11-1-0015 26
Notes to Financial Statements (continued)
Note 28. Recoveries and Resources Not Available, Statement of Budgetary Resources
Note 29. Unobligated Balances Available
Note 30. Undelivered Orders at the End of the Period
Note 31. Offsetting Receipts
Note 32. Transfers-In and Out, Statement of Changes in Net Position
Note 33. Imputed Financing
Note 34. Payroll and Benefits Payable
Note 35. Other Adjustments, Statement of Changes in Net Position
Note 36. Non-exchange Revenue, Statement of Changes in Net Position
Note 37. Reconciliation of Net Cost of Operations to Budget
Note 38. Amounts Held By Treasury (Unaudited)
Note 39. 2004 Antideficiency Act Violation Reported in 2010
Required Supplementary Information (Unaudited)
1. Deferred Maintenance
2. Stewardship Land
3. Supplemental Statement of Budgetary Resources
Required Supplementary Stewardship Information (Unaudited)
Supplemental Information and Other Reporting Requirements (Unaudited)
Superfund Financial Statements and Related Notes
Section II - Page 100
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27
Environmental Protection Agency
Consolidated Balance Sheets
As of September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments (Note 4)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intragovernmental
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net - Non-Federal (Note 7)
Property, Plant & Equipment, Net (Note 9)
Other (Note 6)
Total Assets
Stewardship PP& E (Note 11 )
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities (Note 8)
Debt Due to Treasury (Note 10)
Custodial Liability (Note 12)
Other (Note 13)
Total Intragovernmental
Accounts Payable & Accrued Liabilities (Note 8)
Pensions & Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 23)
Cashout Advances, Superfund (Note 16)
Commitments & Contingencies (Note 18)
Payroll & Benefits Payable (Note 34)
Other (Note 13)
Total Liabilities
NET POSITION
Unexpended Appropriations - Other Funds (Note 17)
Cumulative Results of Operations - Earmarked Funds (Note 19)
Cumulative Results of Operations - Other Funds
Total Net Position
Total Liabilities and Net Position
14,603,024
7,243,613
45,698
223,296
22,115,631
10
417,535
5,254
915,121
2,834
23,456,385 S
51,325
4,844
52,751
132,286
241,206
1,031,448
44,938
20,154
636,673
4,373
264,975
99,996
2,343,763
13,342,784
7,152,382
617,456
21,112,622
15,557,917
6,879,948
39,362
214,831
22,692,058
10
817,844
11,645
852,488
2,228
24,376,273
76,054
9,983
71,200
140,645
297,882
865,764
44,122
19,494
572,412
4,573
250,617
115,918
2,170,782
14,536,347
7,086,476
582,668
22,205,491
23,456,385 S
24,376,273
The accompanying notes are an integral part of these financial statements.
Section II - Page 101
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11-1-0015 28
Environmental Protection Agency
Consolidated Statements of Net Cost
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010 FY2009
COSTS
Gross Costs (Note 21) $ 12,406,265 $ 8,920,963
Less:
Earned Revenue (Notes 20, 21) 693,484 773,612
NET COST OF OPERATIONS (Note 21) $ 11,712,781 $ 8,147,351
The accompanying notes are an integral part of these financial statements.
Section II - Page 102
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29
Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2010
(Dollars in Thousands)
Clean & Safe
Clean Air Water
Costs:
Intragovernmental $ 170,677 $ 193,456
With the Public 1,048,124 6,197,330
Total Costs (Note 21) 1,218,801 6,390,786
Less:
Earned Revenue, Federal 18,923 2,803
Earned Revenue, non Federal 5,906 2,524
Total Earned Revenue (Notes
20,21) 24,829 5,327
NET COST OF OPERATIONS
(Note 21) $ 1,193,972 $ 6,385,459
Land
Preservation &
Restoration
Healthy
Communities &
Ecosystems
342,734 $ 293,850
2,096,211 1,265,653
2,438,945
103,687
446,569
550,256
$ 1,888,689
1,559,503
64,034
44,144
108,178
$ 1,451,325
Compliance &
Environme ntal
Stewardship
$ 182,299
615,931
798,230
3,400
1,494
4,894
793,336
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF OPERATIONS
(Note 21)
Consolidated
Totals
$ 1,183,016
$ 11,223,249
12,406,265
$ 192,847
$ 500,637
693,484
$ 11,712,781
The accompanying notes are an integral part of these financial statements.
Section II - Page 103
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30
Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2009
(Dollars in Thousands)
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF
OPERATIONS (Note 21)
Clean Air
$ 187,484
874,787
1,062,271
15,455
3,036
18,491
Healthy Compliance &
Clean & Safe Land Preservation Communities & Environmental
Water & Restoration Ecosystems Stewardship
S 191,558 S
3,236,903
3,428,461
4,758
3,208
7,966
386,549 $
1,821,301
2,207,850
101,767
580,119
681,886
271,028 S
1,134,155
1,405,183
20,047
42,267
62,314
207,660
609,538
817,198
4,071
(1,116)
2,955
1,043,780 $ 3,420,495 $
1,525,964 $ 1,342,869
814,243
Costs:
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Notes
20,21)
NET COST OF
OPERATIONS (Note 21)
Consolidated
Totals
I 1,244,279
i 7,676,684
8,920,963
146,098
627,514
773,612
8,147,351
The accompanying notes are an integral part of these financial statements.
Section II - Page 104
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31
Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Period Ending September 30, 2010
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources
Net Cost of Operations
FY2010
Earmarked
Funds
FY2010
All Other
Funds
7,086,476
7,086,476 $
130,504
213,984
(20,789)
1,280,570
1,604,269
582,668
582,668
11,294,823
33,859
(1,280,570)
10,048,112
FY2010
Consolidated
Total
7,669,144
7,669,144
11,294,823
130,504
213,984
13,070
11,652,381
27,022
27,022 5
(1,565,385)
(546)
134,618 r
J 134,072 $
(10,147,396)
(546)
161,640
161,094
(11,712,781)
Net Change
Cumulative Results of Operations
65,906
7,152,382
34,788
100,694
617,456 $ 7,769,838
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
FY2010
Earmarked
Funds
FY2010
All Other
Funds
14,536,347
14,536,347
FY2010
Consolidated
Total
14,536,347
14,536,347
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
10,182,421
(17,000)
(65,989)
(11,292,995)
(1,193,563)
13,342,784
10,182,421
(17,000)
(65,989)
(11,292,995)
(1,193,563)
13,342,784
7,152,382 S 13,960,240 S
21,112,622
The accompanying notes are an integral part of these financial statements.
Section II - Page 105
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32
Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Periods Ending September 30, 2009
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexehange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
FY2009
Earmarked
Funds
6,160,531
6,160,531 $
176,168
188,245
(39,705)
1,747,911
2,072,619 $
(84)
28,975
28,891 $
(1,175,565)
925,945
7,086,476 $
- $
-
-
7,086,476 S
FY2009 All
Other Funds
555,766
555,766 $
8,504,157
-
-
57,392
(1,747,911)
6,813,638 $
694
184,356
185,050 $
(6,971,786)
26,902
582,668 $
8,674,710
8,674,710 $
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
15,119,015 S
FY2009
Consolidated
Total
6,716,297
6,716,297
8,504,157
176,168
188,245
17,687
-
8,886,257
610
213,331
213,941
(8,147,351)
952,847
7,669,144
8,674,710
8,674,710
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
22,205,491
The accompanying notes are an integral part of these financial statements.
Section II - Page 106
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33
Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
BUDGETARY RES OURCES
Unobligated Balance, Brought Forward, October 1:
Adjusted Subtotal
Recoveries of Prior Year Unpaid Obligations (Note 28)
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections
Earned:
Collected
Change in Receivables from Federal Sources
Change in Unfilled Customer Orders:
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year, Without Advances
Previously Unavailable
Expenditure Transfers from Trust Funds
Total Spending Authority from Offsetting Collections
Nonexpenditure Transfers, Net, Anticipated and Actual (Note 32)
Temporarily Not Available Pursuant to Public Law (Note 28)
Permanently Not Available (Note 28)
Total Budgetary Resources (Note 27)
3,703,022
3,703,022
277,771
10,256,166
52
918,786
(1,746)
234,559
(132,489)
0
36,809
1,055,919
1,369,345
(11,800)
(73,453)
3,551,8
3,551,880
220,329
15,276,374
5
631,378
2,884
29,183
(93,701)
57,392
627,136
1,371,077
(32,732)
16,577,022
21,014,069
STATUS OFBUDGETARYRESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred (Note 27)
Unobligated Balances:
Apportioned (Note 29)
Exempt from Apportionment
Total Unobligated Balances
Unobligated Balances Not Available (Note 29)
Total Status of Budgetary Resources
11,260,452
690,229
11,950,681
4,430,813
4,430,813
195,528
16,740,272
570,775
16,577,022 $
17,311,047
3,440,829
3,440,829
262,193
21,014,069
The accompanying notes are an integral part of these financial statements.
Section II - Page 107
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Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1
Adjusted Total
Less: Uncollected Customer Payments from Federal Sources,
Brought Forward, October 1
Total Unpaid Obligated Balance, Net
Obligations Incurred, Net (Note 27)
Less: Gross Outlays (Note 27)
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments fromFederal
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual (Note 28)
Change in Uncollected Customer Payments from Federal Sources
Total, Change in Obligated Balance
Obligated Balance, Net, End of Period:
Unpaid Obligations
Less: Uncollected Customer Payments from Federal Sources
Total, Unpaid Obligated Balance, Net, End of Period
15,788,389
15,788,389
(573,824)
15,214,565
11,950,681
(13,588,391)
(277,771)
133,869
13,432,953
13,872,909
(439,956)
9,368,094
9,368,094
(666,246)
8,701,848
17,311,047
(10,670,422)
13,432,953
(220,329)
92,421
15,214,565
15,788,389
(573,824)
15,214,565
NET OUTLAYS
Net Outlays:
Gross Outlays (Note 27)
Less: Offsetting Collections (Note 27)
Less: Distributed Offsetting Receipts (Notes 27 and 31)
Total, Net Outlays
13,588,391
(1,189,788)
(1,402,960)
10,995,643 $
10,670,422
(719,558)
(1,884,134)
8,066,730
The accompanying notes are an integral part of these financial statements.
Section II - Page 108
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35
Environmental Protection Agency
Statements of Custodial Activity
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
FY2010
FY2009
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties
Other
Total Cash Collections
Accrual Adjustment
Total Custodial Revenue (Note 26)
Disposition of Collections:
Transferred to Others (General Fund)
Increases/Decreases in Amounts to be Transferred
Total Disposition of Collections
Net Custodial Revenue Activity (Note 26)
88,318
18,072
101,613
(14,079)
106,390
(16,763)
87,534
16,390
89,627
103,924
105,684
(16,057)
87,520
16,404
89,627
103,924
The accompanying notes are an integral part of these financial statements.
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Environmental Protection Agency
Notes to the Financial Statements
Fiscal Year Ended September 30, 2010 and 2009
(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 FY 2010 financial statements are presented on a consolidated basis for the Balance
Sheet, Statements of Net Cost, Changes in Net Position and Custodial Activity and a
combined basis for the Statement of Budgetary Resources. These financial statements
include the accounts of all funds described in this note by their respective Treasury fund
group.
B. Basis of Presentation
These accompanying financial statements have been prepared to report the financial position
and results of operations of the U. S. Environmental Protection Agency (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 policies, which are
summarized in this note. The Statement of Net Cost has been prepared with cost segregated
by the Agency's strategic goals.
1. General Fund Appropriations (Treasury Fund Groups 0000 - 3999)
a. State and Tribal Assistance Grants (STAG) Appropriation: The STAG
appropriation, Treasury fund group 0103, provides funds for environmental
programs and infrastructure assistance including capitalization grants for State
revolving funds and performance partnership grants. Environmental programs and
infrastructure supported are: Clean and Safe Water; capitalization grants for the
Drinking Water State Revolving Funds; Clean Air; direct grants for Water and
Wastewater Infrastructure needs, partnership grants to meet Health Standards,
Protect Watersheds, Decrease Wetland Loss, and Address Agricultural and Urban
Runoff and Storm Water; Better Waste Management; Preventing Pollution and
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Reducing Risk in Communities, Homes, Workplaces and Ecosystems; and
Reduction of Global and Cross Border Environmental Risks.
b. Science and Technology (S&T) Appropriation: The S&T appropriation,
Treasury fund group 0107, finances salaries, travel, science, technology, research
and development activities, including laboratory supplies, certain operating
expenses, grants, contracts, intergovernmental agreements, and purchases of
scientific equipment. These activities provide the scientific basis for the Agency's
regulatory actions. In FY 2010, Superfund research costs were appropriated in
Superfund and transferred to S&T to allow for proper accounting of the costs.
Environmental scientific and technological activities and programs include Clean
Air; Clean and Safe Water; Americans Right to Know about Their Environment;
Better Waste Management; Preventing Pollution and Reducing Risk in
Communities, Homes, Workplaces, and Ecosystems; and Safe Food.
c. Environmental Programs and Management (EPM) Appropriation: The EPM
appropriation, Treasury fund group 0108, includes funds for salaries, travel,
contracts, grants, and cooperative agreements for pollution abatement, control,
and compliance activities and administrative activities of the Agency's operating
programs. Areas supported from this appropriation include: Clean Air, Clean and
Safe Water, Land Preservation and Restoration, Healthy Communities and
Ecosystems, and Compliance and Environmental Stewardship.
d. Buildings and Facilities Appropriation (B&F): The B&F appropriation,
Treasury fund group 0110, provides for the construction, repair, improvement,
extension, alteration, and purchase of fixed equipment or facilities that are owned
or used by the EPA.
e. Office of Inspector General (OIG) Appropriation: The OIG appropriation,
Treasury fund group 0112, provides funds for audit and investigative functions to
identify and recommend corrective actions on management and administrative
deficiencies that create the conditions for existing or potential instances of fraud,
waste and mismanagement. Additional funds for audit and investigative activities
associated with the Superfund and the LUST Trust Funds are appropriated under
those Trust Fund accounts and transferred to the Office of Inspector General
account. The audit function provides contract, internal controls and performance,
and financial and grant audit services. The appropriation includes expenses
incurred and reimbursed from the appropriated trust funds accounted for under
Treasury fund group 8145 and 8153.
/ Payments to the Hazardous Substance Superfund Appropriation: The Payment
to the Hazardous Substance Superfund appropriation, Treasury fund group 0250,
authorizes appropriations from the General Fund of the Treasury to finance
activities conducted through the Hazardous Substance Superfund Program.
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g. Payments to Leaking Underground Storage Tank Appropriation: The Payment
to the Leaking Underground Storage Tank appropriation, Treasury fund group
0251, authorizes appropriations from the General Fund of the Treasury to finance
activities conducted through the Leaking Underground Storage Tank program.
h. Asbestos Loan Program: The Asbestos Loan Program is accounted for under
Treasury fund group 0118, Program Account, for interest subsidy and
administrative support; under Treasury fund group 4322, Financing Account, for
loan disbursements, loans receivable and loan collections on post-FY 1991 loans.
The Asbestos Loan Program was authorized by the Asbestos School Hazard
Abatement Act of 1986 to finance control of asbestos building materials in
schools. The Program Account 0118 disburses the subsidy to the Financing Fund
for increases in the subsidy. The Financing Account 4322 receives the subsidy
payment, borrows from Treasury and collects the asbestos loans.
i. Allocations and Appropriations Transferred to the Agency: The EPA receives
allocations or appropriations transferred from other federal agencies.
j. Treasury Clearing Accounts: The EPA Department of the Treasury Clearing
Accounts include: (1) the Budgetary Suspense Account, (2) the Unavailable
Check Cancellations and Overpayments Account, and (3) the Undistributed Intra-
agency Payments and Collections (IPAC) Account. These are accounted for under
Treasury fund groups 3875, 3880 and 3885, respectively.
k. General Fund Receipt Accounts: General Fund Receipt Accounts include:
Hazardous Waste Permits; Miscellaneous Fines, Penalties and Forfeitures;
General Fund Interest; Interest from Credit Reform Financing Accounts;
Downward Re-estimates of Subsidies; Fees and Other Charges for Administrative
and Professional Services; Miscellaneous Recoveries and Refunds and Proceeds
of Sales, Personal Property. These accounts are accounted for under Treasury
fund groups 0895, 1099, 1435, 1499, 2753.003, 3200, 3220 and 3845,
respectively.
/. Allocation of Budget Authority: EPA is an allocation budget transfer parent to
five federal agencies: Department of Interior, Department of Labor, Center for
Disease Control, Department of Commerce, and Federal Emergency Management
Agency. EPA has an Interagency Agreement or a Memorandum of
Understanding (MOU) with each child agency to provide an annual work plan and
quarterly progress report containing an accounting of funds obligated in each
budget category within 15 days after the end of each quarter. This allows EPA to
properly report the financial activity. The allocation transfers are reported in the
net cost of operations, changes in net position, balance sheet and budgetary
resources where activity is being performed by the receiving Federal entity. In
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addition, EPA receives allocation transfers, as a child, from the Bureau of Land
Management.
2. Revolving Funds (Treasury Fund Group 4000 - 4999)
a, Reregistration and Expedited Processing Fund: The Revolving Fund,
Treasury fund group 4310, was authorized by the FIFRA of 1972, as amended
by the FIFRA Amendments of 1988 and as amended by the Food Quality
Protection Act of 1996. Pesticide Maintenance fees are paid by industry to
offset the costs of pesticide re-registration and reassessment of tolerances for
pesticides used in or on food and animal feed, as required by law.
b. Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund
group 4311, was authorized in 1963 for the deposit of tolerance fees. Fees are
paid by industry for federal services to set pesticide chemical residue limits in
or on food and animal feed. The fees collected prior to January 2, 1997 were
accounted for under this fund. Presently these fees are being deposited in the
FIFRA fund (see above).
c. Asbestos Loan Program: The Asbestos Loan Program is accounted for under
Treasury fund group 4322, Financing Account for loan disbursements, loans
receivable and loan collections on post-FY 1991 loans. Refer to General Fund
Appropriations paragraph h. for details.
d. Working Capital Fund (WCF): The WCF, Treasury fund group, 4565,
includes four activities: computer support services, financial system services,
employee relocation services, and postage. The WCF derives revenue from
these activities based upon a fee for services. The WCF's customers currently
consist primarily of Agency program offices and a small portion from other
federal agencies. Accordingly, those revenues generated by the WCF from
services provided to Agency program offices and expenses recorded by the
program offices for use of such services, along with the related
advances/liabilities, are eliminated on consolidation of the financial
statements.
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3. Special Funds (Treasury Fund Group 5000 - 5999)
Environmental Services Receipt Account: The Environmental Services Receipt
Account authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549),"
Treasury fund group 5295, 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.
Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by a
1992 act, "Making appropriations for the Department of Veterans Affairs and
Housing and Urban Development, and for sundry independent agencies, boards,
commissions corporations, and offices for the fiscal year ending September 30, 1993
(P.L. 102-389)," Treasury fund group 5297, has funds available to carry out
authorized environmental restoration activities. Funding is derived from the collection
of reimbursements under the Exxon Valdez settlement as a result of an oil spill.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by the
"Consolidated Appropriations Act, 2004 (P.L. 108-199)," Treasury fund group 5374,
was authorized for the expedited processing of certain registration petitions and
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.
4. Deposit Funds (Treasury Fund Group 6000 - 6999)
Deposits include: Fees for Ocean Dumping; Nonconformance Penalties; Clean Air
Allowance Auction and Sale; Advances without Orders; and Suspense and Payroll
Deposits for Savings Bonds, and State, City Income Taxes Withheld, and Other
Federal Payroll Withholding Allotments. These funds are accounted for under
Treasury fund groups 6264, 6265, 6266, 6500, 6050, 6275, and 6276, respectively.
5. Trust Funds (Treasury Fund Group 8000 - 8999)
a. Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group
8145, was established by the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA) to provide resources needed
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 other federal agencies to carry out CERCLA. Risks to
public health and the environment at uncontrolled hazardous waste sites
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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 and investment activity.
b. Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust
Fund, Treasury fund group 8153, was authorized by the Superfund Amendments
and Reauthorization Act of 1986 (SARA) as amended by the Omnibus Budget
Reconciliation Act of 1990. The LUST appropriation provides funding to 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 to 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. The program is financed by a one cent
a gallon tax on motor fuels which will expire in 2011.
c. Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury
fund group 8221, was authorized by the Oil Pollution Act of 1990 (OPA). Monies
were appropriated to the Oil Spill Response Trust Fund in 1993. 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 oil spill cleanup
actions is provided through the U.S. Coast Guard under the Oil Spill Liability
Trust Fund and reimbursable funding from other federal agencies.
d Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed
Funds Trust Fund authorized in the Federal Water Pollution Control Act (Clean
Water Act) as amended by (P.L. 92-500, The Federal Water Pollution Control Act
Amendments of 1972), Treasury fund group 8741, includes gifts for pollution
control programs that are usually designated for a specific use by donors and/or
deposits from pesticide registrants to cover the costs of petition hearings when
such hearings result in unfavorable decisions to the petitioner.
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C. Budgets and Budgetary Accounting
1. General Funds
Congress adopts an annual appropriation for STAG, B&F, and for Payments to the
Hazardous Substance Superfund to be available until expended, as well as annual
appropriations for S&T, EPM and for the OIG to be available for 2 fiscal years. When
the appropriations for the General Funds are enacted, Treasury issues a warrant to the
respective appropriations. As the Agency disburses obligated amounts, the balance of
funds available to the appropriation is reduced at Treasury.
The Asbestos Loan Program is a commercial activity financed from a combination of
two sources, one for the long term costs of the loans and another for the remaining
non-subsidized portion of the loans. Congress adopted a 1 year appropriation,
available for obligation in the fiscal year for which it was appropriated, to cover the
estimated long term cost of the Asbestos loans. The long term costs are defined as the
net present value of the estimated cash flows associated with the loans. The portion of
each loan disbursement that did not represent long term cost is financed under
permanent indefinite borrowing authority established with the Treasury. A permanent
indefinite appropriation is available to finance the costs of subsidy re-estimates that
occur in subsequent years after the loans were disbursed.
Funds transferred from other federal agencies are processed as non-expenditure
transfers. As the Agency disburses the obligated amounts, the balance of funding
available to the appropriation is reduced at Treasury.
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.
2. Revolving Funds
Funding of the FIFRA and Pesticide Registration Funds 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 WCF is provided by fees collected from other Agency appropriations
and other federal agencies to offset costs incurred for providing Agency
administrative support for computer and telecommunication services, financial
system services, employee relocation services, and postage.
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3. Special Funds
The Environmental Services Receipt Account obtains fees associated with
environmental programs.
Exxon Valdez uses funding collected from reimbursement from the Exxon Valdez
settlement.
4. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit
accounts pending further disposition. These are not EPA's funds.
5. Trust Funds
Congress adopts an annual appropriation amount for the Superfund, LUST and the
Oil Spill Response Trust Funds to remain available until expended. A transfer
account for the Superfund and LUST Trust Fund has been established for purposes of
carrying out the program activities. As the Agency disburses obligated amounts from
the transfer account, the Agency draws down monies from the Superfund and LUST
Trust Fund 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 adopts the appropriation amount.
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. The financial statements are
prepared in accordance with GAAP for Federal entities.
Transactions are recorded on an accrual accounting basis and on a budgetary basis (where
budgets are issued). Under the accrual method, revenues are recognized when earned and
expenses are recognized when a liability is incurred, without regard to receipt or payment
of cash. Budgetary accounting facilitates compliance with legal constraints and controls
over the use of federal funds.
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 Statement of Federal Financial Accounting
Standards (SFFAS) No. 7, "Accounting for Revenues and Other Financing Sources."
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The Superfund program receives most of its funding through appropriations that may be
used within specific statutory limits for operating and capital expenditures (primarily
equipment). Additional financing for the Superfund program is obtained through:
reimbursements from other federal agencies, state cost share payments under Superfund
State Contracts (SSCs), and settlement proceeds from Potentially Responsible Parties
(PRPs) under CERCLA Section 122(b)(3) placed in special accounts. Cost recovery
settlements that are not placed in special accounts continue to be deposited in the Trust
Fund.
Most of the other funds receive funding needed to support programs through
appropriations which may be used within statutory limits for operating and capital
expenditures. However, under Credit Reform provisions, the Asbestos Loan Program
receives funding to support the subsidy cost of loans through appropriations which may
be used within statutory limits. The Asbestos Direct Loan Financing fund 4322, an off-
budget fund, receives additional funding to support the outstanding loans through
collections from the Program fund 0118 for the subsidized portion of the loan.
The FIFRA and Pesticide Registration funds receive funding through fees collected for
services provided and interest on invested funds. The WCF receives revenue through fees
collected for services provided to Agency program offices. Such revenue is eliminated
with related Agency program expenses upon consolidation of the Agency's financial
statements. The Exxon Valdez Settlement Fund receives funding through
reimbursements.
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
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
Appropriated 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
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. No provision is made for unrealized
gains or losses on these securities because, in the majority of cases, they are held to
maturity (see Note 4).
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H. Notes Receivable
The Agency records notes receivable at their face value and any accrued interest as of the
date of receipt.
I. Marketable Securities
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 (see Note 4).
J. Accounts Receivable and Interest Receivable
The majority of receivables for non-Superfund funds represent penalties and interest
receivable for general fund receipt accounts, unbilled intragovernmental reimbursements
receivable, allocations receivable from Superfund (eliminated in consolidated totals), and
refunds receivable for the STAG appropriation.
Superfund accounts receivable represent recovery of costs from PRPs as provided under
CERCLA as amended by SARA. Since there is no assurance that these funds will be
recovered, cost recovery expenditures are expensed when incurred (see Note 5).
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 lead 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.
K. Advances and Prepayments
Advances and prepayments represent funds advanced or prepaid to other entities both
internal and external to the Agency for which a budgetary expenditure has not yet
occurred.
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L. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans receivable
resulting from obligations on or before September 30, 1991, are reduced by the allowance
for uncollectible loans. 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.
M. Appropriated Amounts Held by Treasury
For the Superfund and LUST Trust Funds and for amounts appropriated from the
Superfund Trust Fund to the OIG, cash available to the Agency that is not needed
immediately for current disbursements remains in the respective Trust Funds managed by
Treasury.
N. Property, Plant, and Equipment
EPA accounts for its personal and real property accounting records in accordance with
SFFAS No. 6, "Accounting for Property, Plant and Equipment." For EPA-held property,
the Fixed Assets Subsystem (FAS) automatically generates depreciation entries monthly
based on acquisition dates.
A purchase of EPA-held or contract personal property is capitalized if it is valued at $25
thousand or more and has an estimated useful life of at least 2 years. For contractor held
property, depreciation is taken on a modified straight-line basis over a period of 6 years
depreciating 10 percent the first and sixth year, and 20 percent in years 2 through 5.
Detailed records are maintained and accounted for in contractor systems, not in FAS for
contractor held property. Acquisitions of EPA-held personal property are depreciated
using the straight-line method over the specific asset's useful life, ranging from 2 to 15
years.
Personal property also consists of capital leases. To be defined as a capital lease, it must,
at its inception, have a lease term of two or more years and the lower of the fair value or
present value of the minimum lease payments must be $75 thousand or more. Capital
leases may also contain real property (therefore considered in the real property category
as well), but these need to meet an $85 thousand capitalization threshold. In addition, the
lease must meet one of the following criteria: transfers ownership to EPA, contains a
bargain purchase option, the lease term is equal to 75 percent or more of the estimated
service life, or the present value of the lease and other minimum lease payments equal or
exceed 90 percent of the fair value.
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Superfund contract property used as part of the remedy for site-specific response actions
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, 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 EPA's 10 year retention period, depreciation for this
property is based on a 10 year 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 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
Working Capital Fund (WCF). This property is retained in FAS and depreciated utilizing
the straight-line method based upon the asset's acquisition date and useful life.
Real property consists of land, buildings, capital and leasehold improvements and capital
leases. Real property, other than land, is capitalized when the value is $85 thousand or
more. 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 during and after FY 1997 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 102 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.
Software for the WCF, a revenue generating activity, is capitalized if the purchase price
is $100 thousand or more with an estimated useful life of 2 years or more. All other funds
capitalize software if those investments are considered Capital Planning and Investment
Control (CPIC) or CPIC Lite systems with the provisions of SFFAS No. 10, "Accounting
for Internal Use Software." Once software enters the production life cycle phase, it is
depreciated using the straight-line method over the specific asset's useful life ranging
from 2 to 10 years.
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O. 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 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.
P. Borrowing Payable to the Treasury
Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos
direct loans described in part B. and C. of this note. Periodic principal payments are made
to Treasury based on the collections of loans receivable.
Q. Interest Payable to Treasury
The Asbestos Loan Program makes periodic interest payments to Treasury based on its
debt.
R. 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. Annual leave earned but not taken as of
the end of the fiscal year is accrued as an unfunded liability. Accrued unfunded annual
leave is included in Note 34 as a component of "Payroll and Benefits Payable."
S. 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, 1984, the Federal Employees Retirement System (FERS) went into effect
pursuant to Public Law 99-335. Most employees hired after December 31, 1983, are
automatically covered by FERS and Social Security. Employees hired prior to January 1,
1984, elected to either join FERS and Social Security or remain in CSRS. A primary
feature of FERS is that it offers a savings plan to 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
Section II - Page 122
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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.
T. 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.
U. Recovery Act Funds
On February 17, 2009, President Obama signed the American Recovery and
Reinvestment Act of 2009 (Recovery Act). The Act was enacted to create jobs in the
United States, encourage technical advances, assist in modernizing the nation's
infrastructure, and enhance energy independence. The EPA was charged with the task of
distributing funds to invest in various projects aimed at creating advances in science,
health, and environmental protection that will provide long-term economic benefits.
EPA manages almost $7.22 billion in Recovery Act funded projects and programs that
will help achieve these goals, offer resources to help other "green" agencies, and
administer environmental laws that will govern Recovery activities. As of September 30,
2010, EPA has paid out $3.71 billion.
EPA, in collaboration with states, tribes, local governments, territories and other partners,
is administering the funds it received under the Recovery Act through four
appropriations. The funds include:
State and Tribal Assistance Grants (STAG) that in turn include: $4 billion for assistance
to help communities with water quality and wastewater infrastructure needs and $2
billion for drinking water infrastructure needs (Water State Revolving Fund programs
and Water Quality Planning program); $100 million for competitive grants to evaluate
and clean up former industrial and commercial sites (Brownfields program); $300 million
for grants and loans to help regional, state and local governments, tribal agencies, and
non-profit organizations with projects that reduce diesel emissions (Clean Diesel
programs); $600 million for the cleanup of hazardous sites (Superfund program); $200
Section II - Page 123
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11-1-0015 50
million for cleanup of petroleum leaks from underground storage tanks (Leaking
Underground Storage Tank Fund program); and $20 million for audits and investigations
conducted by the Inspector General (IG).
The EPA has committed to focusing on the following areas: Clean Diesel Emissions,
Superfund Hazardous Waste Cleanup, Cleaner Underground Storage Tank Sites,
Revitalized Neighborhoods from Brownfields and Cleaner Water and Drinking Water
Infrastructures.
The vast majority of the contracts awarded under the Recovery Act will be entered into
using competitive contracts. EPA is committed fully to ensuring transparency and
accountability throughout the Agency in spending Recovery Act funds in accordance
with OMB guidance.
EPA has set up a Stimulus Steering Committee that meets to review and report on the
status of the distribution of the Recovery Act Funds to ensure transparency and accuracy.
EPA has also developed a Stewardship Plan which is an Agency-level risk mitigation
plan that sets out the Agency's Recovery Act risk assessment, internal controls and
monitoring activities. The Stewardship Plan is divided into seven functional areas: grants,
interagency agreements, contracts, human capital/payroll, budget execution, performance
reporting and financial reporting. The Stewardship Plan was developed around
Government Accountability Office (GAO) standards for internal control. Under each
functional area, risks are assessed and related control, communication and monitoring
activities are identified for each impacted program. The Plan is a dynamic document and
will be updated as revised OMB guidance is issued or additional risks are uncovered.
EPA has the three-year EPM treasury symbol 689/10108 that is under the Recovery Act.
EPA's two-year EPM treasury symbol 689/00108 is a "regular" program. EPA's other
Recovery Act programs are the following: Office of Inspector General, treasury symbol
689/20113; State and Tribal Assistance Grants, treasury symbol 689/00102; Payment to
the Superfund, treasury symbol 689/00249; Superfund, treasury symbol 689/08195; and
Leaking Underground Storage Tank, treasury symbol 689/08196.
V. British Petroleum (BP) Oil Spill
On April 20, 2010 the Deepwater Horizon drilling rig exploded, releasing large volumes
of oil into the Gulf of Mexico. As a responsible party, BP is required by the 1990 Oil
Pollution Act to fund the cost of the response and cleanup operations. EPA has been
working in conjunction with the Coast Guard who was named the lead on the effort to
fund the immediate oil spill clean ups.
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W. 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 and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Note 2. Fund Balance with Treasury (FBWT)
Fund Balance with Treasury as of September 30, 2010 and 2009, consists of the following:
Trust Funds:
Superfund
LUST
Oil Spill & Misc.
Revolving Funds:
FIFRA/Tolerance
Working Capital
Cr. Reform Finan.
Appropriated
Other Fund Types
Total
Fjitity
Assets
$ 106,247 $
55,132
9,644
4,204
80,485
390
14,049,511
289,149
FY2010
Non-Fjitity
Assets
- $
-
-
_
-
-
-
8,262
Total
106,247 $
55,132
9,644
4,204
80,485
390
14,049,511
297,411
Fjitity
Assets
62,631 $
25,169
2,441
7,153
80,293
390
15,122,481
247,877
FY2009
Non-Fjitity
Assets
- $
-
-
_
-
-
-
9,482
Total
62,631
25,169
2,441
7,153
80,293
390
15,122,481
257,359
14,594,762
8,262 $ 14,603,024 $ 15,548,435
9,482
15,557,917
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 EPA for other entities.
Status of Fund Balances:
FY2010
FY2009
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund (Note 38)
Obligated Balance not yet Disbursed
Non-Budgetary FBWT
Totals
4,430,813
195,529
(3,736,818)
(1,115)
13,432,954
281,661
14,603,024
3,440,831
262,971
(3,583,119)
(18,334)
15,214,555
241,013
15,557,917
The funds available for obligation may be apportioned by OMB for new obligations at the
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52
beginning of the following fiscal year. Funds unavailable for obligation are mostly balances
in expired funds, which are available only for adjustments of existing obligations. For FY
2010 and FY 2009 no differences existed between Treasury's accounts and EPA's statements
for fund balances with Treasury.
Note 3. Cash and Other Monetary Assets
As of September 30, 2010 and 2009, the balance in the imprest fund was $10 thousand.
Note 4. Investments
As of September 30, 2010 and 2009 investments related to Superfund and LUST consist of
the following:
Cost
Intragovernmental Securities:
Non-Marketable FY2010 $ 7,079,053
Non-Marketable FY2009 $ 6,641,708
Amortized
Interest Investments,
(Premium) .
v ' Receivable Net
Discount
(139,302) $
(195,777) $
25,258 $
42,463 $
7,243,613
6,879,948
Market
Value
$ 7,243,613
$ 6,879,948
CERCLA, as amended by SARA, authorizes EPA to recover monies to clean up Superfund
sites from responsible parties (RPs). Some RPs file for bankruptcy under Title 11 of the U.S.
Code. In bankruptcy settlements, 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 (see Note 6). All investments in Treasury securities are earmarked
funds (see Note 19).
The Federal Government does not set aside assets to pay future benefits or other expenditures
associated with earmarked funds. The cash receipts collected from the public for an
earmarked fund are deposited in the U.S. Treasury, which uses the cash for general
Government purposes. Treasury securities are issued to EPA as evidence of its receipts.
Treasury securities are an asset to EPA and a liability to the U.S. Treasury. Because 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 EPA with authority to draw upon the U.S. Treasury to make
future benefit payments or other expenditures. When 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.
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Note 5. Accounts Receivable, Net
The Accounts Receivable as of September 30, 2010 and 2009 consist of the following:
FY2010 FY2009
Intragovernmental:
Accounts & Interest Receivable
Total
Non-Federal:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance forUncollectibles
Total
45,698 $
45,698 $
143,444 $
1,958,981
(1,684,890)
417,535 $
39,362
39,362
137,593
1,376,831
(696,580)
817,844
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 6.
Other Assets
Other Assets as of September 30, 2010 and 2009 consist
Note 7.
Intragovernmental:
Advances to Federal Agencies $
Advances for Postage
Total $
Non-Federal:
Travel Advances $
Letter of Credit Advances
Other Advances
Operating Materials and Supplies
Inventory for Sale
Total $
Loans Receivable, Net
of the following:
FY2010
223,165 $
131
223,296 $
432 $
9
2,105
149
139
2,834 $
FY2009
214,654
177
214,831
(183)
8
2,146
147
110
2,228
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54
Loans Receivable consists of Asbestos Loan Program loans disbursed from obligations made
prior to FY 1992 and are presented net of allowances for estimated uncollectible loans, if an
allowance was considered necessary. Loans 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 an expense in the year the loan is
made. The net loan present value is the gross loan receivable less the subsidy present value.
The amounts as of September 30, 2010 and 2009 are as follows:
FY2010 FY2009
Value of Assets Loans Value of Assets
Related to Receivable, Allowance* Related to
Direct Loans Gross Direct Loans
Direct Loans
Obligated Prior to $
FY1992
Direct Loans
Obligated After FY
1991
Loans
Receivable,
Gross
545 $
4,931
Allowance*
(222)
545 $
4,709
2,003 $
10,590
(948)
2,003
9,642
Total
5,476 $
(222) $
5,254 $
12,593 $
(948) $
11,645
* Allowance for Pre-Credit Reform loans (prior to FY 1992) is the Allowance for Estimated
Uncollectible Loans, and the Allowance for Post Credit Reform Loans (after FY 1991) is the
Allowance for Subsidy Cost (present value).
During FY 2008, EPA made a payment within the U.S. Treasury for the Asbestos Loan
Program based on an upward re-estimate of $33 thousand for increased loan financing costs.
It was believed that the payment only consisted of "interest" costs and, as such, an automatic
apportionment, per OMB Circular A-l 1, Section 120.83, was deemed appropriate.
However, approximately one third ($12 thousand) of the $33 thousand re-estimate was for
increased "subsidy" costs which requires an approved apportionment by OMB before any
payment could be made. Therefore, the payment resulted in a minor technical Anti-
deficiency Act (ADA) violation. On October 13, 2009, EPA transmitted, as required by
OMB Circular A-l 1, Section 145, written notifications to the (1) President, (2) President of
the Senate, (3) Speaker of the House of Representatives, (4) Comptroller General, and (5) the
Director of OMB.
Subsidy Expenses for Credit Reform Loans (reported on a cash basis):
Section II - Page 128
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55
Interest Rate
Technical
Total
Upward Subsidy Reestimate - FY2010
Downward Subsidy Reestimate - FY2010
FY2010 Totals
Upward Subsidy Reestimate - FY2009
Downward Subsidy Reestimate - FY2009
FY2009 Totals
5 $
(35)
(30) $
- $
(3)
(3)$
2 $
(16)
(14)$
- $
(2)
(2)$
7
(51)
(44)
(5)
(5)
Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
FY2010
FY2009
Beginning balance of the subsidy cost allowance
Add: subsidy expense for direct loans disbursed during the
reporting years by component:
Interest rate differential costs
Default costs (net of recoveries)
Fees and other collections
Othersubsidy costs
Total of the above subsidy expense components
Adjustments:
Loan Modification
Fees received
Foreclosed property acquired
Loans written off
Subs idy allowance amortization
Other
End balance of the subsidy cost allowance before reestimates
Add orsubtract subsidy reestimates by component:
(a) Interest rate reestimate
(b) Technical/default reestimate
Total of the above reestimate components
Ending Balance of the subsidy cost allowance
EPA has not disbursed Direct Loans since 1993.
(948) $
(1,752)
477
477
176
73
249
(222) $
1
752
753
36
15
51
(948)
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56
Note 8. Accounts Payable and Accrued Liabilities
The Accounts Payable and Accrued Liabilities are current liabilities and consist of the
following amounts as of September 30, 2010 and 2009:
Intragovernmental:
Accounts Payable
Accrued Liabilities
Total
Non-Federal:
Accounts Payable
Advances Payable
Interest Pay able
Grant Liabilities
Other Accrued Liabilities
Total
FY2010
1,466
49,859
51,325 $
FY2010
118,033
8
7
650,526
262,874
1,031,448
FY2009
2,230
73,824
76,054
FY2009
116,799
9
6
521,188
227,762
865,764
Other Accrued Liabilities primarily relate to contractor accruals.
Note 9. General Property, Plant, and Equipment, Net
General property, plant, and equipment (PP&E) consist of software, real property, EPA and
contractor-held personal property, and capital leases.
As of September 30, 2010 and 2009, General PP&E consist of the following:
EPA-Held Equipment
Software
Contractor Held Equip.
Land and Buildings
Capital Leas es
Total
Acquisition
Value
252,920 $
443,847
95,494
630,252
35,440
1,457,953 $
FY2010
Accumulated Net Book Value
Depreciation
(145,672) $
(158,034)
(39,225)
(177,654)
(22,247)
(542,832) $
107,248 $
285,813
56,269
452,598
13,193
915,121 $
Acquisition
Value
246,999 $
373,964
79,855
607,131
41,068
1^49,017 $
FY2009
Accumulated
Depreciation
(138,385) $
(118,115)
(47,207)
(166,316)
(26,506)
(496,529) $
Net Book
Value
108,614
255,849
32,648
440,815
14,562
852,488
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Note 10. Debt Due to Treasury
The debt due to Treasury consists of borrowings to finance the Asbestos Loan Program. The
debt to Treasury as of September 30, 2010 and 2009 is as follows:
All Other Funds FY2010 FY2009
Beginning Net Ending Beginning Net Ending
Balance Borrowing Balance Balance Borrowing Balance
Intragowrnmental:
Debt to Treasury $ 9,983$ (5,139)$ 4,844$ 13,158$ (3,175)$ 9,983
Note 11. Stewardship Land
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).
As of September 30, 2010, the Agency possesses the following land and land rights:
FY2010 FY2009
Superfund Sites with
Easements
Beginning Balance 33 32
Additions 2 2
Withdrawls 0_ \_
Ending Balance 35_ 33_
Superfund Sites with
Land Acquired
Beginning Balance 30 31
Additions 2 0
Withdrawls 0_ 1_
Ending Balance 32_ 30_
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Note 12. Custodial Liability
Custodial Liability 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, 2010 and 2009, custodial liability is
approximately $53 million and $71 million, respectively.
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2010:
Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes $
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Litragovernmental $
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal $
Liability for Deposit Funds, Non-Federal
Contract Holdbacks
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal $
Covered by
Budgetary
Resources
22,585 $
1,706
52,596
20,431
1,831
649
256
_
-
100,054 $
Not Cove red by
Budgetary
Resources
- $
-
-
-
-
_
-
10,232
22,000
32,232 $
Total
22,585
1,706
52,596
20,431
1,831
649
256
10,232
22,000
132,286
65,314
8,128
155
200
26,199
65,314
8,128
155
200
26,199
73,597 $
26,399 $
99,996
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59
Other Liabilities consist of the following as of September 30, 2009:
Other Liabilities - Intragowrnmental
Current
Employer Contributions & Payroll Ta?es
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Intragowrnmental
Other Liabilities - Non-Federal
Current
Unearned Advances
Liability for Deposit Funds
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal
Cow red by
Budgetary
Resources
19,875 $
960
60,043
27,642
3
54
-
108,577 $
79,490 5
8,330
-
87,820 $
Not Covered by
Budgetary
Resources
- $
_
10,068
22,000
! 32,068 $
5 - $
230
27,868
! 28,098 $
Total
19,875
960
60,043
27,642
3
54
10,068
22,000
140,645
79,490
8,330
230
27,868
115,918
Note 14. Leases
Capital Leases:
The value of assets held under Capital Leases as of September 30, 2010 and 2009 are as
follows:
Summary of Assets Under Capital Lease:
Real Property
Personal Property
Software License
Total
Accumulated Amortization
FY2010
35,285 $
155
35,440 $
22,246
FY2009
40,913
155
41,068
26,506
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EPA had three capital leases for land and buildings housing scientific laboratories and
computer facilities. All of these leases include 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. One capital lease expired during FY
2010 and the others leases terminate in FY 2013 and FY 2025.
The total future minimum capital lease payments are listed below.
Future Payments Due:
Fiscal Year Capital Leases
2011 $ 5,714
2012 5,714
2013 5,714
2014 4,215
After 5 years 43,558
Total Future Minimum Lease Payments 64,915
Less: Imputed Interest $ (38,716)
Net Capital Lease Liability 26,199
Liabilities not Cove red by Budgetary Resources $ 26,199
(See Note 13)
Operating Leases:
The GSA provides leased real property (land and buildings) as office space for EPA
employees. GSA charges a Standard Level User Charge that approximates the commercial
rental rates for similar properties.
EPA had four direct operating leases for land and buildings housing scientific laboratories
and computer facilities. The leases include 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. Two leases expired in FY 2010 and the other two expire in FY
2017 and FY 2020. These charges are expended from the EPM appropriation.
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The total minimum future operating lease costs are listed below:
Operating Leases, Land and
Buildings
Fiscal Year
2011 $ 89
2012 89
2013 89
2014 89
Beyond 2014 374-
Total Future Minimum Lease Payments $ 730
Note 15. FECA Actuarial Liabilities
The Federal Employees' Compensation Act (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, EPA is allocated 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 FECA Actuarial Liability as of September 30, 2010 and 2009 was $44.9 million and
$44.1 million, respectively. The FY 2010 present value of these estimated outflows is
calculated using a discount rate of 3.653 percent in the first year, and 4.3 percent in the years
thereafter. The estimated future costs are recorded as an unfunded liability.
Note 16. Cashout Advances, Superfund
Cashout advances are funds received by EPA, a state, or another PRP 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), cashout funds received by EPA are
placed in site-specific, interest bearing accounts known as special accounts and are used for
potential future work at such sites in accordance with the terms of the settlement agreement.
Funds placed in special accounts may be disbursed to PRPs, to states that take responsibility
for the site, or to other Federal agencies to conduct or finance response actions in lieu of EPA
without further appropriation by Congress. As of September 30, 2010 and 2009, cashouts are
approximately $637 million and $572 million respectively.
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Note 17. Unexpended Appropriations — Other Funds
As of September 30, 2010 and 2009, the Unexpended Appropriations consist of the
following:
Unexpended Appropriations: FY2010 FY2009
Unobligated
Available $ 184,815 $ 1,652,461
Unavailable 275,592 70,053
Undelivered Orders 12,882,377 12,813,833
Total $ 13,342,784 $ 14,536,347
Note 18. Commitments and Contingencies
EPA may be a party in various administrative proceedings, actions and claims brought by or
against it. These include:
• Various personnel actions, suits, or claims brought against the Agency by employees
and others.
• Various contract and assistance program claims brought against the Agency by
vendors, grantees and others.
• The legal recovery of Superfund costs incurred for pollution cleanup of specific sites,
to include the collection of fines and penalties from responsible parties.
• Claims against recipients for improperly spent assistance funds which may be settled
by a reduction of future EPA funding to the grantee or the provision of additional
grantee matching funds.
As of September 30, 2010 and 2009 total accrued liabilities for commitments and potential
loss contingencies is $4.37 million and $4.57 million, respectively. Further discussion of the
cases and claims that give rise to this accrued liability are discussed immediately below.
Litigation Claims and Assessments
There is currently one legal claim which has been asserted against the EPA pursuant to the
Federal Tort Claims and Fair Labor Standards Acts. This loss has been deemed probable,
and the unfavorable outcome is estimated to be between $2 million and $8 million. EPA has
accrued the higher conservative amount as of September 30, 2010. The maximum amount of
exposure under the claim could range as much as $8 million in the aggregate.
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Superfund
Under CERCLA Section 106(a), 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 EPA for reimbursement from the fund 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, 2010, there is one CERCLA Section 106(b) administrative claim which
has been asserted and for which an unfavorable outcome has been deemed probable. It is
estimated that the potential loss could be approximately $2.37 million and this amount has
been accrued as of September 30, 2010.
Judgment Fund
In cases that are paid by the U.S. Treasury Judgment Fund, 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 and 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."
As of September 30, 2010, there are no material claims pending in the Treasury's Judgment
Fund. However, EPA has a $22 million liability to the Treasury Judgment Fund for a
payment made by the Fund to settle a contract dispute claim.
Other Commitments
EPA has a commitment to fund the United States Government's payment to the Commission
of the North American Agreement on Environmental Cooperation between the Governments
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. For the
periods ended September 30, 2010 and 2009, EPA paid $3 million for each of these periods
to the CEC. A payment of $3 million was made in FY 2010.
EPA has a legal commitment under a non-cancellable agreement, subject to the availability
of funds, with the United Nations Environment Program (UNEP). This agreement enables
EPA to provide funding to the Multilateral Fund for the Implementation of the Montreal
Protocol. EPA made payments totaling $10.5 million in FY 2010. Future payments totaling
Section II - Page 137
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64
$9.6 million have been deemed reasonably possible and are anticipated to be paid in fiscal
years 2011 through 2013.
Note 19. Earmarked Funds
Fjnironmental LIST Superfund Other Earmarked
Balance sheet as of September 30, 2010
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other As sets
TotalAssets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Changes in Net Cost for the
Period Bided September 30, 2010
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Statement of Changes in Net Position for the
Period ended September 30, 2010
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
Senices
$ 273,420 $ 55,132 $
3,502,913
266
273,420 3,558,311
$ 4 $ 19,094 $
$ 4 $ 19,094 $
$ 273,416 $ 3,539,217 $
$ 273,420 $ 3,558,311 $
$ - $ 181,870 $
-
$ - $ 181,870 $
$ 231,820 $ 3,436,303 $
115,523
41,596 168,990
271
(181,870)
$r 41,596 $ ' 102,914 $r
$ 273,416 $ 3,539,217 $
Funds
106,247 $
3,740,700
391,388
115,729
4,354,064
1,013,566 $
1,013,566 $
3,340,498 $
4,354,064 $
1,844,712 $
484,165
1,360,547 $
3,416,536 $
14,968
3,396
1,241,402
24,743
(1,360,547)
(76,038) $ '
3,340,498 $
29,578 $
7,697
6,199
43,474
44,223 $
44,223 $
(749) $
43,474 $
121,214 $
98,246
22,968 $
1,817 $
13
2
18,379
2,008
(22,968)
(2,566) $
(749) $
Total Earmarked
Funds
464,377
7,243,613
399,085
122,194
8,229,269
1,076,887
1,076,887
7,152,382
8,229,269
2,147,796
582,411
1,565,385
7,086,476
130,504
213,984
1,259,781
27,022
(1,565,385)
65,906
7,152,382
Section II - Page 138
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Balance sheet as of September 30,2009
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other As sets
Total Assets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Net Cost for the
Period Ended September 30,2009
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Environmental
Services
LUST
Superfund
- $
- $
Other Earmarked
Funds
98,901
79
98,822 $
1,056,669 $
Total Earmarked
Funds
$
$
$
$
$
231,821 $
-
231,821
1 $
1 $
231,820 $
231,821 $
25,169 $
3,422,610
-
217
3,447,996
11,693 $
11,693 $
3,436,303 $
3,447,996 $
62,631 $
3,457,338
769,531
104,735
4,394,236
977,700 $
977,700 $
3,416,536 $
4,394,236 $
25,650 $
4,157
4,827
34,635
32,817 $
32,817 $
1,817 $
34,634 $
345,271
6,879,948
773,688
109,780
8,108,687
1,022,211
1,022,211
7,086,476
8,108,687
75,485 $
55,411
20,074 $
1,846,632
671,067
1,175,565
Statement of Changes in Net Position for the
Period ended September 30,2009
Net Position, Beginning of Period
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Position
$ 211,282 $
20,538
3,244,497 $
124,088
169,186
(3,000)
354
(98,822)
2,702,763 $
52,065
(1,479)
1,693,519
26,338
(1,056,669)
$ ' 20,538 $ ' 191,806 $ ' 713,774 $ _
$ 231,820 $ ~~
1,989 $
15
17,687
2,199
(20,074)
(173) $
6,160,531
176,168
188,245
1,708,206
28,891
(1,175,565)
925,945
3,436,303 $ 3,416,537 $
7,086,476
Earmarked funds are as follows:
Environmental Services Receipt Account: The Environmental Services Receipt Account
authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549)," Treasury fund
group 5295, 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.
Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust Fund, Treasury
fund group 8153, was authorized by the Superfund Amendments and Reauthorization Act of
1986 (SARA) as amended by the Omnibus Budget Reconciliation Act of 1990. The LUST
appropriation provides funding to 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 to 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
Section II - Page 139
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11-1-0015 66
Conservation and Recovery Act. The program is financed by a one cent per gallon tax on
motor fuels which will expire in 2011.
Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group 8145, was
established by CERCLA to provide resources to respond to and clean up hazardous substance
emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund
financing is shared by federal and state governments as well as industry. The EPA allocates
funds from its appropriation to other Federal agencies 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.
Other Earmarked Funds:
Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury fund group
8221, was authorized by the Oil Pollution Act of 1990 (OPA). Monies were appropriated to
the Oil Spill Response Trust Fund in 1993. 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 oil spill cleanup actions is provided through the
U.S. Coast Guard under the Oil Spill Liability Trust Fund and reimbursable funding from
other Federal agencies.
Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed Funds Trust
Fund authorized in the Federal Water Pollution Control Act (Clean Water Act) as amended
P.L. 92-500 (The Federal Water Pollution Control Act Amendments of 1972), Treasury fund
group 8741, includes gifts for pollution control programs that are usually designated for a
specific use by donors and/or deposits from pesticide registrants to cover the costs of petition
hearings when such hearings result in unfavorable decisions to the petitioner.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by a 2004 Act,
"Consolidated Appropriations Act (P.L. 108-199)," Treasury fund group 5374, was
authorized in 2004 for the expedited processing of certain registration petitions and
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.
Reregistration and Expedited Processing Fund: The Revolving Fund, Treasury fund group
Section II - Page 140
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11-1-0015 67
4310, was authorized by the FIFRA of 1972, as amended by the FIFRA Amendments of
1988 and as amended by the Food Quality Protection Act of 1996. Pesticide maintenance
fees are paid by industry to offset the costs of pesticide re-registration and reassessment of
tolerances for pesticides used in or on food and animal feed, as required by law.
Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund group 4311, was
authorized in 1963 for the deposit of tolerance fees. Fees are paid by industry for Federal
services to set pesticide chemical residue limits in or on food and animal feed. The 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).
Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by P.L. 102-
389, "Making appropriations for the Department of Veterans Affairs and Housing and Urban
Development, and for sundry independent agencies, boards, commissions, corporations, and
offices for the fiscal year ending September 30, 1993," Treasury fund group 5297, has funds
available to carry out authorized environmental restoration activities. Funding is derived
from the collection of reimbursements under the Exxon Valdez settlement as a result of an oil
spill.
Note 20. Exchange Revenues, Statement of Net Cost
Exchange, or earned revenues on the Statement of Net Cost include income from services
provided, interest revenue (with the exception of interest earned on trust fund investments),
and miscellaneous earned revenue. As of September 30, 2010 and 2009, exchange revenues
are $693.4 million and $773.6 million respectively.
Section II - Page 141
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Note 21. Intragovernmental Costs and Exchange Revenue
FY2010
Clean Air
Program Costs
Earned Revenue
NET COST
Clean and Safe Water
Program Costs
Earned Revenue
NET COSTS
Land Preservation &
Restoration
Program Costs
Earned Revenue
NET COSTS
Healthy Communities &
Ecosystems
Program Costs
Earned Revenue
NET COSTS
Compliance &
Environmental
Stewardship
Pro gram Costs
Earned Revenue
NET COSTS
Total
Pro gram Costs
Earned Revenue
NET COSTS
Intragovernmental
related revenue.
Intragovernm
ental
$ 170,677
18,923
$ 151,754
$ 193,456
2,803
$ 190,653
$ 342,734
103,687
$ 239,047
$ 293,850
64,034
$ 229,816
$ 182,299
3,400
$ 178,899
$ 1,183,016
192,847
$ 990,169
costs relate to
With the
Public
$ 1,048,124
5,906
$ 1,042,218
$ 6,197,330
2,524
$ 6,194,806
$ 2,096,211
446,569
$ 1,649,642
$ 1,265,653
44,144
$ 1,221,509
$ 615,931
1,494
$ 614,437
$ 11,223,249
500,637
$ 10,722,612
the source
Total
$ 1,218,801
24,829
$ 1,193,972
$ 6,390,786
5,327
$ 6,385,459
$ 2,438,945
550,256
$ 1,888,689
$ 1,559,503
108,178
$ 1,451,325
$ 798,230
4,894
$ 793,336
$ 12,406,265
693,484
$ 11,712,781
of goods or
$
$
$
$
$
$
$
$
$
$
$
$
Intragowrn
mental
187,484
15,455
172,029
191,558
4,758
186,800
386,549
101,767
284,782
271,028
20,047
250,981
207,660
4,071
203,589
1,244,279
146,098
1,098,181
services not the
FY2009
With the
Public Total
$ 874,787 $
3,036
$ 871,751 $
$ 3,236,903 $
3,208
$ 3,233,695 $
$ 1,821,301 $
580,119
$ 1,241,182 $
$ 1,134,155 $
42,267
$ 1,091,888 $
$ 609,538 $
(1,116)
$ 610,654 $
$ 7,676,684 $
627,514
$ 7,049,170 $
classification
1,062,271
18,491
1,043,780
3,428,461
7,966
3,420,495
2,207,850
681,886
1,525,964
1,405,183
62,314
1,342,869
817,198
2,955
814,243
8,920,963
773,612
8,147,351
of the
Note 22. Cost of Stewardship Land
There were no costs related to the acquisition of stewardship land for September 30, 2010
and approximately $323 thousand for September 30, 2009. These costs are included in the
Statement of Net Cost.
Note 23. Environmental Cleanup Costs
As of September 30, 2010, EPA has one site that requires clean up stemming from its
activities. For sites that had previously been listed, it was determined by EPA's Office of
General Counsel to discontinue reporting the potential environmental liabilities for the
Section II - Page 142
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11-1-0015 69
following reasons: (1) although EPA has been put on notice that it is subject to a
contribution claim under CERCLA, no direct demand for compensation has been made to
EPA; (2) any demand against EPA will be resolved only after the Superfund cleanup work is
completed, which may be years in the future; and (3) there was no legal activity on these
matters in FY2009 or in FY2010. During FY2009, costs amounting to approximately $53
thousand were paid out by the Treasury Judgment Fund for another site, and no further action
is warranted.
EPA also holds title to a site in Edison, New Jersey which was formerly an Army Depot.
While EPA did not cause the contamination, the Agency could potentially be liable for a
portion of the cleanup costs, an unfunded environmental liability of $200 thousand.
Accrued Cleanup Cost:
EPA has 15 sites that will require permanent closure, and EPA is responsible to fund the
environmental cleanup of those sites. As of September 30, 2010 and 2009, the estimated
costs for site cleanup were $20.15 million and $19.49 million, respectively. Since the
cleanup costs associated with permanent closure were not primarily recovered through user
fees, EPA has elected to recognize the estimated total cleanup cost as a liability and record
changes to the estimate in subsequent years.
Note 24. State Credits
Authorizing statutory language for Superfund and related Federal regulations requires states
to enter into Superfund State Contracts (SSC) when 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 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 EPA has determined to be reasonable, documented,
direct out-of-pocket expenditures of non-Federal funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply the
credit at the site where it was earned. The state may apply any excess/remaining credit to
another site when approved by EPA. As of September 30, 2010 and 2009, the total remaining
state credits have been estimated at $21.0 million and $21.9 million, respectively.
Note 25. Preauthorized Mixed Funding Agreements
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70
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
actions at their sites with the understanding that EPA will reimburse them a certain
percentage of their total response action costs. EPA's authority to enter into mixed funding
agreements is provided under CERCLA Section 11 l(a)(2). Under CERCLA Section
122(b)(l), 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, 2010, EPA had 6
outstanding preauthorized mixed funding agreements with obligations totaling $15.6 million.
As of September 30, 2009, EPA had 9 for $19.9 million. A liability is not recognized for
these amounts until all work has been performed by the PRP and has been approved by EPA
for payment. Further, 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 EPA.
Note 26. Custodial Revenues and Accounts Receivable
Fines, Penalties and Other Miscellaneous Receipts
Accounts Receivable for Fines, Penalties and Other
Miscellaneous Receipts:
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Total
FY2010
89,627 $
48,505 $
FY2009
103,924
229,658 $ 238,957
(181,153) (174,411)
64,546
EPA uses the accrual basis of accounting for the collection of fines, penalties and
miscellaneous receipts. Collectability by EPA of the fines and penalties is based on the
PRPs' willingness and ability to pay.
Note 27. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited
FY 2010 Statement of Budgetary Resources will be reconciled to the amounts included in the
FY 2011 Budget of the United States Government when they become available. The Budget
of the United States Government with actual numbers for FY 2010 has not yet been
published. We expect it will be published by early 2011, and it will be available on the OMB
website at http://www.whitehouse.gov/.
The actual amounts published for the year ended September 30, 2009 are listed immediately
below:
Section II - Page 144
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Budgetary
Resources
Obligations
Offsetting
Receipts
Net Outlays
FY2009
Statement of Budgetary Resources $ 21,014,069 $ 17,311,047 $ 1,884,134 $ 9,950,864
Adjustments to Undelivered Orders and Others 844 (404) (2)
E^ired and Immaterial Funds* (251,035) (37) 5
Rounding Differences** (8,878) (5,606) (134) 133
Reported in Budget of the U. S. Government S 20,755,000 S 17,305,000 S 1,884,000 S 9,951,000
* Expired funds are not included in Budgetary Resources Available for Obligation and Total
New Obligations in the Budget Appendix (lines 23.90 and 10.00). Also, minor funds are not
included in the Budget Appendix.
** Balances are rounded to millions in the Budget Appendix.
Note 28. 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 for
September 30, 2010 and 2009:
FY2010 FY2009
Recoveries of Prior Year Obligations -Downward
adjustments of prioryears'obligations $ 277,771 $ 220,329
Temporarily Not Available - Rescinded Authority (11,800)
Permanently Not Available:
Payments to Treasury (5,191) (3,180)
Rescinded authority (52,897) (10,000)
Canceled authority (15,365) (19,552)
Total Permanently Not Available $ (73,453) $ (32,732)
Note 29. 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, 2010 and
2009:
Section II - Page 145
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11-1-0015 72
FY2010 FY2009
Unobligated Balance $ 4,441,115 $ 3,452,750
Expired Unobligated Balance 185,226 250,272
Total $ 4,626,341 $ 3,703,022
Note 30. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at September 30, 2010 and 2009 were
$12.63 billion and $14.69 billion, respectively.
Note 31. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt
accounts offset gross outlays. For FY 2010 and 2009, the following receipts were generated
from these activities:
FY2010 FY2009
Trust Fund Recoveries $ 53,247 $ 96,782
Special Fund Environmental Service 41,599 20,539
Downward Re-estimates of Subsidies 51 5
Trust Fund Appropriation 1,280,570 1,747,911
Special Fund Receipt Account and Treasury
Miscellaneous Receipt and Clearing Accounts 27,493 18,897
Total $ 1,402,960 $ 1,884,134
Note 32. Transfers-In and Out, Statement of Changes in Net Position
Appropriation Transfers, In/Out:
For FY 2010 and 2009, 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, 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 follows for September 30, 2010 and 2009:
Transfers In/Out Without Reimbursement, Budgetary:
Section II - Page 146
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73
Fund/Type of Account
Army Corps of Engineers
U.S. Navy
Small Business Administration
Total Appropriation Transfers (Other
Funds)
Net Transfers from In vested Funds
Transfers to Another Agency
Allocations Rescinded
Total of Net Transfers on Statement of
Budgetary Resources
FY2010
(9,000)
(8,000)
(17,000)
1,386,345
(17,000)
1,369,345 $
FY2009
(8,000)
(2,953)
(10,953)
1,382,030
(10,953)
1,371,077
For FY 2010 and 2009, Transfers In/Out under Budgetary Financing Sources on the
Statement of Changes in Net Position consist of transfers to or from other Federal agencies
and between EPA funds. These transfers affect Cumulative Results of Operations. Details of
the transfers-in and transfers-out, expenditure and nonexpenditure, follows for September 30,
2010 and 2009:
Type of Transfer/Rinds
Transfers-in (out) nonexpenditure,
Earmark to S&T and DIG funds
Transfer-in nonexpenditure recovery
from CDC
Transfers-in nonexpenditure, Oil Spill
Transfer-in (out) cancelled funds
Total Transfer in (out) without
Reimbursement, Budgetary
FY2010
FY2009
Earmarked Other Rinds Earmarked Other Rinds
(39,168) $ 33,859 $ (57,392) $ 57,392
18,379
(20,789) $
33,859 $
17,687
(39,705)
57,392
Transfers In/Out without Reimbursement, Other Financing Sources:
For FY 2010 and 2009, Transfers In/Out without Reimbursement under Other Financing
Sources on the Statement of Changes in Net Position are comprised of negative subsidy to a
special receipt fund for the credit reform funds.
The amounts reported on the Statement of Changes in Net Position are as follows for
September 30, 2010 and 2009:
Section II - Page 147
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11-1-0015 74
Type of Transfer/Funds FY2010 FY2009
Earmark Other Funds Earmark Other Funds
Transfers-in by allocation transfer
agency $ $ $ 84 $
Transfers-in property 341 - 46
Transfers (out) of prior year negative
subsidy to be paid following year 205 -_ (740)
Total Transfer in (out) without
Reimbursement, Budgetary $ - $ 546 $ 84 $ (694)
Note 33. 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 2010 were $146.8 million ($23.7 million
from Earmarked funds, and $123.1 million from Other Funds). For FY 2009, the estimates
were $197.8 million ($25.1 million from Earmarked funds, and $172.7 million from Other
Funds).
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.
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. EPA applies
its Headquarters General and Administrative indirect cost rate to expenses incurred for inter-
entity transactions for which other Federal agencies did not include indirect costs to estimate
the amount of unreimbursed (i.e., imputed) costs. For FY 2010 total imputed costs were
$10.8 million ($3.3 million from Earmarked funds, and $7.5 million from Other Funds).
In addition to the pension and retirement benefits described above, 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 2010
entries for Judgment Fund payments totaled $4.0 million (Other Funds). For FY 2009,
entries for Judgment Fund payments totaled $3.7 million (Other Funds).
Section II - Page 148
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The combined total of imputed financing sources for FY 2010 and FY 2009 is $161.6 million
and $213.3 million, respectively.
Note 34. Payroll and Benefits
Payable
Payroll and benefits payable to EPA employees for the
2009 consist of the following:
years ending
September 3 0,20 10 and
Cove r e d by Not Cove red
FY2010 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
FY2009 Payroll & Benefits Payable
Accrued Funded Payroll and Benefits
Withholdings Payable
Fjnployer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
Budgetary by
Resources
$ 66,677 $
31,298
3,588
-
$ 101,563 $
$ 57,004 $
31,307
3,177
-
$ 91,488 $
Note 35. Other Adjustments, Statement of Changes in
Budgetary
Resources
- $
-
-
163,412
163,412 $
- $
-
-
159,129
159,129 $
Net Position
Total
66,677
31,298
3,588
163,412
264,975
57,004
31,307
3,177
159,129
250,617
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 5 years earlier. These amounts affect Unexpended Appropriations.
Rescissions to General
Appropriations $
Canceled General Authority
Total Other Adjustments $
Other Funds
FY2010
Other Funds
FY2009
29,551
50,623 $
15,366 -_
65,989 $ 29,551
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Note 36. Non-exchange Revenue, Statement of Changes in Net Position
Non-exchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net
Position as of September 30, 2010 and 2009 consists of the following items:
Interest on Trust Fund $
TaxRevenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue $
Earmarked Funds
FY2010
130,504 $
172,127
261
41,596
344,488 $
Earmarked Funds
FY2009
176,168
169,186
(1,479)
20,538
364,413
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Note 37. Reconciliation of Net Cost of Operations to Budget
FY2010
FY2009
RESOURCES USED TO FINANCE ACTIVITIES
Budgetary Resources Obligated
Obligations Incurred
Less: Spending Athority from Offsetting Collections and Recoveries
Obligations, Net of Offsetting Collections
Less: Offsetting Reciepts
Net Obligations
Other Resources
Transfers In/Out without Reimbursement, Property
Imputed Financing Sources
Net Other Resources Used to Finance Activities
Total Resources Used to Finance Activities
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NEST COST OF OPERATIONS:
Change in Budgetary Resources Obligated
Resources that Fund Prior Periods Expenses
Budgetary Offsetting Collections and Receipts that
Do Not Affect Net Cost of Operations:
Credit Program Collections Increasing Loan Liabilities for
Guarantees or Subsidy Allowances:
Offsetting Reciepts Not Affecting Net Cost
Resources that Finance Asset Acquition
Total Resources Used to Finance Items Not Part of the Net Cost of Operations
Total Resources Used to Finance the Net Cost of Operations
COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL
NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD:
Components Requiring or Generating Resources in Future Periods:
Increase in Annual Leave Liability
Increase in Environmental and Disposal Liability
Increase in Unfunded Contingencies
Upward/ Downward Reestimates of Credit Subsidy Expense
Increase in Public Exchange Revenue Receivables
Increase in Workers Compensation Costs
Other
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods
Components Not Requiring/ Generating Resources:
Depreciation and Amortization
Expenses Not Requiring Budgetary Resources
Total Components of Net Cost that Will Not Require or Generate Resources
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period
11,950,681
(1,333,690)
10,616,991
(1,375,422)
9,241,569
(341)
161,640
161,299
9,402,868
2,166,944
5,681
94,852
(213,953)
2,053,524
11,456,392
FY2010
4,232
630
(200)
(207)
7,375
979
(3,077)
9,732
85,741
160,916
246,657
256,389
17,311,047
(847,465)
16,463,582
(1,884,134)
14,579,448
656
213,331
213,987
14,793,435
(6,440,873)
(381)
3,943
136,222
(138,030)
(6,439,119)
8,354,316
FY2009
6,461
83
4,529
(337,008)
(3,232)
(329,167)
71,550
50,652
122,202
(206,965)
Net Cost of Operations
11,712,781
8,147,351
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Note 38. Amounts Held by Treasury (UNAUDITED)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by
Treasury in the Superfund and LUST Trust Funds.
Superfund
Superfund is supported by general revenues, cost recoveries of funds spent to clean up
hazardous waste sites, interest income, and fines and penalties.
The following reflects the Superfund Trust Fund maintained by Treasury as of September 30,
2010 and 2009. The amounts contained in these notes have been provided by Treasury. As
indicated, a portion of the outlays represents amounts received by EPA's Superfund Trust
Fund; such funds are eliminated on consolidation with the Superfund Trust Fund maintained
by Treasury.
SUPERFUND FY2010
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
Total Liabilities and Equity
Receipts
Corporate Environmental
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury
Combined
- $
3,526,671,825
3,526,671,825 $
3,526,671,825 $
3,526,671,825 $
-
-
- $
1,308,704,084 $
1,308,704,084
1,308,704,084 $
4,234,294 $
4,234,294 r
4,442,724
209,585,595
218,262,613 $
218,262,613 $
218,262,613 $
3,137,141
53,246,618
3,451,837
59,835,596 *
1,280,570,288
14,967,685
1,355,373,569 $
(1,308,704,084) $
(1,308,704,084)
46,669,485 $
4,234,294
4,234,294
4,442,724
3,736,257,420
3,744,934,438
3,744,934,438
3,744,934,438
3,137,141
53,246,618
3,451,837
59,835,596
1,280,570,288
14,967,685
1,355,373,569
-
1,355,373,569
In FY 2010, the EPA received an appropriation of $1.28 billion for Superfund. Treasury's
Bureau of Public Debt (BPD), the manager of the Superfund Trust Fund assets, records a
Section II - Page 152
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79
liability to EPA for the amount of the appropriation. BPD 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, 2010 and 2009, the Treasury Trust Fund has a liability to EPA for
previously appropriated funds of $3.53 billion and $3.28 billion, respectively.
SUPERFUNDFY2009
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Receipts and Outlays
Equity
Total Liabilities and Equity
Receipts
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
3,277,721
3,277,721
3,277,721
3,277,721
1,905,845
1,905,845
1,905,845
Treasury
(7,975) $
(7,975)
19,624
159,991
171,640
171,640
171,640
96,782
1,374
98,156
1,747,911
52,064
1,898,131
(1,905,845)
(1,905,845)
(7,714)
Combined
(7,975)
(7,975)
19,624
3,437,712
3,449,361
3,449,361
3,449,361
96,782
1,374
98,156
1,747,911
52,064
1,898,131
1,898,131
Section II - Page 153
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LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In
FY 2010 and 2009, there were no fund receipts from cost recoveries. The following
represents the LUST Trust Fund as maintained by Treasury. The amounts contained in these
notes are provided by Treasury. Outlays represent appropriations received by EPA's LUST
Trust Fund; such funds are eliminated on consolidation with the LUST Trust Fund
maintained by Treasury.
LUST FY2010
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
EPA
- $
210,146,189
Treasury
(5,349,000) $
(5,349,000)
20,815,275
3,271,951,525
Combined
(5,349,000)
(5,349,000)
20,815,275
3,482,097,714
210,146,189 $ 3,287,417,800 $ 3,497,563,989
210,146,189 $ 3,287,417,800 $ 3,497,563,989
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
- $
103,901,000 $
103,901,000
103,901,000 $
158,254,000 $
10,685,000
51,000
168,990,000 r
115,523,147
284,513,147 $
158,254,000
10,685,000
51,000
168,990,000
115,523,147
284,513,147
(103,901,000) $
(103,901,000)
180,612,147 $
284,513,147
Section II - Page 154
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LUST FY 2009
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total As sets
Liabilities & Equity
Equity
EPA
305,445
305,445
305,445
Treasury
(10,359) $
(10,359)
22,838
3,094,325
3,106,804
3,106,804 $
Combined
(10,359)
(10,359)
22,838
3,399,770
3,412,249
3,412,249
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
312,577
312,577
312,577
159,719
9,454
13
169,186
124,087
293,273
(312,577)
(312,577)
(19,304)
159,719
9,454
13
169,186
124,087
293,273
293,273
Note 39. Antideficiency Act Violation Reported in 2010
During FY 2004, EPA awarded a contract in the amount of $194 thousand for the analysis of
drinking-water. The funding was available for FY 2004 and FY 2005. The contract
performance period crossed three fiscal years, FY 2004, FY 2005, and FY 2006. As a result,
the obligation of funds went beyond the appropriation resulting in an Antideficiency Act
violation. On July 14, 2010 EPA transmitted, as required by OMB Circular A-l 1, Section
145, written notifications to the (1) President, (2) President of the Senate, (3) Speaker of the
House of Representatives, (4) Comptroller General, and (5) the Director of OMB.
Section II - Page 155
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11-1-0015 82
Environmental Protection Agency
As of September 30, 2010
(Dollars in Thousands)
1. 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.
The EPA classifies tangible property, plant, and equipment as follows: (1) EPA-Held
Equipment, (2) Contractor-Held Equipment, (3) Land and Buildings, and, (4) Capital Leases.
The condition assessment survey method of measuring deferred maintenance is utilized. The
Agency adopts requirements or standards for acceptable operating condition in conformance
with industry practices. No deferred maintenance was reported for any of the four categories.
2. Stewardship Land
Stewardship land is acquired as contaminated sites in need of remediation and clean-up; thus
the quality of the land is far-below the standard for usable and manageable land. Easements
on stewardship lands are in good and usable condition but acquired in order to gain access to
contaminated sites.
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Environmental Protection Agency
As of September 30, 2010
(Dollars in Thousands)
3. Supplemental Combined Statement of Budgetary Resources
For the Period Ending September 30, 2010
BUDGETARY RESOURCE
Unobligated Balance Brought Forward, October 1
Recoveries of prior year unpaid obligations
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections:
Collected
Change in receivables from Federal sources
Advance received
Without advance from Federal source
Expenditure Transfers from trust funds
Nonexpenditure transers, net anticipated and actual
Temporarily not available pursuant to Public Law
Permanently not available
Total Budgetary Resources
EPM
FIFRA
LUST
S&T
STAG
OTHER
TOTAL
596,033$ 4,163$ 13,113$ 230,607$ 1,135,800$ 1,723,306$ 3,703,022
32,763 7,137 5,155 55,779 176,938 277,771
2,993,779
848,049
4,978,223
1,436,115 10,256,166
52 52
98,534 23,237
(2,786)
(6,687) (1,151)
(174,170)
-
(9,070)
(17,715)
36
113,101
(9,200)
12,260
(116)
(5,677)
(947)
26,834
-
(7,137)
4,719
-
(7,930)
(38,796)
780,000
1,157
248,074
42,629
9,975
1,273,244
(2,600)
(9,806)
918,786
(1,746)
234,559
(132,489)
36,809
1,369,345
(11,800)
(73,453)
3,510,680 $ 26,249 $ 124,186 $ 1,109,028 $ 6,127,795 $ 5,679,083 $ 16,577,022
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Unobligated funds apportioned
Unobligated balance not available
Total Status of Budgetary Resources
2,996,093$ -$ 117,024$ 846,166$ 4,410,501$ 2,890,669$ 11,260,452
33,158 24,473 - 9,663 - 622,935 690,229
3,029,250
342,894
138,536
24,473
1,776
0
117,024
7,058
105
855,829
202,007
51,191
4,410,501
1,717,294
(0)
3,513,604
2,159,783
5,697
11,950,681
4,430,813
195,528
3,510,680 $ 26,249 $ 124,186 $ 1,109,028 $ 6,127,795 $ 5,679,083 $ 16,577,022
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net
Unpaid obligations brought forward, October 1
Less: Uncollected customer payments from Federal
sources brought forward, October 1
Total unpaid obligation balance, net
Obligations incurred net
Less: Gross outlays
Less: Recoveries of prior year unpaid obligations, actual
Change in uncollected customer payments from Federal
sources
Total
Obligated Balance, net, end of period:
Unpaid obligations
Less: Uncollected customer payments from Federal
sources
Total, unpaid obligated balance, net, end of period
NET OUTLAYS
Gross outlays
Less: Offsetting collections
Less: Distributed Offsetting Receipts
Total, Net Outlays
878,039$ 2,990$ 327,859$ 423,294$ 12,136,931$ 2,019,276$ 15,788,389
(333,906) - (36,245) - (203,673) (573,824)
544,133 2,990 327,859
3,029,250 24,473 117,024
(2,655,567) (25,036) (174,282)
(32,763) (7,137)
387,048 12,136,931 1,815,603 15,214,565
855,829 4,410,501 3,513,604 11,950,681
(862,403) (6,410,218) (3,460,886) (13,588,391)
(5,155) (55,779) (176,938) (277,771)
176,957
1,062,011
2,427 263,464
1,181
376,500 10,081,435
(44,268) 133,869
1,647,114 13,432,953
1,218,961 2,427
(156,949) -
263,464
411,565 10,081,435 1,895,056 13,872,909
(439,956)
1,062,012$ 2,427$ 263,464$ 376,500$ 10,081,435$ 1,647,114$ 13,432,953
2,655,567 $ 25,036 $ 174,282 $ 862,403 $ 6,410,218 $ 3,460,886 $ 13,588,391
(91,847) (22,086) (36) (33,534) (4,719) (1,037,566) (1,189,788)
(1,402,960) (1,402,960)
2,563,720
2,950 $ 174,247 $ 828,869 $ 6,405,499 $ 1,020,359 $ 10,995,643
Section II - Page 157
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Environmental Protection Agency
Required Supplemental Stewardship Information
For the Year Ended September 30, 2010
(Dollars in Thousands)
INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT:
EPA's Office of Research and Development provides the scientific basis for EPA decision-
making by conducting cutting-edge science and technical analysis to assist in the development of
sustainable solutions to our environmental problems and more innovative and effective
approaches to reducing environmental risks. EPA is unique among scientific institutions in
combining research, analysis, and the integration of scientific information across the full
spectrum of health and ecological issues and across the risk assessment and risk management
paradigm. Research enables us to assess and identify the most important sources of risk to
human health and the environment and by so doing, informs our priority-setting, ensures
credibility for our policies, and guides our deployment of resources.
Among the Agency's highest priorities are research programs that address: the development of
alternative techniques for prioritizing chemicals for further testing through computational
toxicology; the environmental effects on children's health; the potential risks and effects of
manufactured nanomaterials on human health and the environment; the impacts of global change
and providing information to policy makers to help them adapt to a changing climate; the
potential risks of unregulated contaminants in drinking water; the development of recreational
water quality criteria; the health effects of air pollutants such as paniculate matter; the protection
of the nation's ecosystems; and the provision of near-term, appropriate, affordable, reliable,
tested, and effective technologies and guidance for potential threats to homeland security. EPA
also supports regulatory decision-making with chemical risk assessments.
For FY 2010, the full cost of the Agency's Research and Development activities totaled over
$663M. Below is a breakout of the expenses (dollars in thousands):
FY 2006 FY2007 FY2008 FY2009 FY2010
Programmatic Expenses $630,438 $624,088 $597,080 $600,552 $590,790
Allocated Expenses $104,167 $100,553 $103,773 $119,630 $71,958
Each of EPA's strategic goals has a Science and Research Objective.
INVESTMENTS THE NATION'S INFRASTRUCTURE
The Agency makes significant investments in the nation's drinking water and clean water
infrastructure. The investments are the result of three programs: the Construction Grants
Program which is being phased out and two State Revolving Fund (SRF) programs.
Construction Grants Program: During the 1970s and 1980s, the Construction Grants Program
was a source of Federal funds, providing more than $60 billion of direct grants for the
Section II-Page 158
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11-1-0015 85
construction of public wastewater treatment projects. These projects, which constituted a
significant contribution to the nation's water infrastructure, included sewage treatment plants,
pumping stations, and collection and intercept sewers, rehabilitation of sewer systems, and the
control of combined sewer overflows. The construction grants led to the improvement of water
quality in thousands of municipalities nationwide.
Congress set 1990 as the last year that funds would be appropriated for Construction Grants.
Projects funded in 1990 and prior will continue until completion. After 1990, EPA shifted the
focus of municipal financial assistance from grants to loans that are provided by State Revolving
Funds.
State Revolving Funds: EPA provides capital, in the form of capitalization grants, to state
revolving funds which state governments use to make loans to individuals, businesses, and
governmental entities for the construction of wastewater and drinking water treatment
infrastructure. When the loans are repaid to the state revolving fund, the collections are used to
finance new loans for new construction projects. The capital is reused by the states and is not
returned to the Federal Government.
The Agency also is appropriated funds to finance the construction of infrastructure outside the
Revolving Funds. These are reported below as Other Infrastructure Grants.
The Agency's expenses related to investments in the nation's Water Infrastructure are outlined
below (dollars in thousands):
FY 2006 FY 2007 FY 2008 FY 2009 FY2010
Construction Grants $39,193 $9,975 $11,517 $30,950 $13,009
Clean Water SRF $1,339,702 $1,399,616$1,063,825 $835,446 $679,332
Safe Drinking Water SRF $910,032 $962,903 $816,038 $906,803 $733,804
Other Infrastructure Grants $411,023 $381,481 $388,555 $306,366 $229,632
Allocated Expenses $446,113 $443,716 $396,253 $414,249 $201,674
HUMAN CAPITAL
Agencies are required to report expenses incurred to train the public with the intent of increasing
or maintaining the nation's economic productive capacity. Training, public awareness, and
research fellowships are components of many of the Agency's programs and are effective in
achieving the Agency's mission of protecting public health and the environment, but the focus is
on enhancing the nation's environmental, not economic, capacity.
The Agency's expenses related to investments in the Human Capital are outlined below (dollars
in thousands):
FY 2006 FY 2007 FY 2008 FY 2009 FY2010
Training and Awareness Grants $43,765 $32,845 $30,768 $37,981 $25,714
Section II-Page 159
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11-1-0015 86
Fellowships $12,639 $12,185 $9,650 $6,818 $6,905
Allocated Expenses $9,320 $7,255 $7,025 $8,924 $3,973
Section II-Page 160
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Balance Sheet for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010
FY2009
ASSETS
Intrago vernmental:
Fund Balance With Treasury (Note SI)
Investments
Accounts Receivable, Net
Other
Total Intragovernmental
Accounts Receivable, Net
Property, Plant & Equipment, Net
Other
Total Assets
106,247
3,740,700
27,323
12,941
3,887,211
364,065
101,714
1,075
62,631
3,457,338
20,694
23,100
3,563,763
748,838
81,216
419
4,354,065 S
4,394,236
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
Custodial Liability
Other
Total Intragovernmental
Accounts Payable & Accrued Liabilities
Pensions & Other Actuarial Liabilities
Cashout Advances, Superfund (Note S2)
Payroll & Benefits Payable
Other
Total Liabilities
NET POSITION
Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
45,641
62,260
107,901 $
178,045 $
6,420
636,673
45,792
38,736
1,013,566
3,340,498
3,340,498
47,787
187
76,051
124,025
183,477
7,829
572,412
44,604
45,353
977,700
3,416,536
3,416,536
4,354,065 S
4,394,236
The accompanying notes are an integral part of these financial statements.
Section II-Page 161
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11-1-0015 88
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Net Cost for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010 FY2009
COSTS
Gross Costs $ 1,844,712 $ 1,672,246
Expenses from Other Appropriations 30,349 130,931
Total Costs 1,875,061 1,803,177
Less:
Earned Revenue 484,165 615,577
NET COST OF OPERATIONS $ 1,390,896 $ 1,187,600
The accompanying notes are an integral part of these financial statements.
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Section II-Page 162
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89
Statement of Changes in Net Position for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010 FY2009
Earmarked Earmarked
Funds Funds
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Nonexchange Revenue - Securities Investment
Nonexchange Revenue - Other
Transfers In/Out
Trust Fund Appropriations
Income from Other Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out
Imputed Financing Sources
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
3,416,536
3,416,536
14,968
3,396
(39,168)
1,280,570
30,349
1,290,115
24,743
24,743
2,702,763
2,702,763
52,065
(1,479)
(54,393)
1,747,911
130,931
1,875,035
(84)
26,422
26,338
(1,390,896) (1,187,600)
(76,038) 713,773
3,340,498
3,416,536
The accompanying notes are an integral part of these financial statements.
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
Section II-Page 163
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90
(Dollars in Thousands)
(Unaudited)
FY2010
FY2009
BUDGETARY RES OURCES
Unobligated Balance, Brought Forward, October 1:
Adjusted Subtotal
Recoveries of Prior Year Unpaid Obligations
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections
Earned:
Collected
Change in Receivables from Federal Sources
Change in Unfilled Customer Orders:
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year, Without Advances
Previously Unavailable
Expenditure Transfers from Trust Funds
Total Spending Authority from Offsetting Collections
Nonexpenditure Transfers, Net, Anticipated and Actual
Temporarily Not Available Pursuant to Public Law
Permanently Not Available
Total Budgetary Resources
1,605,363
1,605,363
171,423
36,809
518,936
47
244,146
4,423
767,552
1,273,244
(2,600)
(4,102)
1,513,176
1,513,176
118,278
636,392
292,403
1,401
12,032
4,574
310,410
1,269,453
3,847,690
3,847,709
STATUS OFBUDGETARYRESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Apportioned
Exempt from Apportionment
Total Unobligated Balances
Unobligated Balances Not Available
Total Status of Budgetary Resources (Note S6)
1,475,861
312,141
1,788,002
2,058,813
2,058,813
874
3,847,690 $
1,996,048
246,297
2,242,345
1,593,443
1,593,443
11,921
3,847,709
The accompanying notes are an integral part of these financial statements.
Section II-Page 164
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91
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
FY2010
FY2009
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1
Adjusted Total
Less: Uncollected Customer Payments from Federal Sources,
Brought Forward, October 1
Total Unpaid Obligated Balance, Net
Obligations Incurred, Net
Less: Gross Outlays
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments fromFederal
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual
Change in Uncollected Customer Payments fromFederal Sources
Total, Change in Obligated Balance
Obligated Balance, Net, End of Period:
Unpaid Obligations
Less: Uncollected Customer Payments fromFederal Sources
Total, Unpaid Obligated Balance, Net, End of Period
1,861,908 $
1,861,908
(118,896)
1,743,012
1,788,002
(1,785,572)
(171,423)
(4,471)
1,569,549
1,692,915
(123,366)
1,392,311
1,392,311
(112,921)
1,279,390
2,242,345
(1,654,470)
(118,278)
(5,975)
1,743,012
1,861,908
(118,896)
1,569,549
1,743,012
NET OUTLAYS
Net Outlays:
Gross Outlays (Note S6)
Less: Offsetting Collections (Note S6)
Less: Distributed Offsetting Receipts* (Note S6)
Total, Net Outlays
1,785,572
(763,081)
(53,247)
969,244
1,654,470
(304,434)
(1,244,694)
105,342
Offsetting receipts line includes the amount in 68X0250 (payment to trust fund) from Treasury
The payment cannot be made directly through the trust fund, but must go through a "pass-through" fund
The accompanying notes are an integral part of these financial statements.
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Section II-Page 165
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92
Related Notes to Superfund Trust Financial Statements
For the Periods Ending September 30, 2010 and 2009
(Dollars in Thousands)
(Unaudited)
Note SI. Fund Balance with Treasury for Superfund Trust
Fund Balances with Treasury for the Superfund as of September 30, 2010 and 2009 is $106.2
million and $62.63 million, respectively. Fund balances are available to pay current liabilities
and to finance authorized purchase commitments (see Status of Fund Balances below).
Status of Fund Balances:
Unobligated Amounts in Fund Balance:
Available for Obligation
Unavailable for Obligation
Net Receivables from Invested Balances
Balances in Treasury Trust Fund
Obligated Balance not yet Disbursed
Totals
FY2010
FY2009
2,058,813 $
874
(3,526,672)
(1,115)
1,574,347
106,247 $
1,593,443
11,824
(3,277,674)
(7,975)
1,743,013
62,631
The funds available for obligation may be apportioned by the OMB for new obligations at the
beginning of the following fiscal year. Funds unavailable for obligation are mostly balances in
expired funds, which are available only for adjustments of existing obligations.
Note S2. Cashout Advances, Superfund
Cashout Advances are funds received by EPA, a state, or another PRP 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), cashout funds received by EPA are placed in
site-specific, interest bearing accounts known as special accounts and are used for potential
future work at such sites in accordance with the terms of the settlement agreement. Funds placed
in special accounts may be disbursed to PRPs, to states that take responsibility for the site, or to
other Federal agencies to conduct or finance response actions in lieu of EPA without further
appropriation by Congress. As of September 30, 2010 and 2009, cashout advances are $637
million and $572 million.
Note S3. Superfund State Credits
Authorizing statutory language for Superfund and related Federal regulations require states to
enter into SSCs when 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 they will share in the
cost of the remedial action. Under Superfund's authorizing statutory language, states will
Section II-Page 166
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11-1-0015 93
provide 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. Credit is limited to state site-specific expenses EPA has
determined to be reasonable, documented, direct out-of-pocket expenditures of non-Federal
funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply the
credit at the site where it was earned. The state may apply any excess/remaining credit to
another site when approved by EPA. As of September 30, 2010, the total remaining state credits
have been estimated at $20.9 million. The estimated ending credit balance on September 30,
2009 was $21.9 million.
Note S4. Superfund Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
actions at their sites with the understanding that EPA will reimburse them a certain percentage of
their total response action costs. EPA's authority to enter into mixed funding agreements is
provided under CERCLA Section 11 l(a)(2). Under CERCLA Section 122(b)(l), 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, 2010, EPA had 6 outstanding preauthorized mixed funding
agreements with obligations totaling $15.6 million. As of September 30, 2009, EPA had 9 for
$19.9 million. A liability is not recognized for these amounts until all work has been performed
by the PRP and has been approved by EPA for payment. Further, 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 EPA.
Note S'5. Income and Expenses from other Appropriations; General Support Services Charged
to Superfund
The Statement of Net Cost reports costs that represent the full costs of the program outputs.
These costs 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 2010 and 2009, the EPM appropriation funded a variety of programmatic and
non-programmatic activities across the Agency, subject to statutory requirements. This
appropriation was created to fund personnel compensation and benefits, travel, procurement, and
contract activities. This distribution is calculated using a combination of specific identification
of expenses to Reporting Entities, and a weighted average that distributes expenses
proportionately to total programmatic expenses. As illustrated below, this estimate does not
impact the consolidated totals of the Statement of Net Cost or the Statement of Changes in Net
Position.
Section II-Page 167
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94
FY2010
FY 2009
Superfund
All Others
Total
Income from
Other
Appropriations
30,349
(30,349)
Expenses from
Other
Appropriations
(30,349) $
30,349
Net
Effect
1
-
- $ - $
Income from
Other
Appropriations
130,931
(130,931)
Expenses from
Other Net
Appropriations Effect
(130,931) $
130,931
- $ - $
In addition, the related general support services costs allocated to the Superfund Trust Fund from
the S&T and EPM funds are $194 thousand for FY 2010 and $234 thousand for FY 2009.
Note S6. Reconciliation of the Statement of Budgetary Resources to the President's Budget
Budgetary resources, obligations incurred, and outlays, as presented in the audited FY 2009
Statement of Budgetary Resources, will be reconciled to the amounts included in the Budget of
the United States Government when they become available. The Budget of the United States
Government with actual numbers for FY 2010 has not yet been published. We expect it will be
published by March 2011, and it will be available on the OMB website at
http://www.whitehouse.gov/omb/budget/fy20101. The actual amounts published for the year
ended September 30, 2009 are included in EPA's FY 2009 financial statement disclosures.
Budgetary
Resources
3,847,709 $
(709)
3,847,000 $
Obligations
2,242,345 $
(345)
2,242,000 $
Offsetting
Receipts
1,244,694 $
(694)
1,244,000 $
Net Outlays
1,350,036
(36)
1,350,000
FY2009
Statement of Budgetary Resources
Rounding Differences * *
Reported in Budget of the U. S. Government
* Balances are rounded to millions in the Budget Appendix.
Note S7. Superfund Eliminations
The Superfund Trust Fund has intra-agency activities with other EPA funds which are eliminated
on the consolidated Balance Sheet and the Statement of Net Cost. These are listed below:
FY 2010 FY 2009
Advances
Expenditure Transfers Payable
Accrued Liabilities
Expenses
Transfers
$9,265
$25,555
$2,214
$33,419
$38,016
$14,327
$25,189
$2,991
$29,100
$54,392
Section II-Page 168
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11-1-0015 95
Section II-Page 169
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11-1-0015 96
Appendix II
Agency's Response to Draft Report
November 09, 2010
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal 2010 and 2009 Consolidated Financial Statements
FROM: Barbara J. Bennett /s/
Chief Financial Officer
TO: Arthur A. Elkins, Jr.
Inspector General
Fiscal Year 2010 marks another successful financial statements audit cycle for the U.S.
Environmental Protection Agency. This year, we broadened Agency partnerships with a focus
on strengthening fiscal integrity, enhancing core business operations, and contributing to
Agency-wide performance management systems. We are proud of the many accomplishments
and thank you for identifying additional areas for improvement in the draft Inspector General's
Audit Report. The audit work performed will help shape future financial management
initiatives.
Our offices worked together to expand stakeholder involvement, thereby engaging all
parts of the Agency in fiscal stewardship yielding significant results. Attached are the Agency's
responses to this audit report. Detailed corrective action plans will be provided to you and your
staff within 90-days of the issuance of the final audit report. Please let me know if you have any
questions, or your staff can contact Stefan Silzer, Acting Director, Office of Financial
Management of 202-564-5389 regarding the audit.
Attachment
Section II-Page 170
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11-1-0015 97
cc: Mark Bialek, Deputy Inspector General
Craig E. Hooks, Assistant Administrator, Office of Administration and Resources
Management
Malcolm D. Jackson, Assistant Administrator, Office of Environmental Information
Maryann Froehlich, Deputy Chief Financial Officer
Melissa Heist, Assistant Inspector General
Joshua Baylson, Associate Chief Financial Officer
Stefan Silzer, Acting Director, Office of Financial Management
Raffael Stein, Director, Office of Financial Services
Paul Curtis, Director Financial Statements Audit
Jim Wood, Director, Cincinnati Finance Center
Stella Whitsell, Staff Director, Reporting and Analysis Staff
Jeanne Conklin, Staff Director, Financial Policy and Planning Staff
Section II-Page 171
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11-1-0015 98
Attachment 1
Response to Draft Audit of EPA's Fiscal 2010 and 2009 Consolidated Financial Statements
1 - Further Improvements Needed in Reviewing the Superfund State Contract (SSC)
Unearned Revenue Spreadsheets
Recommendations
We recommend that the Office of the Chief Financial Officer (OCFO):
1. Work with the regions to review prior years' fund code "T" disbursements data on the SSC
spreadsheets.
Response: (Concur)
Office of Financial Service (OFS) will work with the regions during the close out and
reconciliation process described in recommendation 3 (of this Position Paper) and make
necessary adjustments as a result of the regional review.
2. Work with the regions to review the spreadsheet data for the estimated site costs, state cost
share, credits, and billings.
Response: (Concur)
OFS has reviewed and reconciled the site billing and disbursement data presented on the
accrual spreadsheets as of the fourth quarter of fiscal 2010 and appropriate adjustments were
made based on our review as well as additional issues identified by auditors. In fiscal 2011,
OFS will continue to work with the regions to ensure the estimated site costs, state cost share,
and credits are correctly reported on the accrual spreadsheets. OFS has made progress in this
area working directly with some regions to ensure they understand how and when the data
needs to be updated on the accrual spreadsheets for credits and state cost share. OFS will
continue this effort with the remaining regions during fiscal 2011. In addition, OFS will
request that the percentage of sites reviewed for regional A-123 SSC process be increased for
the fiscal 2011 review.
3. Require regions to report to Cincinnati Finance Center (CFC) the SSC site closeout
amounts, including the final actual site costs separated by "T" and "TR1" disbursements, final
state share, and the amount of refund paid or final billing.
Response: (Concur)
OFS will continue its efforts to request the regions to complete the close out process for SSC
sites that are listed as "closed" on the accrual spreadsheets. OFS will remind the regions
quarterly to work on the "closed" sites and complete all financial and/or administrative
actions that are needed. As part of the close out process, regions will be confirming and/or
Section II-Page 172
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11-1-0015
99
adjusting various data on the accrual spreadsheets which will include the fund code "F and
"TR1" disbursements.
4. Review the quarterly SSC spreadsheets to determine whether the site data are reasonable
and the resulting site calculations are logical. Specifically, review the data for billings,
credits, or unearned revenue in excess of state cost shares; no estimated site costs; no billings;
reimbursable "TR1" expenses in excess of billings; and closed sites with accrued unbilled
costs or unearned revenue.
Response: (Concur)
OFS will include additional reviews on the SSC accrual spreadsheets to address the potential
concerns described in the Office of Inspector General (OIG) recommendations. These
procedures will be included as part of the fiscal 2011 SSC accrual process.
2- EPA Should Assess Collectability of Receivables and Record Any Needed Allowances for
Doubtful Accounts.
Recommendations
We recommend that the Office of the Chief Financial Officer require the Office of Financial
Services to:
5. Establish a federal allowance for $6.6 million, which remains on the Twin Cities site
receivable.
Response: (Non-Concur)
OCFO has determined that the full $12.9 Million is collectable in accordance with Statement
of Federal Financial Accounting Standards Number 1, Accounting for Selected Assets and
Liabilities. We have based our determination on the fact that the Department of Defense is
seeking appropriated funds to partially cover their liability and has booked a $12.9 Million
liability. Therefore, EPA deems the entire $12.9 million receivable to be collectable.
Your Agency
Trading Partntr
Reap Categoiy
68
21
22
Select
Select
Sileet
Your Ajency Ms
C,,.- rj
FundTitle
HAZARDOUS SUBSTANCE SUPERFUND
UNAVAILABLE RECEIPTS ACCOUNTS
SQL
1310
1310
Grand Total
Total
13,021672
37 £01
mm
Trading Partner
Your Agency
Category
68
21
22
Your Partner's Data
Fund
21000021
FundTile
ALL ARMY FUNDS
SGL
1310
2110
Grand Total
Total
66,424
13,058,273
13,125,697
Section II-Page 173
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11-1-0015 100
6. Review collectability of open federal accounts receivables and establish an allowance
and/or write-off.
Response: (Concur)
CFC will review remaining open federal account receivables to ensure accurate status is
reflected and reconcilable to the general ledger.
7. Establish procedures to ensure that CFC timely bills federal agencies within their
authorized appropriation period.
Response: (Concur)
Procedures are in place to ensure the Finance Centers bill federal agencies within the
authorized appropriation period. Environmental Protection Agency (EPA) Resource
Management Directives System (RMDS) 2540-12, Intra-governmental Business Rules,
http://intranet.epa.gov/ocfo/policies/direct/2540-12.pdf sets forth the Agency-wide financial
policy for intra-governmental business rules. The policy states that intra-governmental
business transactions will be processed, reconciled, and resolved in accordance with Treasury
Financial Manual (TFM) Bulletin No. 2007-03 Section VI, Procurement Requirements,
http://www.fms.treas.gov/tfm/vol 1 /07-03.pdf. The TFM Bulletin establishes that the
agreement/order shall include"... (d) the effective date and duration of the agreement, to
include the expiration of the funding source, (e) the amount and the method of payment, and
(f) the method and frequency of performance (revenue and expenses) reporting:".
3 - Improvements Needed In Controls for Headquarters Personal Property
We recommend that the Assistant Administrator for Administration and Resources Management
require the Director, Facilities Management and Services Division, (FMSD) to:
Recommendations
8. Develop a management-level property management training course and require
completion of the course by all EPA managers.
Response: (Concur)
FMSD is working to develop a mandatory, annual, on-line training course for all
employees with special emphasis on roles and responsibilities of managers and
supervisors. The course will provide vital information on property policy and procedures
and provide notice to all employees regarding the potential for personal liability for
property assigned to them. Course development will be completed in February 2011.
9. Adequately address and resolve the issue and determine why personal property items are
missing.
Section II-Page 174
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11-1-0015 101
Response: (Concur; additional information provided)
To establish some background, it should be noted that the personal property inventory
process was disrupted during FY 2009 as a result of implementation of the Customer
Technology Solutions (CTS) computer replacement project. The Headquarters'
inventory conducted from January through May, 2010, presented the first opportunity
to thoroughly review the impact of the CTS project on the property inventory.
Unfortunately, the results of the inventory indicated that there were 2,272 items
unaccounted for, with an original purchase value of $6.3 million.
OARM took immediate steps to locate the missing items, and with the assistance and
cooperation of Office of Environmental Information, has found 1,222 items or 54% of
the outstanding items leaving 1,050 items remaining. As a result, the original
purchase value at risk was reduced by $4 million or 64% to the current total of $2.2
million. OARM's efforts are continuing, and it is anticipated that most of the
outstanding items will be located over the coming weeks, especially during the
ongoing spot inventories.
Additional specific actions include: multiple re-inventories involving those custodial
areas having missing items; re-inventories of numerous storage areas including those
where CTS equipment has been stored; and collaboration with OEI on a separate
inventory which is planned for completion in December.
OARM is continuing focused spot inventories which are expected to locate additional
items and will begin the comprehensive FY2011 annual inventory process in January
2011. This effort will enable OARM to identify items that are unaccounted for as
well as new items added to the inventory between October and January.
OARM has requested that the Headquarters Board of Survey (BOS) delay its review
of items unaccounted for in FY 2010 for three months (October - January). The BOS
is comprised of five employees from several Headquarters Program Offices and
convenes at the end of each fiscal year to resolve missing property issues. This
additional time will enable OARM to continue efforts to locate as many items as
possible.
While the CTS project was a major factor, there were several additional factors which
contributed to the unaccountable personal property at Headquarters. OARM is taking
actions to address each of these factors and strengthen the integrity of the property
management process. Key factors include:
a. A need for increased awareness among employees of property policy and
practices. Property is frequently purchased, shipped, relocated, disposed of or
otherwise reassigned without attention to the procedure or necessary
documentation required.
Section II-Page 175
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11-1-0015 102
b. Custodial Officers are assigned property responsibilities as collateral duties and
are generally not in a position to enforce compliance.
c. Many of the missing items are cell phones and blackberries which are frequently
provided absent proper tracking protocol.
d. Property is currently tracked by location and not by the individual. This inability
to associate individual responsibility with assigned property has led to a lack of
accountability for personal property.
Consistent with its previous commitment, OARM is providing the rigorous
management oversight that is required to meet and avoid the current challenges. The
first priority action taken was to reassign responsibility for the Personal Property
program to the Deputy Division Director to ensure the necessary level of attention.
Further, additional resources have been dedicated to support program operations.
Third, training will be required for all employees. By taking these and other
corrective actions, OARM is confident that it will continue to strengthen the
necessary oversight and control of Headquarters' personal property and minimize
risks associated with the program.
4 - EPA Should Continue Efforts to Reconcile Intra-governmental Transactions
Recommendation
We recommend that the Office of the Chief Financial Officer:
10. Continue efforts to reconcile EPA's intra-governmental transactions and make
appropriate adjustments to comply with federal financial reporting requirements.
Response: (Concur with recommended change to wording)
OFS will continue to reconcile its intra-governmental activity on a quarterly basis.
Since EPA and OIG agree that the Agency is diligently working to reconcile intra-
governmental transactions with our trading partners, we suggest replacing the first paragraph
on pages 5 and 15 regarding "EPA Should Continue Efforts to Reconcile Intra-
governmental Transactions" with the following text:
As of September 30, 2010, EPA reported $378 million in unresolved differences with 48
trading partners for intra-governmental transactions. Of that amount, $271 million was
reported by Treasury to be material differences. The remaining $107 million represents
amounts reported for nonverifying agencies, accruals, timing differences, and other
agencies whose differences were not reported as material. According to the Treasury
Financial Manual, verifying agencies are those that are required to report in the
Government-wide Financial Report System. These include the 24 major Chief Financial
Officer (CFO) Act agencies and 11 other agencies material to the Financial Report of the
United States Government. Any agency not required is a non-verifying agency. Treasury
Section II-Page 176
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11-1-0015 103
policy requires verifying agencies to confirm and reconcile intra-governmental
transactions with their trading partners with a goal of $0 net differences. Based on our
review of correspondence with other agencies, EPA had difficulty eliminating these
differences primarily because of differing accounting treatments and accrual
methodologies among federal agencies, and because of a large reporting error made by
one of EPA's trading partners. EPA's inability to eliminate its intragovernmental
transactions contributes to a long-standing government-wide problem that hinders the
ability of the U.S. Government Accountability Office to (GAO) render an opinion on the
Consolidated Financial Statements of the Federal Government.
Additional comment for page 15: suggest replacing "un-reconciled differences" with "un-
eliminated differences" since EPA has reconciled and knows basis for differences.
5 - EPA Improperly Closed Accounts When Cancelling Treasury Symbols
Recommendations
We recommend the Chief Financial Officer:
11. Refund the cancelled funds to Treasury.
Response: (Non-Concur)
Subsequent to the issuance of the subject position paper, Office of Financial Management
(OFM) found that the $933,299 advanced funds provided to the Working Capital Fund from
the Environmental Program and Management (EPM) Fund (treasury symbol 682/30108) for
services were improperly reflected as drawn down of an advance in treasury symbol
683/40108. The FY 2002/2003 funds were expended before cancelled, though the incorrect
fund was referenced in this transaction. Therefore, there are no funds to be returned to
Treasury. While we do not concur with the recommendation as written, we do acknowledge
an error affected our reporting of customer advance funds and will make the appropriate
adjusting entry to 683/40108 in FY 2011. We will also review our procedures and ensure
processes for reconciliations are put in place so that no future issues occur.
12. Revise its cancellation procedures for the elimination of the balances from the cancelled
treasury symbols.
Response: (Concur)
OFM will evaluate its procedures and revise them as necessary to ensure timely review of
the balances in canceling treasury symbols. Appropriate procedures will be implemented
in FY 2011.
13. Make appropriate adjustments to properly reflect balances.
Response: (Concur)
Section II-Page 177
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11-1-0015 104
We will conduct analysis and provide guidance to ensure that balances are properly
reported. Adjustments will be made during FY 2011 based on the results of our analysis.
Responsible Managers:
Signature/Date
Stefan Silzer, Acting Director, Office of Financial Manager, OCFO
Signature/Date
Raffael Stein, Director, Office of Financial Services
Signature/Date
Craig E. Hooks, Assistant Administrator, Office of Administration and Resources
Management
Section II-Page 178
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11-1-0015 105
Appendix III
Distribution
Chief Financial Officer
Assistant Administrator for Administration and Resources Management
Assistant Administrator for Environmental Information and Chief Information Officer
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Director, Office of Policy and Resources Management, Office of Administration and
Resources Management
Director, Office of Administration, Office of Administration and Resources Management
Director, Office of Technology Operations and Planning, Office of Environmental Information
Director, Office of Budget, Office of the Chief Financial Officer
Acting Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Office of Financial Services, 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, Las Vegas Finance Center, Office of the Chief Financial Officer
Director, Office of Planning, Analysis, and Accountability, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Office of Technology Solutions, Office of the Chief Financial Officer
Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Director, Accountability and Control Staff, Office of the Chief Financial Officer
Director, Payroll Management and Outreach Staff, Office of the Chief Financial Officer
Agency Audit Followup Coordinator
Agency Follow-up Official
Audit Followup Coordinator, Office of the Administrator
Audit Followup Coordinator, Office of the Chief Financial Officer
Audit Followup Coordinator, Office of Administration and Resources Management
Audit Followup Coordinator, Office of Solid Waste and Emergency Response
Audit Followup Coordinator, Office of Environmental Information
Audit Followup Coordinator, Office of Grants and Debarment, Office of Administration and
Resources Management
Audit Followup Coordinator, Office of Financial Management, Office of the
Chief Financial Officer
Audit Followup Coordinator, Office of and Financial Services, Office of the
Chief Financial Officer
Section II-Page 179
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ERA'S FY 2010
Agency Financial Report
Section
Other Accompanying Information
This document is one chapter from the Fiscal Year 2010 Agency Financial Report, U.S.
Environmental Protection Agency (EPA- 190-R-10-003), published on November 15, 2010. This
document is available at: www.epa.gov/ocfo/financialperformancereports.htm. Printed copies of
EPA's FY2010 Agency Financial Report are available from EPA's National Service Center for
Environmental Publications at 1-800-490-9198 or by e-mail at nscep@bps-lmit.com.
Section III - Page 1
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INTRODUCTION
Management challenges and integrity weaknesses represent vulnerabilities in program
operations that may impair EPA's ability to achieve its mission and threaten the Agency's
safeguards against fraud, waste, abuse, and mismanagement. These areas are identified
through internal Agency reviews and independent reviews by EPA's external evaluators, such
as the Office of Management and Budget (OMB), the Government Accountability Office (GAO),
and EPA's Office of Inspector General (OIG). This section of the APR includes two components:
1) a brief discussion of EPA's progress in addressing its FY 2010 integrity weaknesses and 2)
key management challenges identified by EPA's OIG, followed by the Agency's response.
Under the Federal Managers' Financial Integrity Act (FMFIA), all federal agencies must provide
reasonable assurance that policies, procedures, and guidance are adequate to support the
achievement of their intended mission, goals, and objectives (See Section I, "Management
Discussion and Analysis," for the Administrator's assurance statements.). Agencies also must
report any material weaknesses identified through internal and/or external reviews and their
strategies to remedy the problems. Material weaknesses are vulnerabilities that could
significantly impair or threaten fulfillment of the Agency's programs or mission. For FY 2010, no
new material weaknesses were identified by the Agency or the OIG. Additionally, the Agency
removed three material weaknesses identified as part of the Agency's FY 2009 audited financial
statement process. Two material weaknesses—Understated Unearned Revenue and
Understated Accounts Receivable—were closed, and a third—Improvements in Billings Cost
and Reconciling Unearned Revenue for Superfund State Contracts (SSC) Costs—was
downgraded to a significant deficiency. The Agency continues to review the SSC process as
part of its review of internal controls over financial activities to identify potential process issues
and/or gaps in procedures. (See following subsection for a discussion of new, existing, and
corrected weaknesses and significant deficiencies.)
The Reports Consolidation Act of 2000 requires OIG to identify, briefly assess, and report
annually the most serious management and performance challenges facing the Agency. In FY
2010, OIG identified seven areas it considers to be EPA's most pressing management
challenges (See page seven of this section for OIG's report to the Administrator.). EPA has
made progress in addressing the issues OIG identified and will continue to work diligently in
assessing and resolving vulnerabilities before they become serious management issues.
EPA's senior managers remain committed to maintaining effective and efficient internal controls
to ensure that program activities are carried out in accordance with applicable laws and sound
management policy. EPA leaders meet periodically to review and discuss progress the
Agency's progress in addressing issues raised by OIG and other external evaluators, as well as
progress in addressing current weaknesses and emerging issues. The Agency will continue to
address its remaining weaknesses and report on its progress.
Section III-Page 2
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ERA'S PROGRESS IN ADDRESSING
FY 2010 WEAKNESSES AND SIGNIFICANT DEFICIENCIES
(Prepared by EPA)
In FY 2010, EPA continued to address its
material and Agency internal control
weaknesses. This section discusses the
weaknesses resolved in FY 2010, as well
as new weaknesses and deficiencies
identified and those for which corrective
actions are still underway.
1.
2.
3.
4.
EPA's FY 2010 Weaknesses and Significant
Deficiencies
Material Weaknesses
1. Understated Unearned Revenue*
2. Understated Accounts Receivable*
3. Improvements in Billing Costs and Reconciling
Unearned Revenue for Superfund State Contract
Costs*
Agency Weaknesses
Implementation of Data Standards*
Program Evaluation
Permit Compliance System
Strengthening the Agency's Implementation of
FMFIA
Streamlining EPA's Process for Developing
Chemical Assessments Under IRIS
Electronic Content Management**
Significant Deficiency
Improvements in Billing Costs and Reconciling
Unearned Revenue for Superfund State Contract
Costs**
Assess Collectibility of Federal Receivables and
Record Any Needed Allowances for Doubtful
Accounts**
Improvements Needed In Controls for
Headquarters Personal Property
Improperly Closed Accounts When Cancelling
Treasury Symbols**
1.
Material Weaknesses
Understated Unearned Revenue
During the FY 2009 financial statement
audit process, OIG determined that EPA
materially understated its unearned
revenue. This resulted from recording
expenditures of more than $97.7 million in
Superfund special accounts against the
wrong fund code, which incorrectly
reduced EPA's liability for advances and
recognized revenue not earned. The
majority of these transactions ($93.6
million) occurred between fiscal years
2003 and 2007. EPA restated its FY 2008
financial statements to reflect the correct
unearned revenue. The Agency has
developed and implemented an
appropriate accounting model for future
transactions and prepared and entered
correct transactions into Integrated
Financial Management System (IFMS) to
properly state the fiscal 2009 and 2008
(Restated) financial statements.
Additionally, the Agency coordinated
corrective actions among its regional
offices, and monitored special account
fund code usage. Furthermore, regional
offices corrected open obligations to avoid creating additional negative fund code balances and
made corrections at the detail site level. Correction activity for Regions 1, 2, 4, 5, 6, 9 and 10
has been completed. The support documentation for the special account negative fund code
corrections resulting from the fiscal years 2008 and 2009 financial statement audits was
provided to the OIG.
* All corrective actions were completed in FY 2010.
** Items identified as new in FY2010.
Section III-Page 3
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EPA recommends closing this material weakness based on the completion and validation of
corrective actions.
Understated Accounts Receivable
EPA materially understated the FY 2008 accounts receivables by not recording approximately
$151 million in receivables. EPA's Servicing Finance Office (SFO) was not aware of legal
documents supporting seven receivables until the end of FY 2009. EPA's Regional Legal
Enforcement Offices, Offices of Regional Counsel, and Regional Program Offices did not
inform the SFO of the multi-party settlements in time to record the receivables in the Integrated
Financial Management System during the proper fiscal year. EPA recorded the accounts
receivable and restated its FY 2008 financial statements to reflect the correct accounts
receivable balance.
To prevent future occurrences, the Agency now utilizes the Department of Justice 30-day
tracking report more extensively to monitor unrecorded bankruptcy settlements. Additionally, the
Agency reiterated to the Regional Bankruptcy Coordinators that any bankruptcy settlement must
be sent to the SFO so that an appropriate accounts receivable is established. The Agency will
continue to conduct the established reconciliation process throughout the year and look for
additional methods to improve the process wherever possible.
EPA recommends closing this material weakness based on the completion and validation of
corrective actions.
Improvement Needed in Billing Costs and Reconciling Unearned Revenue for Superfund
State Contract (SSC) Costs
During the Agency's FY 2009 financial statement audit, OIG stated that EPA did not properly
review the calculations used to reconcile unearned revenue for Superfund State Contract (SSC)
costs.
In FY 2010, the Agency improved accountability for the SSC contract requirements and site
status information by researching transactions in older funds to determine validity, strengthening
the review/verification process for reconciling Superfund site costs, and ensuring data and
calculations used are consistent and properly supported. The Agency provided instructions to
the regions for careful review of the "closed" sites and the steps necessary to complete the
closure activity. Extra measures and verifications were taken to ensure data entered on the
spreadsheets were correctly transferred into the financial system. For instance, the review of the
SSC spreadsheet was added to the regional review of internal control over financial activities.
This included ensuring that spreadsheets were completed for all sites, that contract values and
percentages were updated, and that credits were included and that they were for the correct
amounts.
As part of the quarterly SSC accrual process, OCFO will continue to send requests to the
regions emphasizing the need to review all sites they have listed as 'Closed' to make sure they
are taking care of all actions. This may include, but is not limited to, billing a particular state for
its share of the costs, adjusting the contract values and/or percentages, and reclassifying
appropriated disbursements where applicable. The Agency has included language in its
quarterly call for regional input into the spreadsheets to request that the regions ensure all
billings are done timely.
Section III - Page 4
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EPA recommends closing this as a material weakness and downgrading it to a Significant
Deficiency based on progress made to date. Given the actions taken by the Agency to address
this at the material weakness level, this issue is now considered to be a significant deficiency.
The Agency will continue to review the SSC process as part of its review of internal control over
financial activities to identify potential process issues and/or gaps in procedures, and anticipates
that all remaining corrective actions will be completed in FY 2011.
Agency Weaknesses
Implementation of Data Standards
EPA receives most of its data (e.g., air monitoring, enforcement, etc.) from state and tribal
partners electronically. To ensure a more efficient and accurate exchange of this data, EPA in
collaboration with states and tribes, developed 26 different data standards, which included
standard names, formats and XML tags. Examples of data standards include biological
identification, contact information, monitoring location, and sample handling. The data standards
address, for example, how to exchange a date (YYYY/MM/DD) or how to exchange information
about a facility or chemical. In FY 2005, EPA acknowledged implementation of data standards
as an Agency weakness. Since then, EPA has established a process for ensuring that each
data standard adopted by the Agency is fully implemented in a cost-effective and timely manner.
The Agency has completed all corrective actions associated with this weakness and validated
the effectiveness of the controls in place. Since June 2005, the Agency has produced semi-
annual Data Standards Report Cards demonstrating EPA progress in implementing approved
data standards. This report is available on-line within the Registry of EPA Applications, Models
and Datasets (READ). To remedy the weakness, EPA has developed on-line training, which
provides developers with information on how to identify applicable standards for use in systems
and data products. Also, the Agency conducted training sessions on data standards
implementation for developers supporting EPA program offices, and conducted formal briefings
for program offices on data standards development and implementation.
EPA completed all planned conformance reviews under the FMFIA corrective action plan and
continues to work with internal program offices and Exchange Network state partners to assist
them in performing self-assessments. The Agency developed a Data Standards website that
serves as a "one stop shop" for key information about data standards. EPA will continue to
reach out and communicate with Agency system managers and developers about the
importance of this activity.
EPA recommends closing this Agency weakness based on the completion and validation of
corrective actions.
Program Evaluation
In its September 2007 report, Using the Program Assessment Rating Tool as a Management
Control Process, OIG identified several limitations to systematically conducting program
evaluations at EPA. These include: 1) funding limitations, 2) lack of internal and external
expertise, 3) the need for strategic investment in program evaluation, 4) insufficient
data/performance measurement information, and 5) program evaluation partnerships with
states. The Agency recommended Program Evaluation as an Agency weakness in FY 2009.
The Agency continues to take steps to implement key actions in EPA's two-part program
evaluation strategy and will assess progress to determine whether modifications are needed to
Section III - Page 5
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close this weakness in FY 2011. In FY 2010, Agency efforts focused on training, offering
introductory and advanced performance management courses in logic modeling, performance
measurement, and program evaluation to EPA managers and staff. This included
Environmental Results Under Grants Training to new grants specialists and project officers; and
Program Evaluation Competition Pre-Proposals Workshops for headquarters and regional
offices. Additionally, the Agency plans to sponsor a one-and-a-half day program evaluation
training workshop for staff whose proposals are selected for funding under the 2010 Program
Evaluation Competition and is also funding a new course, Using Statistical Approaches to
Support Performance Measurement and Evaluation.
In addition, the Agency continued to leverage existing Agency networks focused on
measurement and evaluation (e.g., Program Evaluation Network) to discuss challenges and
potential solutions to long-term measurement and data collection challenges Agency-wide. To
increase program evaluation partnerships, the Agency will continue to coordinate with the
Environmental Council of the States and other partners to identify additional steps to strengthen
further environmental program evaluation.
Permit Compliance System
In FY 1999, EPA recommended Permit Compliance System (PCS) as an Agency weakness.
EPA needs to revitalize or replace PCS to provide an information system that both the states
and EPA can use to ensure complete and accurate National Pollution Discharge Elimination
System (NPDES) permit and discharge data.
EPA has been working closely with states and regions through numerous workgroups to
develop the data requirements for the new system, design the new system, clean-up PCS data,
transfer (migrate) existing PCS data to Integrated Compliance Information System (ICIS), and
implement direct user and batch releases of ICIS. In FY 2010 the Agency:
• Completed data migration from PCS to ICIS and added Michigan into the ICIS-NPDES in
August 2010.
• Completed Software Technical Specifications for Wave 1 of Full Batch functionality.
• Completed Software Development for Wave 1 of Full Batch functionality.
• Completed Functional and Integration testing of Wave 1 Full Batch functionality.
• Continue work with selected Wave 1 states to meet their data thresholds for data migration
from Legacy PCS to ICIS-NPDES.
• Began Software Technical Specifications development for Wave 2 of Full Batch functionality
(Compliance Monitoring).
• Continued work with the State/EPA Integrated Project Team (IPT) to fully develop and test
the XML schemas for the Wave 1 full batch release.
The FY 2011 corrective actions are contingent on funding availability and include the following:
• Complete User Validation and Acceptance Testing for the Wave 1 full batch release.
• Implement the Wave 1 Full Batch Release of ICIS-NPDES.
• Migrate/move four additional states from PCS to ICIS-NPDES.
• Complete Software Technical Specifications for Wave 2 of Full Batch functionality.
• Complete Software Development for Wave 2 of Full Batch functionality.
• Complete Functional and Integration testing of Wave 2 Full Batch functionality.
Section III-Page 6
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• Work with selected Wave 2 states to meet their data thresholds for data migration from
Legacy PCS to ICIS-NPDES.
• Begin Software Technical Specifications for Wave 3 of Full Batch functionality (Enforcement
Actions and violation related data).
The final closure date for this Agency weakness is now projected to be the end of fourth quarter
FY 2013 (PCS to be shut down in FY 2014). This completion date is based on various
assumptions and estimates that extend more than several years into the future.2
Streamlining EPA's Process for Developing Chemical Assessments Under the Integrated
Risk Information System (IRIS)
GAO identified "Transforming EPA's Processes for Assessing and Controlling Toxic Chemicals"
as a high-risk area in its January 2009 High-Risk Series. In its report, GAO states that the
Agency needs to take actions to increase the transparency of the Integrated Risk Information
System (IRIS) and enhance its ability under the Toxic Substances Control Act (TSCA) to obtain
health and safety information from the chemical industry. GAO noted that EPA's Integrated Risk
Information System (IRIS), which contains assessments of more than 500 toxic chemicals, is at
a serious risk of becoming obsolete because EPA has been unable to keep its existing
assessments current or to complete assessments of important chemicals of concerns. Agency
senior managers recommended Streamlining EPA's Process for Developing Chemical
Assessments Under IRIS as an Agency-level weakness during the FY 2009 end-of-year
Management Integrity Meeting.
In FY 2010, EPA released five major assessments for external peer review and public comment.
These assessments are being reviewed by the National Academy of Sciences (formaldehyde)
or EPA's Science Advisory Board (SAB). The Agency is committed to continuing to move these
assessments through the IRIS process to completion. When three major assessments
(formaldehyde, trichloroethylene, and dioxin) that require a large commitment of FTE are
completed, the Agency expects to be able to increase the total number of assessments it can
perform.
To address the issue of assessments on the database that need to be updated, the Agency
established the IRIS Update Project in 2010. This project identifies toxicity values on IRIS that
are more than 10 years old and screens them for the availability of new data or new assessment
methods that could change a toxicity value of a cancer descriptor. Toxicity values will be
updated in batches of 8- to12 assessments and reviewed by a Federal Standing Science
Committee and a Standing External Peer Review Panel of EPA's SAB. The 2009/2010 agenda
for the IRIS Update Project was announced in a Federal Register Notice on October 21, 2009
(74 FR 54040).
2 This completion date is based on various assumptions about the future; therefore, any changes to the
assumptions would impact the schedule. For example, the Agency completed an Alternative Analysis for
ICIS on September 30, 2008. The current FY 2013 completion date assumes no changes to the currently
planned technical approach and also assumes FY 2008, FY 2009, and FY 2010 extramural funding for
ICIS at the President's budget amount of $6.7 million. For FY 2011 and beyond, we assumed that annual
funding will rise to $ 7.5 million. (If OECA assumes the President's budget level of $6.7 continues in FY
2011 and beyond, the schedule would likely move five or more quarters into the future, with a shut-down
date for PCS delayed until FY 2015). Further, as with any project, extended timelines for completion add
risk to the project, and predictions about when the project will be completed become more speculative.
Section III - Page 7
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In FY 2010, to ensure that the IRIS program is focusing on the greatest needs, Agency
expanded the role of EPA program and regional offices in nominating and prioritizing chemicals
for IRIS assessment. The Agency has met internally with program and regional offices to better
understand their assessment needs and to get input on their priorities for the current IRIS
agenda. The priorities are being used to allocate resources among the assessments and
determine which ones will be done first.
Also, EPA is working with the California Environmental Protection Agency's (CalEPA) Office of
Environmental Health Hazard Assessment and the Agency for Toxic Substances and Disease
Registry under separate Memoranda of Understanding. These efforts to pool resources and
share information will eventually increase the IRIS program's efficiency and output of
assessments.
In an effort to qualitatively advance the state of the science and increase our ability to more
efficiently and rapidly conduct assessments, the Agency began a pilot project in FY 2010 on
advancing the next generation (NexGen) of risk assessment that will explore the feasibility of
using advances in molecular systems biology for developing health assessments. It is
anticipated that this pilot project will help pave the way for using high throughput data to develop
rapid health assessments. This is a collaborative effort with the National Institute of
Environmental Health Sciences, the National Human Genome Research Institute and CalEPA.
Strengthening the Agency's Implementation of FMFIA
OIG identified "Reporting on Compliance with FMFIA" as a potential Agency weakness, noting
that the Agency's management integrity guidance for FY 2008 and 2009 did not require
reporting on compliance with all five of the GAO's Standards for Internal Control in the Federal
Government, as referenced in OMB Circular A-123. OIG recommended that EPA enhance its
FMFIA guidance to address all five standards more explicitly and that the Administrator
communicate to senior managers the significance of the FMFIA certifications and compliance
with the GAO standards. In addition, OIG recommended that the Agency develop tiered training
on FMFIA implementation for managers and staff.
The Agency recommended Strengthening the Agency's Implementation of FMFIA as an Agency
weakness in FY 2009 and is taking steps to strengthen EPA's FMFIA process and to address
OIG concerns.
• In FY 2010, OCFO completed Management Integrity Program Compliance Reviews in the
Offices of Water and Solid Waste, and in Regions 2, 4, 9, and 10 and used the findings to
inform Management Integrity Guidance for the Agency. OCFO will continue to conduct
Program Compliance Reviews in program and regional offices on a rotating annual basis to
assess the Agency's FMFIA implementation and determine the need for guidance, training,
and other tools and assistance.
• OCFO developed a three-tier strategy for Agency-wide training for senior managers,
Management Integrity Advisors (MIAs), and Agency staff and has begun beta testing the
module for the MIAs. All three on-line training modules will be available in FY 2011.
• The Administrator issued a kick-off memo to senior managers announcing the FY 2010
FMFIA process, clarifying expectations for senior leadership, and emphasizing the
importance of maintaining internal controls over programmatic operations and financial
activities.
Section III-Page 8
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• OCFO issued technical guidance to help Assistant Administrators and Regional
Administrators establish a solid foundation for reviewing internal controls over program
operations, conducting internal control reviews over financial activities, and preparing their
statements of assurance on the adequacy of internal controls. The guidance included a
template for developing Program Review Strategies which requires reporting on all five GAO
standards.
• OCFO will continue to analyze regional and program offices' FY 2010 and FY 2011 annual
assurance letters to ensure that assurance statements are adequately supported and
documented and to identify best practices. In addition, the Agency will use reviews
conducted by OIG and other oversight agencies to determine the effectiveness of corrective
actions.
Electronic Content Management
In today's world of electronic records, mail, and documents, the traditional paper-based
management strategies fall short of retrieval and access needs. Agency inconsistencies in how
electronic content is stored, maintained, and accessed (or not) have begun to impact critical
processes related to electronic records management. In addition, slow transition from paper-
based records management to electronic records management is increasing costs and reducing
Agency efficiency. Electronic content management comprises the strategies to receive or
create, preserve, maintain, discover, and retrieve and access structured data (e.g., air
monitoring data stored in a database, rulemaking documents and files organized in an
application) and unstructured data (e.g., email messages, loose documents and files on a
desktop or shared drives) and has a multitude of drivers (e.g., Federal Records Act; electronic
retrieval such as eDiscovery; Freedom of Information Act; and Agency business operations
such as, permitting, enforcement, research, remediation, and rulemaking). While the scope
electronic content management is quite broad, the Agency faces challenges that result from
shortcomings pertaining to electronic retrieval, electronic records management, and email
retention.
EPA recommends Electronic Content Management as an Agency weakness and proposes an
enterprise-level approach to resolve the shortcomings posed by electronic retrieval, electronic
records management, and email retention. The Agency is developing a corrective action
strategy that will outline the major milestones and completion dates to correct this weakness.
Significant Deficiency
Improvement Needed in Billing Costs and Reconciling Unearned Revenue for Superfund
State Contract (SSC) Costs
During the Agency's FY 2009 financial statement audit, OIG stated that EPA did not properly
review the calculations used to reconcile unearned revenue for Superfund State Contract (SSC)
costs.
EPA recommends this issue as a Significant Deficiency, based on progress made to remedy
this as a material weakness (see discussion under Material Weaknesses for details on actions
taken by the Agency). The Agency anticipates that all remaining corrective actions will be
completed in FY2011.
Section III-Page 9
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Assess Collectibility of Federal Receivables and Record Any Needed Allowances for
Doubtful Accounts
During the FY 2010 Financial Statement Audit, OIG stated that the Agency should assess
federal receivables collectability and record any needed allowances for doubtful accounts.
The Agency anticipates completing corrective actions related to this significant deficiency in FY
2011.
Improvements Needed In Controls for Headquarters Personal Property
During the FY 2010 Financial Statement Audit, OIG identified improvements needed in the
controls for Headquarters personal property. The Agency anticipates completing corrective
actions related to this significant deficiency in FY 2011.
Improperly Closed Accounts When Cancelling Treasury Symbols
During the FY 2010 Financial Statement Audit, OIG identified improper procedures used when
canceling treasury symbols. The Agency anticipates completing corrective actions related to this
significant deficiency in FY 2011.
Summary of Financial Statement Audit
Audit Opinion
Restatement
Audit Opinion: Unqualified
No
Material Weaknesses
Understated Unearned Revenue
Understated Accounts Receivable
Billing Costs and Reconciling
Unearned Revenue for SSC Costs
Total Material Weaknesses
Beginning
Balance
1
1
1
3
New
0
0
0
0
Resolved
1
1
1
3
Consolidated
0
0
0
0
Ending
Balance
0
0
0
0
Section III-Page 10
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Summary of Management Assurance
Effectiveness of Internal Control Over Financial Reporting (FMFIA § 2) (A-123 Appendix A)
Statement of Assurance
Unqualified
Material Weaknesses
Understated Unearned
Revenue
Understated Accounts
Receivable
Billing Costs and Reconciling
Unearned Revenue for SSC
Costs
Total Material Weaknesses
Beginning
Balance
1
1
1
3
New
0
0
0
0
Resolved
1
1
1
3
Consolidated
0
0
0
0
Reassessed
0
0
0
0
Ending
Balance
0
0
0
0
Effectiveness of Internal Control Over Operations (FMFIA § 2)
Statement of Assurance
Unqualified
Material Weaknesses
Total Material Weaknesses
Beginning
Balance
0
0
New
0
0
Resolved
0
0
Consolidated
0
0
Reassessed
0
0
Ending
Balance
0
0
Conformance With Financial Management System Requirements (FMFIA § 4)
Statement of Assurance
Systems Conform to Financial Management System Requirements
Non-Conformances
Total Non-Conformances
Beginning
Balance
0
New
0
Resolved
0
Consolidated
0
Reassessed
0
Ending
Balance
0
Compliance With FFMIA
Overall Substantial Compliance
1 . System Requirement
2. Accounting Standards
3. USSGL at Transaction Level
Agency
Yes
Auditor
Yes
Yes
Yes
Yes
NOTE: See "EPA Holds Itself Accountable " in Section I of this report for additional information on FMFIA
2, FMFIA 4, and FFMIA presented in the summary graphs above."
Section III-Page 11
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FY 2010 KEY MANAGEMENT CHALLENGES IDENTIFIED BY THE
OFFICE OF INSPECTOR GENERAL
EPA's Top Major Management Challenges
Reported by the Office of Inspector General
The Need for a National Environmental Policy: Environmental quality depends on
policies related to farming, energy, water, transportation, and federal land
management. A national environmental policy would help EPA and other federal
agencies go beyond existing, fragmented coordination efforts to set national
environmental goals and regulatory standards, particularly for problems that cross state
or national borders or pose risks to future generations.
Water and Wastewater Infrastructure: Many drinking water and wastewater
systems across the country are unable to maintain compliance with federal water
standards due to needed repairs and new constructions. Over the next 20 years, EPA
estimates that approximately $1 trillion will be needed to pay for water and wastewater
infrastructure. EPA needs to lead in developing a coherent federal strategy with states
and local governments to assess and organize resources to meet water and
wastewater infrastructure needs.
Oversight of Delegations to States: Differences between state and federal policies,
interpretations, and priorities make effective oversight a challenge. EPA needs to more
consistently and effectively oversee its delegation of programs to the states assuring
that delegated programs are achieving their intended goals.
Safe Reuse of Contaminated Sites: The common practice of not removing all
sources of contamination from hazardous sites is inhibited by a regulatory structure
that places key responsibilities for monitoring and enforcing the long-term safety of
contaminated sites on non-EPA parties that may lack necessary resources,
information, and skill; changes in site risks as conditions change overtime; and
existing weaknesses in EPA's oversight of the long-term safety of sites as well as
funding deficiencies.
Limited Capability to Respond to Cyber Security Attacks: EPA is highly vulnerable
to existing external network threats, despite reports from security experts that
Advanced Persistent Threats (APTs), designed to steal or modify information without
detection are becoming more prevalent throughout the government. Currently, EPA
has reported that more than 5,000 servers and user workstations may have been
compromised from recent cyber security attacks along with national security and
confidential business and personal data. (Previous years reported under Homeland
Security)
Reducing Domestic Greenhouse Gas (GHG): In response to a Supreme Court
ruling in April 2007, EPA issued an Endangerment Finding that current and projected
atmospheric concentrations of six GHGs threaten the public health and welfare of
current and future generations. However, EPA must take significant action to address
the adverse impacts of these air pollutants.
EPA's Framework for Assessing and Managing Chemical Risks: EPA's
effectiveness in assessing and managing chemical risks is limited by its authority to
regulate chemicals under the TSCA. Chemicals manufactured before 1976 were not
required to develop and produce data on toxicity and exposure, which are needed to
properly and fully assess potential risks.
FY
2008
•
FY
2009
•
•
•
FY
2010
•
•
•
•
•
•
•
Link to EPA
Strategic
Goal
Cross-Goal
Goal 2
Cross-Goal
Goal 3
Cross Goal
Goal 1
Goal 4
Goal 5
Section III-Page 12
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\ UNITED STA TES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
May 11,2010
MEMORANDUM
SUBJECT: EPA's Fiscal Year 2010 Management Challenges
TO: Lisa P. Jackson
Administrator
We are pleased to provide you with a list of areas the Office of Inspector General
considers to be key management challenges confronting the U.S. Environmental Protection
Agency (EPA). We developed a definition for management challenges to clarify and distinguish
them from internal control weaknesses. Weaknesses are deficiencies in internal control
activities designed to address and meet internal control standards. In contrast, we define
management challenges as a lack of capability derived from internal, self-imposed constraints
or, more likely, externally imposed constraints that prevent an organization from reacting
effectively to a changing environment. For example, lack of controls over approval of bankcard
purchases would be considered a control weakness because it can be corrected internally by
adding the necessary controls. Conversely, the Agency's ability to address an issue such as
funding shortfalls for water infrastructure repairs would constitute a management challenge, as
EPA does not have the ability to solve these challenges without outside assistance, such as
from Congress and States.
We identified the management challenges listed below using past audit, evaluation, or
investigative work along with additional analysis of Agency operations. Other challenges may
exist in areas that we have not yet reviewed. Detailed summaries of the challenges are provided
in the Attachment.
Section III-Page 13
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Management Challenges
The Need fora National Environmental Policy
Water and Wastewater Infrastructure
Oversight of Delegations to States
Safe Reuse of Contaminated Sites
Limited Capability to Respond to Cyber Security Attacks (new)
Reducing Domestic Greenhouse Gas Emissions (new)
EPA's Framework for Assessing and Managing Chemical Risks (new)
Page
1
3
5
7
11
14
18
This year, we deleted three challenges primarily due to EPA's actions to address our
prior concerns: (1) Management of Stimulus Funds, (2) Meeting Homeland Security
Requirements, and (3) Voluntary Programs. We also deleted EPA's Organization and
Infrastructure as a challenge because we believe that remaining actions that need to be taken
are within EPA's control. The Need for a National Environmental Policy incorporates and
replaces the prior Threat and Risk Assessment challenge, and Oversight of Delegations to
States includes prior Performance Measurement information.
We welcome the opportunity to discuss our list of challenges and any comments you
might have.
Bill A. Roderick
Acting Inspector General
Attachment
Section III - Page 14
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Attachment
The Need for a National Environmental Policy
Congress passed the National Environmental Policy Act and created the U.S. Environmental
Protection Agency (EPA) in 1970 to carryout national policy. Before EPA's creation, more than a
dozen federal agencies had environmental responsibilities, and there was no organized,
concerted focus to address pollution and degradation of the environment caused by prior years
of neglect. Creating EPA served as the first step to address national environmental policy by
consolidating separate federal efforts. A 2002 National Academy of Public Administration
(NAPA) case study noted that establishing EPA proved difficult because its Administrator had
no clear authority or 'organic' act3 with which to integrate various statutorily separate programs.
An earlier NAPA report noted that EPA has suffered since its inception from its structure and
conflicting goals4 - challenges that remain as EPA nears its 40th anniversary.
Environmental law scholars have noted that rigid environmental laws do not allow EPA to
confront emerging, cross-media, and cross-boundary challenges. In 1997, the National
Research Council (NRC) recognized that problems such as global climate change, stratospheric
ozone depletion, the loss of biological diversity, long-range transport of pollutants in air or water,
global pressures on ocean resources, and regional water scarcity are broader, more complex
environmental problems than those that received major attention several decades ago, and
require more concerted, coordinated efforts.5 The current fragmented approach to these
problems stems from environmental laws that often focus on a single media or threat, and
EPA's goals and program offices that implement separate legislative mandates. Additionally,
EPA lacks complete authority or control over many activities that impact the condition of our
nation's environment, such as land use and transportation planning. Environmental quality
depends on policies related to farming, energy, water, transportation, and federal land
management, but neither Congress nor the Executive Branch is fully engaged in harmonizing
these issues. A national policy would help EPA and other federal agencies go beyond existing,
fragmented coordination efforts.
Testimony in 1995 by the Comptroller General of the United States before the Senate
Committee on Government Affairs relates to EPA's current predicament: "[T]he lack of an
integrated approach to government leads to redundancy and waste. [Government can make
huge efforts to provide services to the public, yet still fall far short of its intentions because of
faulty coordination of its efforts within and across agency lines." As a result, observations from a
1996 NRC report still resonate today: "Although substantial progress has been made in
improving environmental quality, the country still lacks a unified national strategy."6 The
Environmental Law Institute further noted, "Interagency coordination concerning the
environment is uneven at best."7
3 Ink, Dwight, NAPA, Ash Council Case Study: 1969-1970, Historical Documents on Management
Reform Maintained by the Executive Organization and Management Panel, March 12, 2002.
4 NAPA, Resolving the Paradox of Environmental Protection: An Agenda for Congress, EPA & the States,
September 1997.
5 NRC, Committee on Research Opportunities and Priorities for EPA, Building a Foundation for Sound
Environmental Decisions, 1997.
6 NRC, Policy Division, Linking Science and Technology to Society's Environmental Goals, 1996.
7 Environmental Law Reporter News & Analysis, Special Issue: Agenda for a Sustainable America,
National Governance: Still Stumbling Toward Sustainability, 39 Envtl. L. Rep. News & Analysis 10321
(April 2009).
Section III - Page 15
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The structure created by the National Environmental Policy Act 40 years ago has not resulted in
a comprehensive approach to environmental protection. EPA's main effort to identify and
address national goals was its Proposed Environmental Goals for America with Milestones for
2005 (1995). The NRC said this effort did not prioritize individual goals or acknowledge trade-
offs between desired outcomes and/or goal choices. Officials within EPA said the 1995 report
was a creative effort that lacked follow-through. In the 2008 Report on the Environment, EPA
provided data on cross-program issues in the form of indicators that assessed the status and
trends of environmental conditions at the time. However, this report did not integrate cross-
agency strategies to address national environmental goals. EPA's 2006-2011 Strategic Plan
identifies 25 federal agencies that contribute to EPA's goals. While goal-specific chapters
describe cross-media and interagency activities, the Strategic Plan does not integrate these
efforts or describe national goals that go beyond EPA's current mission and goal structure. The
Plan also notes that delegated State programs conduct much of the day-to-day work involved in
many air and water programs. However, our evaluations have shown that EPA's oversight of
State programs requires improvement. Thus, though EPA has undertaken worthwhile efforts in
the past, the Agency has not developed a comprehensive environmental protection plan that
includes the efforts of all stakeholders.
Other federal agencies and countries have taken steps to integrate efforts across all levels of
government. For example, after the terrorist attacks on September 11, 2001, the White House
and Congress created the U.S. Department of Homeland Security to organize activities spread
across more than 40 federal agencies.8 The comprehensive National Strategy for Homeland
Security seeks to develop a complementary system connecting all levels of government without
duplicating effort. In 2007, Congress passed legislation mandating a Quadrennial Homeland
Security Review of the Strategy beginning in FY 2009.9 This review provides an enterprise-wide
focus on responsibilities across government supporting "a national strategy, not a federal
strategy" to "guide, organize, and unify our Nation's homeland security efforts." Australia and
Japan have successfully taken a national policy approach to environmental protection and
conservation legislation and activities.10 Both countries have recognized the value of
establishing national environmental goals and setting national policy.
Developing and implementing a national policy poses a number of challenges. However,
environmental protection - like homeland security - is a public good and as such requires a
nationally coordinated approach toward policy. EPA must have the force of national
environmental goals to set regulatory standards, particularly for problems that cross State or
national borders or pose risks to future generations. Congress should provide EPA, States, and
the other 25 federal agencies that share a responsibility for environmental protection the means
to identify and manage environmental problems of national significance. EPA should work with
Congress and the Administration to examine ways to leverage resources expended on various,
insular environmental protection efforts. The Administration should propose to Congress that it
create expert panels to consider formulating a national environmental policy and subsequent
quadrennial review. Congress could also consider integrating or passing legislation that may be
U.S. Department of Homeland Security, History Office, Brief Documentary History of the Department of
Homeland Security: 2001-2008, 2008.
9 "The Implementing Recommendations of the 9/11 Commission Act of 2007," which passed into law on
August 3, 2007, requires that every 4 years, beginning in FY 2009, the Secretary of Homeland Security
conduct a Quadrennial Homeland Security Review of the United States. The Secretary planned to provide
conclusions of the first review to Congress in a final report by December 31, 2009, but issued the report in
February 2010.
10 Australia enacted its primary environmental legislation -the Environment Protection and Biodiversity
Conservation Act 1999 - in July 2000. In 1993, Japan established a "Basic Environmental Law" to chart
the direction of the nation's environmental policies.
Section III-Page 16
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recommended by these panels to harmonize various efforts and, where appropriate, maintain
existing requirements in environmental statutes. Through these efforts, EPA and its partners
could move away from isolated, media- and interest-specific initiatives toward a more cohesive,
unified, and future-thinking approach to environmental protection. While EPA has much to
celebrate heading into its 40th anniversary, by its 50th the Agency should have taken the critical
- albeit challenging - steps necessary to integrate efforts through its role as the Nation's
environmental leader.
Water and Wastewater Infrastructure
The water and wastewater infrastructure gap remains a major challenge for 2010. Drinking
water and wastewater treatment systems are reaching the end of their life cycles, and huge
capital investments are needed to replace, repair, and construct facilities so that municipalities
can meet existing and emerging federal human health and environmental standards.
Approximately 160,000 public drinking water systems provide the Nation with drinking water,
while 16,000 sewage treatment plants treat and dispose of wastewater.11 Under the Clean
Water Act (CWA) and Safe Drinking Water Act (SDWA), water and wastewater facilities are
responsible for ensuring that water leaving their facilities meets federal standards. EPA is
responsible for administering these laws, enforcing violations of the standards, and assisting
facilities to meet their treatment requirements.
Aging Infrastructure. Much of the drinking water and wastewater infrastructure in the United
States was built over 40 years ago.12 Some of the Nation's water infrastructure systems have
components over 100 years old. The American Society of Civil Engineers recently assigned an
overall "D" grade in its Report Card for America's Infrastructure and "D-" to drinking water and
wastewater.13 Replacing aging systems is necessary to maintain our Nation's waters and public
health, but it will be costly. EPA has struggled to update these systems over the years because
neither the Agency nor municipalities have sufficient modernization and replacement funds.
Meeting Existing Standards. Meeting existing standards requires regular investment for
treatment plants and distribution systems. Water and wastewater facilities already make
considerable capital expenditures; local governments spend more on water infrastructure than
on anything else except education.14 However, many drinking water and wastewater systems
are failing to keep up with repairs and new construction required to maintain compliance with
federal standards. According to EPA, each year there are approximately 240,000 water main
breaks and 75,000 sewer overflows, resulting in public health threats.15
Meeting Additional Standards. New and more stringent standards compel systems to make
even more extensive capital improvements. For example, many wastewater treatment plants
are beginning to install costly nutrient removal technologies. Drinking water facilities will also
11 U.S. EPA Website, "Safe Drinking Water Act- Basic Information"; U.S. Department of Energy, Energy
Efficiency and Renewable Energy, Federal Energy Management Program, "Biomass and Alternative
Methane Fuels Fact Sheet," July 2004.
12 U.S. EPA Website, "Sustainable Infrastructure for Water & Wastewater."
13 American Society of Civil Engineers, 2009 Report Card for America's Infrastructure - full report.
14 U.S. Conference of Mayors, Mayors Water Council, Who Pays for the Water Pipes, Pumps, and
Treatment Works? Local Government Expenditures on Sewer and Water- 1991 to 2005.
15 U.S. EPA, Office of Research and Development, National Risk Management Research Laboratory,
Aging Water Infrastructure Research Program, Addressing the Challenge through Innovation, EPA/600/F-
07/015, September 2007.
Section III-Page 17
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need to meet new standards. Between January 2006 and December 2007, EPA issued three
new rules16 and made substantial revisions to the existing Lead and Copper Rule.
Paying for Upgrades and Maintenance. Funding is the biggest issue facing public water
agencies, said Ken Kirk, executive director of the National Association of Clean Water Agencies
(NACWA). As an example of the magnitude of costs, a single city, the District of Columbia,
estimated it will need to spend $3.6 billion to meet some CWA requirements.17 In a recent white
paper, NACWA said the federal contribution to the nation's overall water and wastewater
investment has dropped from about 78 percent in the 1970s to 3 percent today. EPA and the
U.S. Government Accountability Office (GAO) have cited an estimated $300-$500 billion funding
gap for wastewater treatment and water infrastructure over the next 20 years.18 The gap
represents infrastructure failures, like water main breaks and sewer overflows that could
increase public health, environmental, and economic risks.
The Federal Government does not have a national approach to bridging the water and
wastewater infrastructure gap. EPA's Clean Water and Drinking Water State Revolving Funds
received a total of about $1.4 billion in federal capitalization grants in FY 2009.19 Congress
added $6 billion to these funds in the American Recovery and Reinvestment Act of 2009
(ARRA). The U.S. Department of Housing and Urban Development and the U.S. Department of
Agriculture also provided grant and loan assistance for water and wastewater infrastructure of
about $2 billion in FY 200620 and received funding through the ARRA. However, these programs
are small in relation to the gap and are not part of a comprehensive investment strategy to
address water infrastructure needs; they reflect each agency's mission and congressional
direction. On February 24, 2010, the Senate passed a bill allocating an additional $1 billion for
Safe Drinking Water Capitalization grants, provided the projects are under contract within 8
months and under construction within 12 months.21 The bill also provides the U.S. Army Corps
of Engineers an additional $30 million for water infrastructure construction.22
EPA's Role. While EPA is responsible for administering the CWA and SDWA, it does not have
resources or authority to address the funding gap. However, EPA should take the lead in
organizing a coherent federal strategy within the limits of its statutory authorities and
responsibilities.
On January 12, 2010, Administrator Jackson defined seven key themes to focus the work of the
Agency. One theme, "Protecting America's Waters," noted that "Recovery Act funding will
expand construction of water infrastructure, and we will work with states to develop and launch
16 U.S. EPA, Final Ground Water Rule (November 2006), Long Term 2 Enhanced Surface Water
Treatment Rule (January 2006), and the Stage 2 Disinfection Byproducts Rule (January 2006).
17 NACWA, PowerPoint presentation on CSOs, 2007.
18 Daily Environment Report, "Stormwater, Nutrients, Wetlands Jurisdiction Seen as Leading Clean Water
Issues for 2010," January 20, 2010.
19 U.S. EPA, Drinking Water State R
Capitalization Grants by Federal Fiscal Year of Award by State.
20 U.S. Department of Agriculture, F
Activity Report - FY 2006, page 6.
21 See HR 2847, Commerce, Justic
Amendment to Senate Amendment, page 13.
22 See HR 2847, Commerce, Justice, Scienci
Amendment to Senate Amendment, page 3.
19 U.S. EPA, Drinking Water State Revolving Fund Allotments; U.S. EPA, Clean Water SRF Federal
c
20 U.S. Department of Agriculture, Rural Development, Water and Environmental Programs, Annual
c
21 See HR 2847, Commerce, Justice, Science, and Related Agencies Appropriations Act, 2010, House
r
22 See HR 2847, Commerce, Justice, Science, and Related Agencies Appropriations Act, 2010, House
Section III-Page 18
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an Urban Waters initiative."23 Despite this key theme, the Office of Enforcement and
Compliance Assurance did not list infrastructure as a priority for its 2011-2013 activities.24
In its role administering the CWA and the SDWA, EPA should ensure there is a comprehensive
federal understanding of the risks to public health, the environment, and the economy if this
critical resource gap remains unresolved. A comprehensive approach to bridging the water and
wastewater infrastructure gap would systematically assess the investment requirements, alert
the public and Congress of unfunded liabilities and risks, and work with States and local
governments to organize resources to meet needs.
Oversight of Delegations to States
EPA's oversight of State programs requires improvement. GAO and our office have reported that
EPA has made some progress in this area; however, there are a number of factors and
practices that reduce the effectiveness of Agency oversight. Key among these are limitations in
the availability, quality, and robustness of program implementation and effectiveness data, and
limited Agency resources to independently obtain such data. Differences between State and
federal policies, interpretations, and priorities make effective oversight a challenge.
EPA's mission is to protect human health and the environment. To accomplish its mission, EPA
develops regulations and establishes programs that implement environmental laws. These
programs may be delegated to State, local, and tribal agencies that request to take primacy of
the program. Delegation, however, does not abrogate EPA of its statutory and trust
responsibilities for protecting human health and the environment. EPA performs oversight of
State, local, and tribal programs to provide reasonable assurance that delegated programs are
achieving their goals. In addition to regulatory programs, EPA sponsors voluntary partnerships
and programs with more than 10,000 industries, businesses, nonprofit organizations, and State
and local governments on more than 40 pollution prevention programs and energy conservation
efforts. Dealing with partners requires different types of management approaches and controls
as compared with dealing with parties that require oversight. EPA does not have the resources
to effectively administer all of its responsibilities directly. EPA relies heavily on local, State, and
tribal agencies for compliance and enforcement and to obtain performance data. In its FV'2007
Performance and Accountability Report, EPA states it delegated the responsibility for issuing
permits and for monitoring and enforcing compliance to the States and tribes.
A critical management challenge for EPA is oversight of its delegations to States. Federal
environmental statutes grant EPA a significant role in implementing the intent of the law, and
also authorize a substantial role for States. Federal intent is to give all citizens an equal level of
environmental protection. However, quality data are often lacking to ensure that the intent of
the law is met. For example, EPA lacks the data necessary to assess the benefits of its air
toxics standards, such as data on decreased incidence of cancer. Data on the program's
effectiveness, such as changes in emissions, concentrations of air toxics in the (ambient)
outdoor air, and data on compliance with air toxics standards are limited and inconclusive. In
addition, federal requirements establish consistency for businesses and within industries
23 U.S. EPA Memorandum, "Our Top Priorities," issued by Administrator Lisa Jackson to all EPA
employees, January 12, 2010.
24 U.S. EPA Website, Office of Enforcement and Compliance Assurance, National Enforcement Initiatives
for Fiscal Years 2011-2013.
Section III-Page 19
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nationwide. States' discretion adds flexibility to address specific circumstances and local
issues. Joint implementation and enforcement leads to special challenges in interpretations,
strategies, and priorities.
EPA has begun to improve its oversight by implementing the State Review Framework. The
Framework is intended to be a consistent approach for overseeing programs and identifying
weaknesses and areas for improvement. However, EPA has not yet implemented it in a
consistent manner. GAO reported that while EPA has made substantial progress in improving
priority setting and enforcement planning with States, EPA's oversight needed further
enhancement. For example, State Revolving Fund reviews show that EPA has limited ability to
determine whether States are performing appropriate enforcement in a timely manner, and
whether penalties are applied to environmental violators in a fair and consistent manner within
and among States. In response to these findings, EPA has initiated a Clean Water Act
Enforcement Action Plan, which among other things is aimed at strengthening Agency oversight
of State water quality compliance and enforcement.
We have continued our work on this topic. In studies we have published this past year, we
found that EPA does not exercise its authority to oversee programs when necessary. EPA
Oversight and Policy for High Priority Violations of Clean Air Act Need Improvement noted that
Headquarters did not oversee regional and State high-priority violator (HPV) performance, and
regions did not oversee State HPV performance. If HPVs are not addressed in a timely
manner, continued emissions from facilities may result in significant environmental and public
health impacts, undermining deterrence efforts and creating unfair economic benefits.
EPA Needs to Accelerate Adoption of Numeric Nutrient Water Quality Standards noted that
EPA has not held States accountable to committed milestones, and States have not been
motivated to create nutrient water quality standards because implementation is costly and often
unpopular with constituencies. We recommended that EPA use its CWA authority to
promulgate water quality standards for States as needed.
An ongoing review of issues related to this management challenge focuses on agreements
between EPA and States that operate National Pollution Discharge Elimination System
programs. EPA expressed concern that, if inadequate, these documents could limit EPA's
authority to take enforcement actions when needed. We are assessing this question and the
adequacy of these documents to establish national baselines for State program characteristics,
monitoring, inspections, and enforcement. We will follow this review with projects that bear on
other aspects of how EPA manages its relations with its State and tribal partners.
In summary, while EPA is renewing its attention on the oversight of programs delegated to
States, much remains to be done because the issues are complex and changeable. Effective
oversight of delegations to States is a continuous management challenge that requires an
agile organization, accurate data, and consistent interpretations of policy. To provide effective
oversight, the Agency must address limitations in the availability, quality, and robustness of
program implementation and data.
Safe Reuse of Contaminated Sites
In the last decade, EPA has placed increasing emphasis on the reuse of contaminated or once-
contaminated properties. Today, EPA has a performance measure to define a population of
Section III-Page 20
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contaminated sites that are "ready for reuse.25 The Agency has identified thousands of
contaminated sites that it encourages developers and "anyone interested" to use for building
renewable energy facilities (e.g., wind, solar, biomass facilities).26 EPA has successfully turned
some actual or perceived problem sites into properties that reinvigorated communities and
created jobs.27 Contaminated properties have become viable again as retail stores, public
recreation areas, housing complexes, sports stadiums, and commercial office space.
EPA's goal to recycle and reuse contaminated property can produce measured economic
benefits, provide environmental benefits that result from preserving undeveloped lands, and
improve quality of life for communities. While these goals are notable and may have added
significance in difficult economic times, EPA's duty is to ensure that contaminated sites are safe
for humans and the environment. EPA faces significant and increasing challenges in this area
due to (1) the common practice of not removing all sources of contamination from hazardous
sites; (2) a regulatory structure that places key responsibilities for monitoring and enforcing the
long-term safety of contaminated sites on non-EPA parties that may lack necessary resources,
information, and skill; (3) changes in site risks as site conditions change overtime; and
(4) weaknesses in EPA's oversight of the long-term safety of sites.
Many contaminated sites, such as Superfund sites, must be monitored in the long term (i.e.,
30 years or more) because known contamination is often not removed or remediated and
controls that prevent prohibited activities at sites must be maintained and enforced. New
controls or monitoring may be required if previously undetected or new contaminants emerge,28
which can happen directly as a result of a change in the site brought about by reuse. The lack of
effective long-term monitoring and enforcement of reuse controls at contaminated sites can
pose significant risks to human health and the environment. The New York Department of
Environmental Conservation released a report in March 2009 listing hundreds of "old"
Superfund, Brownfields, and other clean-up cases that were reopened to investigate potential
new threats from vapor intrusion.29 Improvements in analytic techniques and knowledge gained
from site investigations has led to increased awareness of soil vapor as a medium of concern
and of the potential for human exposure from the soil vapor intrusion pathway.30 However, EPA
has yet to finalize Agency guidance on assessing or addressing the potential risks from vapor
intrusion and does not estimate it will do so until 2012.31
EPA has acknowledged challenges to ensuring the long-term safety of contaminated sites.32 In
2005, the Agency released a report that examined a range of long-term stewardship issues33
25 U.S. EPA, Guidance for Documenting and Reporting the Superfund Sitewide Ready-for-Reuse
Performance Measure, Attachment A, OSWER 9365.0-36.
26 U.S. EPA Website, "RE-Powering America's Land: Renewable Energy on Contaminated Land and
Mining Sites."
27 U.S. EPA Website, "Superfund Redevelopment."
28 U.S. EPA, Brownfields Technology Primer: Vapor Intrusion Considerations for Redevelopment, EPA
542-R-08-001, March 2008.
29 New York State Department of Environmental Conservation, Status of Vapor Intrusion Evaluations at
Legacy Sites, February 11, 2009; New York State Department of Environmental Conservation, Strategy
for Evaluating Soil Vapor Intrusion at Remedial Sites in New York, DER-13, October 18, 2006.
30 New York State Department of Environmental Conservation, Strategy For Evaluating Soil Vapor
Intrusion at
Remedial Sites in New York, DER-13, October 18, 2006.
31 EPA-OIG, Lack of Final Guidance on Vapor Intrusion Impedes Efforts to Address Indoor Air Risks,
Report No. 10-P-0042, December 14, 2009.
32 U.S. EPA, Long-Term Stewardship: Ensuring Environmental Site Cleanups Remain Protective Over
Time: Challenges and Opportunities Facing EPA's Cleanup Programs, EPA 500-R-05-001, September
2005.
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and challenges it faced, as well as the role of non-EPA parties (i.e., States, tribes, and other
federal agencies) in ensuring long-term safety of contaminated sites. The Agency identified five
categories of challenges: (1) understanding roles and responsibilities; (2) implementing and
enforcing institutional controls;34 (3) implementing, enforcing, and monitoring engineering
controls;35 (4) estimating long-term stewardship costs and obtaining funding and resources; and
(5) managing and communicating information to prevent breaches of controls and ensuring
consistent information in databases. The report made a number of recommendations that
generally rely on partnerships and relationships to share, communicate, and exchange
necessary information on roles, responsibilities, and costs associated with long-term
stewardship responsibilities. The report encouraged non-EPA parties to adhere to legal
provisions for implementing institutional controls, where applicable (e.g., Uniform Environmental
Covenants Act36). In response to reported GAO concerns in this area, EPA has also taken some
steps to better manage the implementation of institutional controls at Superfund sites.37
However, many sites remain for which the implementation status of institutional controls is not
available.38
Our work has identified a number of additional challenges that EPA faces in ensuring effective
long-term monitoring or stewardship of contaminated sites. We found that some States were not
financially prepared to take over their long-term monitoring and maintenance responsibilities for
Superfund sites.39 Recent news from Michigan's Department of Environmental Quality shows
that the Department believes that it will run out of money for its hazardous waste clean-up
program by the end of 2010.40 We have reported on State failures to enforce clean-up
agreements,41 EPA's failure to follow Superfund site deletion guidance42 and five-year review
procedures,43 and EPA's lack of systems to determine whether a site clean-up is
33 EPA generally characterizes long-term stewardship activities as activities that ensure (1) ongoing
protection of human health and the environment, (2) the integrity of remedial or corrective actions so they
continue to operate properly, and (3) the ability of people to reuse sites in a safe and protective manner.
34 Institutional controls are legal or administrative controls intended to minimize the potential for human
exposure to contamination by limiting land or resource use. A local government is often the only entity
that has legal authority to implement certain types of institutional controls (e.g., zoning restrictions).
35 Engineering controls are the engineered physical barriers or structures designed to monitor and
prevent or limit exposure to the contamination.
The Uniform Environmental Covenants Act confirms the validity of environmental covenants (i.e.,
institutional controls/land use controls) by ensuring that land use restrictions, mandated environmental
monitoring requirements, and a wide range of common engineering controls designed to control the
potential environmental risk of residual contamination will be reflected in land records and effectively
enforced overtime. Currently, about one-half of U.S. States have passed a Uniform Environmental
Covenants Act. Uniform Environmental Covenants Act, drafted by the National Conference of
Commissioners on Uniform State Laws, August 2003.
37 GAO, Hazardous Waste Sites: Improved Effectiveness of Controls at Sites Could Better Protect the
Public, GAO-05-163 January 28, 2005. See also U.S. EPA, Superfund Website on institutional controls.
38 U.S. EPA Website, Superfund Information Systems, Published Institutional Control Site Reports for All
Regions.
39 EPA-OIG, Some States Cannot Address Assessment Needs and Face Limitations in Meeting Future
Superfund Cleanup Requirements, Report No. 2004-P-00027, September 2004.
40 The Detroit News, "Michigan Out of Cash to Clean Up Toxic Sites," March 4, 2010.
41 EPA-OIG, Improved Controls Would Reduce Superfund Backlogs, Report No. 08-P-0169, June 2,
2008.
42 EPA-OIG, EPA Decisions to Delete Superfund Sites Should Undergo Quality Assurance Review,
Report No. 08-P-0235, August 20, 2008.
43 EPA-OIG, EPA Has Improved Five-Year Review Process for Superfund Remedies, But Further Steps
Needed, Report No. 2007-P-00006 December 5, 2006; EPA-OIG, EPA's Safety Determination for Delatte
Metals Superfund Site Was Unsupported, Report No. 09-P-0029, November 19, 2008.
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noncompliant.44 We have found that EPA relies on the self-certification of a third-party
environmental professional to determine whether statutorily required environmental due
diligence has been performed at Brownfields sites funded by EPA grants.45 EPA also conducts
no oversight of the requirement to meet "continuing obligations" at Brownfields properties
funded by EPA. Continuing obligations include land use controls and institutional controls
designed to prevent unacceptable uses of a contaminated properties.46 Weaknesses or lapses
in meeting environmental due diligence or continuing obligations requirements can result in
undetected or undisclosed contamination and inappropriate land use. Although EPA recognized
at least 5 years ago that implementing and enforcing institutional controls was a challenge
because of its limited authority in this area, EPA does not conduct oversight of these activities
even at sites supported with EPA money.
Our January 2010 report found new contamination at a deleted Superfund site in Delaware
where EPA conducted informal and undocumented oversight of the site reuse plans.47 The
current site owner had nearly finalized plans for reusing the site for public recreation but in a
manner that was inconsistent with the site clean-up plan. EPA had not kept current with the site
reuse plans. In addition, EPA did not issue a Ready for Reuse (RfR) determination for this site
because it believed it was not necessary. An RfR could potentially address some of the internal
challenges to ensuring safe reuse of contaminated sites. However, RfRs are not required to be
completed and have been treated as discretionary. Nonetheless, EPA has held up RfRs as
providing the necessary "limitations that need to be followed to ensure [site] protectiveness." An
RfR was not issued for the site reviewed in our January 2010 report because site managers
seemed to believe an RfR was only needed to aid the real estate market. At another Superfund
site, we also found that EPA did not take action to address a 6-year gap in environmental
sampling that the State should have conducted.48 This type of oversight weakness can result in
a failure to detect conditions that show a clean-up remedy is not protecting human health and
the environment.
Only in the last several years has EPA focused attention on the long-term stewardship aspects
of contaminated sites across its clean-up programs. EPA's management of the long-term
oversight and monitoring requirements for the safe reuse of contaminated sites has lagged
behind the Agency's marketing of site reuse opportunities and its showcasing of successes.
This gap promises to increase substantially as EPA continues to heavily promote the reuse of
contaminated sites without investing in the tools needed to ensure the safe, long-term use of
these sites. Many Superfund sites are now moving to the long-term monitoring phase with more
sites expected to do so in the future.49 EPA's December 2008 report on future Superfund
workload needs states that the "post-construction" workload will require the greatest increase in
44 EPA-OIG, EPA Needs to Track Compliance with Superfund Cleanup Requirements, Report No. 08-P-
0141, April 28, 2008.
45 EPA-OIG Assignment No. 2010-0008 on whether Brownfield grantees meet "All Appropriate Inquiry"
requirements to investigate and disclose environmental conditions.
46 U.S. EPA, Brownfields Fact Sheet, EPA Brownfields Grants CERCLA Liability and All Appropriate
Inquiries, EPA 560-F-09-026, April 2009.
47 EPA-OIG, Changes in Conditions at Wildcat Landfill Superfund Site in Delaware Call for Increased EPA
Oversight, Report No. 10-P-0055, January 27, 2010.
48 EPA-OIG Assignment No. 2008-0018 to test and review results of long-term monitoring efforts at
several deleted Superfund sites.
49 U.S. EPA, Long-Term Stewardship: Ensuring Environmental Site Cleanups Remain Protective Over
Time: Challenges and Opportunities Facing EPA's Cleanup Programs, EPA 500-R-05-001, September
2005.
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coming years and will increase by 89 percent over the current full-time equivalent distribution.50
EPA will continually need to assess challenges it faces as well as challenges among the diverse
group of non-EPA parties it must work with to ensure sites are safely reused. To address the
challenges, these assessments should include consideration of new or expanded authorities
and regulations, new organizations, new methods of sharing information, and dedicated funding
and resources for long-term stewardship activities.
In its Fiscal Year 2009 Performance and Accountability Report, EPA agreed with the
recommendations in this challenge. EPA also stated that it works closely with State and local
governments to ensure mechanisms such as institutional controls are maintained to permit safe
reuse of sites. It stated that EPA conducts 5-year reviews; has procedures in place to ensure 5-
year reviews are properly conducted and Superfund sites are properly deleted; encourages
State enforcement of clean-up agreements; and is working to complete draft guidance on
tracking substantial noncompliance with Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) enforcement instruments.
We recognize improvements and efforts EPA has made and it must continue to make to
address the significant challenges of ensuring the long-term safety of contaminated sites. Our
work and the Agency's work have shown that these challenges derive from internal challenges
that EPA can address through improved oversight and management of activities inherent to
successful long-term stewardship of contaminated sites. However, successful long-term
stewardship also rests on having properly resourced and informed non-EPA parties who have
ongoing access to current information, are actively involved in compliance, and conduct
appropriate due diligence and oversight of contaminated sites. EPA is highly limited in
addressing this challenge when State or local governments with primary responsibility for
addressing many long-term safety issues have neither the money nor the will to do so. The
lessons from recent issues such as vapor intrusion show that site reuse can generate new
environmental risks. New strategies are needed that take EPA beyond merely encouraging non-
EPA parties to fulfill requirements and duties and focus on providing EPA, and the parties they
must work with, the information, resources, and authorities to ensure long-term safety of reused
sites.
Limited Capability to Respond to Cyber Security Attacks
EPA has a limited capacity to effectively respond to external network threats despite reports
from security experts that Advanced Persistent Threats (APTs) designed to steal or modify
information without detection are becoming more prevalent throughout the government.51 Our
ongoing analysis shows that the Agency has not addressed the challenge of remediating
escalating threats from cyber security attacks. To date, EPA has reported that over 5,000
servers and user workstations may have been compromised as a result of recent cyber security
attacks. These compromised systems extend to every EPA regional office and Headquarters.
Moreover, ongoing work disclosed that EPA could not identify the owners of approximately 10
percent of the Internet Protocol (IP) addresses that are potentially compromised due to an
APT.52
50 U.S. EPA, Superfund Workload Assessment Report, OSWER Document 9200-2-81, December 2,
2008. Postconstruction workload can refer to all activities after a clean-up remedy is constructed. This
workload includes long-term monitoring and reuse activities.
51 Federal Computer Week, "Google Attacks: A Wake-up Call or Curtain Call for Agencies?" February 4,
2010.
52 Electronic mail from EPA's Computer Security Incident Response Capability Center, April 6, 2010.
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Our Office of Cyber Investigations and Homeland Security attempted to work with EPA's Office
of Technology Operations and Planning (OTOP) to develop an Agency-wide plan of action to
investigate and combat the current threat, but OTOP has not agreed to take actions we
recommend to improve EPA's awareness of and capability to respond to ongoing APTs. During
the course of our investigation, OTOP implemented firewall blocks on known IP addresses and
utilized a Domain Name Service "blackholing" technique53 to further identify systems that may
be communicating with possibly hostile Internet sites. However, when Agency management was
questioned about this technique and the fact that it cast suspicion on over 5,000 EPA computer
systems, the Agency pulled back, stating that it was not confident that these computers were
actually compromised. Moreover, EPA declared that it had no means to scan these systems for
compromises. We subsequently suggested a solution in which EPA would fund a contract to
install hardware on the network and an agent (a small computer program) on each EPA
computer. Our solution would allow for remote acquisition of the computer's memory and hard
drive, as well as automatically scan all EPA computer systems to identify relevant data
pertaining to the APT. The Agency did not agree to implement our suggested solution.
Security of EPA's network greatly depends on ongoing public- and private-sector partnerships
led by the United States Computer Emergency Readiness Team (US-CERT).54 The unknown
origins of many cyber attacks and the complex ways they compromise data networks55 make
this ongoing collaboration crucial to the security of EPA's network. EPA relies heavily on US-
CERT to identify external threats, develop technical solutions, and coordinate government-wide
responses to cyber attacks because the Agency currently lacks the funds, forensic tools, and
technical expertise to establish this capability internally. EPA's overreliance on information
provided by US-CERT is further compounded by limited follow-up activities to investigate the
extent of and impact on Agency systems. For example, US-CERT provided multiple alerts to the
ongoing APT, yet EPA performed limited actions to validate system compromises. Because
EPA reported what may be many false positives regarding possible compromises, our office
must expend excessive time and travel resources to acquire images and forensically analyze
systems. The rejection of an automated approach further hinders our work and impacts Agency
security.
The mission of US-CERT is to protect the Nation's Internet infrastructure and to coordinate
defense against and responses to cyber attacks across the Nation.56 Accordingly, it
disseminates actionable cyber security information to EPA's Computer Security Incident
Response Capability Center (CSIRC), whose goal is to protect EPA information assets and
respond to actual and potential incidents.57 As such, EPA's CSIRC is expected to have
sufficient technical expertise and resources to coordinate rapid and highly skilled responses to
incidents of malicious attacks on its network.
The results of our ongoing analysis and prior audits lead us to conclude that CSIRC has neither
the technical knowledge nor resources to actively pursue a course of action that will enable EPA
to promptly identify and effectively remedy ongoing cyber threats. Although EPA currently
monitors network traffic to identify hostile traffic at its Internet choke points, the evidence shows
that EPA should conduct more detailed analysis to better understand and combat the insidious
nature of these cyber attacks. The Agency does not have the resources, in equipment and staff,
53 A Domain Name Service converts host names and domain names into IP addresses on the Internet.
The "blackholing" technique is used to deny a route to a machine for a particular IP address or domain.
Figures cited based on data provided by OTOP.
54 US-CERT Web Site, http://www.us-cert.gov/aboutus.html.
55 CNN.com/technology, "U.S. Government Sites among Those Hit by Cyberattack," July 8, 2009.
56 US-CERT Web Site, http://www.us-cert.gov/aboutus.html.
57 U.S. EPA Intranet, http://cfint.rtpnc.epa.gOv/otop//security/csirc/about us.cfm.
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to adequately assess attacks against its infrastructure. Rather, EPA continues to depend on
others to specifically identify whether systems are actually compromised. It relies on (1) US-
CERT to alert it to hostile activity originating from within EPA's domain space, and (2) a
monitoring device, NIKSUN, acquired by our office. In addition, our offers to train EPA
information security officers and other key information technology personnel on proper first
response methods were rejected because the Agency believes that first response is not its
responsibility.
EPA leadership must meet this challenge head-on by sufficiently funding the development of a
real capability to identify and investigate attacks against EPA's computer and network systems.
Moreover, Congress should fully consider EPA's new budget proposals to ensure that the
Agency has the fiscal capacity to tackle this challenge. EPA management cannot continue to
rely on a "pay as you go" mentality; rather, EPA needs an established budget for managing
information technology infrastructure and security. Key leaders must understand the threats that
exist to EPA's confidential business information and the importance of minimizing those risks.
Furthermore, the Chief Information Officer and OTOP leadership should carefully study and
trust the classified intelligence materials provided to them regarding threats against government
domains. The Agency should also develop a method to disseminate sensitive information,
including classified data, to senior leadership and technical staff, especially when the network is
reportedly (5,000 plus systems) compromised.
Moreover, EPA should acquire forensic tools and experienced technical specialists to analyze
and determine whether attackers have gained entry to EPA's network systems, what they did
while within EPA's domain space, what information was compromised, and what information
may have been maliciously removed from the EPA network. This information is not only
necessary for EPA's operational mission, but is also necessary to preserve the crime scene
associated with the intrusion event. EPA also should compile a better inventory of network
assets, including intellectual properties, and identify where data sit on its network. And, finally,
EPA should deploy a better method of identifying and authenticating individuals allowed to
access EPA's network. Only then will EPA be able to execute a strategy that effectively protects
its resources, infrastructure, and intellectual property from individuals and entities that intend to
do harm.
In addition, EPA should aggressively address previously reported security weaknesses to
strengthen its ability to detect and respond to network attacks.58 In particular, EPA should:
• Implement a process that tracks IP address assignments and documents the origin of all
active IP addresses so responders can take quicker steps to minimize harm caused by
APTs.59
• Implement a vulnerability management program to proactively identify and correct
commonly known vulnerabilities before they can be exploited.60
• Communicate high-risk vulnerability alerts more effectively throughout the Agency and
follow up with responsible parties to ensure satisfactory remediation.61
58 EPA-OIG, Project Delays Prevent EPA from Implementing an Agency-wide Information Security
Vulnerability Management Program, Report No. 09-P-0240, September 21, 2009.
59 EPA-OIG, Management of EPA Met
No. 08-P-0273, September 23, 2008.
60 EPA-OIG, Project Delays Prevent E
Vulnerability Management Program, Report No. 09-P-0240, September 21, 2009.
61 EPA-OIG, EPA Needs to Strengthen Fina\
Report No. 2007-P-00017, March 29, 2007.
59 EPA-OIG, Management of EPA Headquarters Internet Protocol Addresses Needs Improvement, Report
c
60 EPA-OIG, Project Delays Prevent EPA from Implementing an Agency-wide Information Security
61 EPA-OIG, EPA Needs to Strengthen Financial Database Security Oversight and Monitor Compliance,
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• Verify that EPA's numerous Information Security Officers are adequately skilled to
conduct regular vulnerability tests of their respective local area networks and systems,
as well as successfully recognize and remediate high and medium risks in a uniform and
acceptable manner.62
• Take steps to improve the reliability of data used to assess the status of its information
security program and posture with regard to known network threats.63
Taking these actions would enhance EPA's ability to effectively: (1) identify what key data
(intellectual, confidential, privacy) has been stolen, (2) determine collateral damage to the
Agency's trusted business partners, and (3) remediate threats as they occur. The Agency's
limitation in these areas is alarming, because information security experts believe that a large-
scale cyber attack could be as devastating to the U.S. economy and infrastructure as a terrorist
bombing.64
EPA leadership should acknowledge the seriousness of this challenge by taking aggressive
steps to enhance the Agency's cyber security capabilities. EPA leadership must realize that
these APTs are spurred by organized, funded, and trained entities that are intent on obtaining
and compiling sensitive U.S. data to use against our government. Adequate funding and a
coordinated technical strategy would enable EPA to identify an attack signature or methodology
or other information that would aid in the battle against parties intent on targeting valuable U.S.
data. Then, the Agency would be positioned to share that information and provide a basis for
other federal agencies to replicate these actions within their individual domains. The sharing of
intellectual information about APTs will enhance the government's position, and prompt actions
by EPA could establish it as a leader in government-wide efforts to combat this growing threat.
Reducing Domestic Greenhouse Gas Emissions
In April 2007, the U.S. Supreme Court ruled in the Massachusetts v. EPA case that greenhouse
gases (GHGs) are air pollutants under the Clean Air Act (CAA).65 The Supreme Court also
ruled that EPA must determine whether GHG emissions from new motor vehicles cause or
contribute to air pollution, which in turn could reasonably be anticipated to endanger public
62 EPA-OIG, Results of Technical Network Vulnerability Assessment: Region 9, Report No. 09-P-0052,
December 9, 2008; EPA-OIG, Results of Technical Network Vulnerability Assessment: EPA's Radiation
and Indoor Environments National Laboratory, Report No. 09-P-0053, December 9, 2008; EPA-OIG,
Results of Technical Network Vulnerability Assessment: EPA's Las Vegas Finance Center, Report No.
09-P-0054, December 9, 2008; EPA-OIG, Results of Technical Network Vulnerability Assessment: EPA's
Research Triangle Park Campus, Report No. 09-P-0055, December 9, 2008; EPA-OIG, Results of
Technical Network Vulnerability Assessment: EPA Headquarters, Report No. 09-P-0097, February 23,
2009; EPA-OIG, Results of Technical Network Vulnerability Assessment: EPA's Great Lakes National
Program Office, Report No. 09-P-0185, June 30, 2009; EPA-OIG, Results of Technical Network
Vulnerability Assessment: EPA's National Computer Center, Report No. 09-P-0186, June 30, 2009; EPA-
OIG, Results of Technical Network Vulnerability Assessment: Region 8, Report No. 09-P-0187, June 30,
2009; EPA-OIG, Results of Technical Network Vulnerability Assessment: EPA's Potomac Yard Buildings,
Report No. 09-P-0188, June 30, 2009; EPA-OIG, Results of Technical Network Vulnerability Assessment:
EPA's 1310 L Street Building, Report No. 09-P-0189, June 30, 2009; EPA-OIG, Results of Technical
Network Vulnerability Assessment: EPA's Research Triangle Park Finance Center, Report No. 09-P-
0227, August 31, 2009.
63 EPA-OIG, Self-reported Data Unreliable for Assessing EPA's Computer Security Program, Report No.
10-P-0058, February 2, 2010.
64 CNN.com/technology, "U.S. at Risk of Cyber Attacks, Experts Say," August 18, 2008.
65 Supreme Court of the United States, Syllabus, Massachusetts etal. v. Environmental Protection
Agency etal., Case No. 05-1120, Certiorari to the United States Court of Appeals for the District of
Columbia Circuit, Argued November 29, 2006, Decided April 2, 2007.
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health or welfare. In response to the Supreme Court decision, EPA issued an endangerment
finding in December 2009 stating that the current and projected atmospheric concentrations of
six GHGs (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and
sulfur hexafluoride) threaten the public health and welfare of current and future generations.66
EPA also determined that new motor vehicles threaten public health and welfare, as defined
under CAA Section 202(a), because they contribute to GHG pollution. The issuance of these
findings means that EPA must address the adverse impacts of this new set of air pollutants.67
Addressing these impacts is a significant undertaking, similar to EPA's establishment of the six
CAA criteria pollutants in the 1970s.68
EPA is addressing domestic GHG emissions through three avenues: (1) regulations, (2)
voluntary programs, and (3) research and development.69 Each presents the Agency with
challenges that are to some extent beyond EPA's direct control.
• Regulations. EPA is regulating GHG emissions without specific legislation establishing
a GHG program,70 and in the midst of political and private opposition.71
• Voluntary Programs. EPA is relying on voluntary programs to reduce GHG emissions,
but some of these reductions are based on limited, unverified, and anonymous data.72
• Research and Development. EPA is relying on multiagency research organizations for
the information and tools to help address GHGs,73 and to accelerate the development of
new and advanced GHG reduction technologies.74 Consequently, EPA has limited
control over the content, conduct, and timing of this research.
EPA has begun developing regulations to control GHG emissions from vehicles75 and large
industrial facilities,76 and plans to develop other GHG regulations,77 but there is no statutory
Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Endangerment and Cause or
Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, Final Rule,
December 15, 2009.
67 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Endangerment and Cause or
Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, Proposed Rule,
April 24, 2009.
68 Kreutzer, David, PhD, and Karen Campbell, PhD, The Heritage Foundation, CO2-Emission Cuts: The
Economic Costs of the EPA's ANPR Regulations, Center for Data Analysis Report #08-10, October 29,
2008.
69 U.S. EPA Website, information on U.S. and EPA change regulatory initiatives, policies, and actions.
70 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008; Federal Register, Environmental
Protection Agency, 40 CFR Parts 86, 87, 89, et al., Mandatory Reporting of Greenhouse Gases, Final
Rule, October 30, 2009; U.S. EPA Administrator's letter to Senator Rockefeller concerning EPA's work to
comply with the Supreme Court's decision in Massachusetts v. EPA, February 22, 2010
71 Bravender, Robin, "16 'Endangerment' Lawsuits Filed Against EPA Before Deadline," New York Times,
February 17, 2010; Berger, Matthew, "GOP Protest Builds Against EPA Regulating Greenhouse Gases,"
Solve Climate Blog, December 30, 2009.
72 EPA-OIG, Voluntary Greenhouse Gas Reduction Programs Have Limited Potential, Report No. 08-P-
0206, July 23, 2008.
73 EPA-OIG, EPA Needs a Comprehensive Research Plan and Policies to Fulfill its Emerging Climate
Change Role, Report No. 09-P-0089, February 2, 2009; Pielke, Roger A., Jr., "Scientific Information and
Global Change Policymaking," Climate Change 28: 315-19, 1994.
74 C-Span video archives, EPA Administrator's Address to the National Press Club on the Agency's Key
Priorities, March 8, 2010, at 00:24:04 and 00:25:48.
75 Federal Register, Environmental Protection Agency, 40 CFR Parts 86 and 600, Department of
Transportation - National Highway Traffic Safety Administration, 49 CFR Parts 531, 533, 537, et al.,
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language that specifically establishes a GHG emissions reduction program78 beyond new motor
vehicles.79 Without such language, EPA is relying on its interpretation of its authorities under
the CAA to regulate GHG emissions from thousands of sources,80 which could increase the risk
of legal challenges to its GHG rules.81 Industry groups, policy institutes, selected lawmakers,
and three States have already filed 16 lawsuits challenging EPA's December 2009
endangerment finding.82 Additionally, some lawmakers have proposed legislation to veto EPA's
endangerment finding and stop the Agency from regulating GHGs.83 Such political and private
opposition make it more difficult for EPA to obtain the information it needs to develop and
sustain GHG regulations.
To regulate sources of the six GHGs, EPA needs quality emissions data from GHG sources,
assessments of the effectiveness of available GHG emissions reduction technologies, cost-
benefit and cost-effectiveness analyses of regulatory control options, and assessments of the
effectiveness of long-term storage of captured GHGs.84 Obtaining quality information to
develop and sustain regulatory decisions - already a difficult, lengthy process85 - can be even
more challenging when sources challenge the legal basis of the Agency's rules. For example,
the 1990 CAA Amendments required that EPA address the hazards of mercury from a single
source category - power plants.86 Amid controversies and challenges, the Agency took about
15 years87 to issue mercury regulations for coal-fired power plants, which were subsequently
Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards, Proposed Rule, September 28, 2009.
76 Federal Register, Environmental Protection Agency, 40 CFR Parts 51, 52, 70, and 71, Prevention of
Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, Proposed Rule, September 30,
2009.
77 U.S. EPA Administrator's February 22, 2010 letter to Senator Rockefeller concerning EPA's work to
comply with the Supreme Court's decision in Massachusetts v. EPA.
78 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008.
79 Supreme Court of the United States, Syllabus, Massachusetts etal. v. Environmental Protection
Agency etal., Case No. 05-1120, Certiorari to the United States Court of Appeals for the District of
Columbia Circuit, Argued November 29, 2006, Decided April 2, 2007.
80 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008; and Federal Register, Environmental
Protection Agency, 40 CFR Parts 51, 52, 70, and 71, Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule, Proposed Rule, September 30, 2009.
81 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008.
82 Bravender, Robin, "16 'Endangerment' Lawsuits Filed Against EPA Before Deadline," New York Times,
February 17, 2010.
83 Berger, Matthew, "GOP Protest Builds Against EPA Regulating Greenhouse Gases," Solve Climate
Blog, December 30, 2009.
84 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008.
85 EPA-OIG, Additional Analyses of Mercury Emissions Needed Before EPA Finalizes Rules for Coal-
Fired Electric Utilities, Report No. 2005-P-00003, February 3, 2005; EPA-OIG, Monitoring Needed to
Assess Impact of EPA's Clean Air Mercury Rule on Potential Hotspots, Report No. 2006-P-00025, May
15, 2006; U.S. EPA Website, information on Agency's efforts to research and control mercury from power
plants.
Clean Air Act Amendments of 1990, Section 112(n)(1).
87 EPA-OIG, Additional Analyses of Mercury Emissions Needed Before EPA Finalizes Rules for Coal-
Fired Electric Utilities, Report No. 2005-P-00003, February 3, 2005; EPA-OIG, Monitoring Needed to
Assess Impact of EPA's Clean Air Mercury Rule on Potential Hotspots, Report No. 2006-P-00025, May
15, 2006; and U.S. EPA Website, information on the Agency's efforts to research and control mercury
from power plants.
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vacated by the court in 2008.88 To control the six GHGs, EPA will not only have to address
power plants, but also new source categories.89 According to the Administrator, efforts to
reduce GHGs will touch practically every part of the U.S. economy.90 The economic challenges
of controlling GHG emissions sector by sector through regulations will mean that innovation and
new technologies beyond EPA's direct control will be needed.91
In addition to regulations, EPA is relying on voluntary programs to reduce 45 million metric tons
of carbon equivalents annually from the buildings, industry, and transportation sectors,92 but
some voluntary programs present challenges.93 For example, three key voluntary programs
(ENERGY STAR, Climate Leaders, and Clean Energy-Environment State Partnership) are joint
partnerships between EPA, other federal/State/local agencies, and/or industries.94 A major
challenge with voluntary programs has been weaknesses in data collection and reporting
systems.95 These systems are neither transparent nor verifiable, and are limited by anonymous
reporting and the use of third-party industry data. Some of the reported reductions from
voluntary programs may be based on unreliable data, and are not within EPA's direct control.
EPA is relying on two multiagency research and development programs (U.S. Global Change
Research Program (USGCRP) and the Climate Change Technology Program (CCTP) to better
understand the effects and risks of climate change, and to develop new technologies to reduce
GHG emissions.96 Important questions remain about the degree to which climate change will
occur, how fast it will occur, and how the changes will affect the rest of the climate system.97
EPA is part of the 13-agency USGCRP98 effort to improve understanding of the science of
climate change and its potential impacts.99 EPA fulfills its USGCRP role through the Agency's
Global Change Research Program (GCRP), whose primary emphasis is to understand the
potential consequences of climate variability and change on human health, ecosystems, and
socioeconomic systems in the United States.100 EPA regions and State/local agencies rely on
GCRP and USGCRP for information and tools to help them fulfill their regulatory
responsibilities.101 Whether the regions and State/local agencies get the information and tools
they need in a timely manner is not fully within their control. The CCTP, a multiagency effort led
by the U.S. Department of Energy (DOE), is supposed to accelerate the development of new
U.S. EPA Website, information on the Clean Air Mercury Rule.
89 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008.
90 C-Span video archives, EPA Administrator's Address to the National Press Club on the Agency's Key
Priorities, March 8, 2010, at 00:32:38.
91 Federal Register, Environmental Protection Agency, 40 CFR Chapter I, Regulating Greenhouse Gas
Emissions Under the Clean Air Act, Proposed Rule, July 30, 2008.
92 U.S. EPA, Performance and Accountability Report for Fiscal Year 2009, November 16, 2009.
93 EPA-OIG, Voluntary Greenhouse Gas Reduction Programs Have Limited Potential, Report No. 08-P-
0206, July 23, 2008.
94 U.S. EPA Website, Current and Near-Term Greenhouse Gas Reduction Initiatives.
95 EPA-OIG, Voluntary Greenhouse Gas Reduction Programs Have Limited Potential, Report No. 08-P-
0206, July 23, 2008.
96 U.S. EPA Website, information on U.S. and EPA change regulatory initiatives, policies, and actions;
U.S. EPA, Performance and Accountability Report for Fiscal Year 2009, November 16, 2009.
97 U.S. EPA, Performance and Accountability Report for Fiscal Year 2009, November 16, 2009, page II-6.
98 U.S. Global Change Research Program Website, Participating Departments and Agencies in USGCRP.
99 U.S. Global Change Research Program Website, "About/Program Overview."
100 U.S. EPA Website, information on EPA's Global Change Research Program.
101 EPA-OIG, EPA Needs a Comprehensive Research Plan and Policies to Fulfill its Emerging Climate
Change Role, Report No. 09-P-0089, February 2, 2009; Pielke, Roger A., Jr., "Scientific Information and
Global Change Policymaking," Climate Change 28: 315-19, 1994.
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and advanced technologies to address climate change.102 Some climate-change-related
technologies being explored within CCTP are terrestrial sequestration (U.S. Department of the
Interior), biofuels (DOE), fuel cells (U.S. Department of Defense), and ENERGY STAR products
(EPA). EPA recognizes that creativity and innovation, among other things, will be needed to
meet these challenges.103 Such innovations are beyond EPA's direct control.104
EPA's Framework for Assessing and Managing Chemical Risks
EPA's framework for assessing and managing chemical risks has not yet achieved the goal of
protecting human health and the environment. In 1976, Congress passed the Toxic Substances
Control Act (TSCA) authorizing EPA to collect information on, and to regulate the production
and distribution of, chemicals. TSCA required EPA to (1) create an inventory of "existing
chemicals" already in commerce, (2) regulate unreasonable risk from "new chemicals"
introduced into commerce subsequent to the Act, and (3) make health and safety information
available for examination while protecting manufacturers' confidential business information. We
recently reported that EPA's New Chemicals Program had limitations in three processes
intended to identify and mitigate new risks - assessment, oversight, and transparency.105
Moreover EPA's performance measures for managing risks from new chemicals do not
accurately reflect program performance in preventing risk, nor do they assure compliance.
EPA's effectiveness in assessing and managing chemical risks is hampered in part by
limitations on the Agency's authority to regulate chemicals under TSCA. When TSCA was
enacted, it authorized the manufacture and use, without any evaluation, of all chemicals that
were produced for commercial purposes in 1976 or earlier years. Thus, manufacturers of these
grandfathered chemicals were not required to develop and produce data on toxicity and
exposure, which are needed to properly and fully assess potential risks. Further compounding
this problem, the statute never provided adequate authority for EPA to evaluate existing
chemicals as new concerns arose or as new scientific information became available.
Enforcement is also critical to ensuring environmental protection, but TSCA lacks the broad
information-gathering and enforcement provisions found in other major environmental protection
statutes. For example, TSCA lacks the administrative authority to seek injunctive relief, issue
administrative orders, collect samples, and quarantine and release chemical stocks, among
other key authorities.
On September 29, 2009, the Administration outlined core principles to strengthen U.S. chemical
management laws.106 Administrator Jackson testified before Congress on December 2,
2009,107 on the need to revise and modernize TSCA, but the Agency's toxics chief recently
indicated that TSCA reform is "unlikely" this congressional session.108 However, in the absence
109
DOE, U.S. Climate Change Technology Program, Vision and Framework for Strategy and Planning,
Report No. DOE/PI-0005, September 2006.
103 C-Span video archives, EPA Administrator's Address to the National Press Club on the Agency's Key
Priorities, March 8, 2010, at 00:24:04 and 00:25:48.
104 DOE, U.S. Climate Change Technology Program, Vision and Framework for Strategy and Planning,
Report No. DOE/PI-0005, September 2006.
105 EPA_QIG, EPA Needs a Coordinated Plan to Oversee its Toxic Substances Control Act Activities 10-
P-0066, February 17, 2009.
106 U.S. EPA, Essential Principles for Reform of Chemicals Management Legislation, September 29,
2009.
107 U.S. Senate, Committee on Environment and Public Works, Oversight Hearing on the Federal Toxic
Substances Control Act, December 2, 2009.
108 ^p^ joxjcs chief, Steve Owens, made these remarks during the Environmental Council of States'
spring meeting on March 24, 2010. However, on April 15, 2010, two members of Congress (Sen.
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of new legislation, we found EPA could better manage existing authorities. EPA does not have
integrated procedures and measures in place to ensure that new chemicals entering commerce
do not pose an unreasonable risk to human health and the environment. Oversight of regulatory
actions designed to reduce known risks is a low priority, and the resources allocated by EPA are
not commensurate with the scope of monitoring and oversight work. In addition, EPA's
procedures for handling confidential business information requests are predisposed to protect
industry information rather than to provide public access to health and safety studies.
EPA's framework for assessing and managing chemical risks from endocrine disrupters is also
failing to show results. In August 1996, Congress passed both the Food Quality Protection Act
and amendments to the SDWA, calling for the screening and testing of chemicals and
pesticides for possible endocrine-disrupting effects (i.e., adverse effects on the development of
the brain and nervous system, the growth and function of the reproductive system, as well as
the metabolism and blood sugar levels). EPA established the Endocrine Disruption Screening
Program (EDSP) in 1998.109 The EDSP was mandated to use validated methods for the
screening and testing of chemicals to identify potential endocrine disrupters. In 2000, EPA
estimated that approximately 87,000 chemicals would need to be screened for potential
endocrine-disrupting effects. As of February 25, 2010, EPA issued test orders to industry for 67
pesticide active ingredients and high-production volume chemicals with some pesticide inert
uses. Thus, 14 years after the passage of the Food Quality Protection Act and amendments to
the SDWA, EPA has yet to regulate the endocrine-disrupting effects of any chemicals.
Lautenberg and Rep. Waxman) introduced legislation in their respective chambers to overhaul TSCA,
though activists and others note that extensive stakeholder discussions on each bill could delay passage
of TSCA reform legislation until next year.
109 Federal Register, Environmental Protection Agency, Endocrine Disrupter Screening Program, August
11,1998.
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EPA's Response to Office of Inspector General (OIG) Management Challenges
(PREPARED BY EPA)
Need fora National Environmental Policy
Summary of Challenge: OIG believes that a national environmental policy is needed to help
EPA and other federal agencies ensure a comprehensive approach to environmental protection.
While EPA's 2006-2011 Strategic Plan includes cross-media initiatives, it does not describe
national goals that go beyond EPA's current mission and goal structure. OIG notes that
Congress needs to provide EPA and other federal agencies the capacity to identify and manage
environmental problems of national significance. Further, Congress and the Administration
should examine ways to leverage resources. The Administration should propose to Congress
the creation of expert panels to formulate a national environmental policy and subsequent
quadrennial reviews of federal responsibilities.
Agency Response: OIG's report asserts that there is no overarching environmental policy or
framework governing environmental issues that cut across the federal government. In fact, a
national environmental policy does exist in the form of authorizing statutory goals and mandates
embodied in the National Environmental Policy Act (NEPA) and in the various media-specific
authorities under which EPA and other agencies operate. For example, NEPA provides as its
"purpose:"
To declare a national policy which will encourage productive and enjoyable harmony between
man and his environment; to promote efforts which will prevent or eliminate damage to the
environment and biosphere and stimulate the health and welfare of man; to enrich the
understanding of the ecological systems and natural resources important to the Nation; and to
establish a Council on Environmental Quality.
EPA is organized consistent with its Congressional statutes, and this is entirely appropriate.
Reorganizing the agency in some other manner to create more integration across media would
simply create new stovepipes of a different nature. Under any organizational structure, EPA and
the federal agencies must use matrix management. For example, if organized by function as
suggested in the draft report (e.g., separate offices for standard-setting, monitoring, permitting,
enforcement), there would have to be subunits within each of the major programs to deal with
specific media (a water subunit within the Enforcement Office). Those subunits would then have
to coordinate across the Agency (all water subunits within the various offices would have to
coordinate standard setting, monitoring, permitting, etc.). It is entirely possible that, if the
Agency had been structured along functional lines, we would now be bemoaning the
fragmented nature of water regulations.
Efforts are also ongoing to assure intra-agency coordination across media. EPA uses high-level,
cross-agency councils and committees to address coordination on topics such as science,
environmental justice, Indian policy, agriculture, international activities, performance
management, and information management. EPA has also established operating procedures to
guarantee cross-program engagement on rules and policies. In addition, EPA establishes issue-
specific initiatives as needed to deal with cross-media concerns. For example, EPA recently
launched a cross-program initiative on the regulation of electric utilities. An initiative is also
underway to better harmonize EPA's place-based activities.
EPA has had considerable success in achieving its mission, and is confident that success will
continue in the future. The Agency's mission is already guided by statements of national policy
and specific national objectives, as outlined in major existing environmental statutes. Like any
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large organization, EPA must coordinate across disparate internal offices. However, these
coordination issues would not disappear if the Agency were reorganized along different lines.
Creating a new National Environmental Policy and Quadrennial Review framework would
require a large investment of time and resources, but is not likely to substantially improve our
environmental results.
Water and Wastewater Infrastructure
Summary of Challenge: Under the Clean Water Act (CWA) and the Safe Drinking Water Act
(SWDA), EPA is responsible for assisting water and wastewater facilities in meeting their water
treatment requirements. Many drinking water and wastewater systems across the country are
unable to maintain compliance with federal water standards due to repairs and new
constructions. OIG believes EPA needs to take the lead in developing a coherent federal
strategy, within the limits of its statutory authorities and responsibilities, to assess the
investment requirements and work with states and local governments to organize resources to
meet water and wastewater infrastructure needs.
Agency Response: Over the past year, based on input from state and local stakeholders EPA
has been developing a Sustainability Policy which will help set the course for our future efforts
across the water sector and with other federal agencies, including the incorporation of
sustainability into the State Revolving Loan programs.
EPA also continues to work with partners across the water sector to promote sustainable water
and wastewater systems based on the ten Attributes of an Effectively Managed Utility. This first-
of-its-kind national collaboration enables utilities to operate under a common management
framework, which is helping the sector move in a unified manner towards sustainability. Building
on momentum with existing partners, EPA will be reaching out to those that represent smaller
systems to ensure that the framework is adopted across the spectrum of large and small
utilities.
Recognizing that water efficiency has significant implications for water infrastructure, EPA has
continued to expand the WaterSense program, launched in 2006. The WaterSense label makes
it easy for consumers to find products and services that save water while ensuring performance,
thereby reducing the burden on infrastructure and mitigating water availability challenges. It also
helps to build a national consciousness of the value of water and water services, which is
essential to the national awareness and acceptance that everyone must help pay for our
infrastructure needs. WaterSense milestones in the last year include the release of
specifications for new homes and showerheads.
Sustainable Infrastructure has also been integrated into the Sustainable Communities
partnership with the Department of Housing and Urban Development (HUD) and Department of
Transportation (DOT). As our nation plans for future growth, we must ensure that water
infrastructure and water quality are priorities as we develop policies to ensure sustainable
communities. To that end, water infrastructure planning was integrated with other considerations
in the $100 million grant notice that was recently released by HUD. EPA is also conducting
pilots with three states on incorporating sustainability into Clean Water Revolving Fund loan
program priorities - both on the system and community levels. In these and other ways, EPA
has taken a leading role with Federal partners and has worked to increase public awareness
and appreciation of the need for sustainable water infrastructure. Expanding EPA's role could
only come with increased authority and resources.
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The following bullets give a summary of some of the other recent activities under the
Sustainable Infrastructure Initiative:
• In May, EPA convened the regions and various Headquarters offices for a national meeting
to better define and invigorate efforts to promote asset management. As a follow-up to the
meeting, we are working to better integrate asset management into the daily work of the
Regions, as well as permits and enforcement offices.
• In addition to the ongoing series of asset management training courses EPA offers across
the country (40 sessions conducted over the last eight years), the Agency conducted two
beta versions of a second asset management training course to deal with more advanced
topics.
• EPA will continue its efforts to promote better management practices at the system level to
improve system technical, managerial and financial capacity. Central to this effort is the
Check Up Program for Small Systems (CUPSS) asset management software for drinking
and wastewater systems. CUPSS is a free, easy-to-use, asset management tool for small
drinking water and wastewater utilities. In partnership with state agencies and technical
assistance providers, the Agency continues to promote and assist small systems to learning
about and doing asset management by using CUPSS. By using proven outreach methods to
assemble a national CUPSS training network, the Agency will be able to reach more small
water and sewer utilities than ever before. A comprehensive marketing, user support, and
training strategy will be fully implemented, with emphasis on leveraging our state and
training assistance provider partners as the "CUPSS Trainer Network."
• In the fall of 2009, EPA completed two workshops with EPA Regions 6 and 8 to introduce
utilities to a program to improve their energy efficiency and management based on the
Energy Management Guidebook for Wastewater and Drinking Water Utilities. Since the
Guidebook was published in 2008, EPA has sponsored a total of 21 workshops around the
country. EPA Regional offices are now working with over 100 utilities across the country to
help them develop more detailed energy management programs based on the Guidebook.
• Growth of the WaterSense partnership to more than 500 promotional partners, 125
manufacturers, 130 retailer/distributors (including Lowe's and Home Depot), and 900
irrigation partners as of July, 2010. In 2009, WaterSense labeled products saved more than
36 billion gallons of water and more than $267 million on consumers' water and sewer bills.
• EPA is actively working with a long list of partners to implement our Green Infrastructure
Action Plan. The focus of this work is on green infrastructure approaches to managing wet
weather. Among other activities, the Action Plan aims to better document costs, benefits and
effectiveness of practices, incorporate green infrastructure into Long Term Control Plans for
combined sewer overflows, and foster implementation in communities across the country.
• EPA continues an active schedule of outreach activities through various communications
channels, including notably a series of webcasts on topics which range across the SI
initiative.
Oversight of Delegation of States
Summary of Challenge: A critical management challenge for EPA is overseeing its delegation
of programs to the states, mostly due to differences between state and federal policies,
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interpretations, strategies, and priorities. While EPA has improved its oversight, particularly in
priority setting and enforcement planning with states, the Agency needs accurate data and
consistent policy interpretation to ensure effective oversight of all delegated regulatory and
voluntary programs. OIG believes EPA must address the limitations in the availability, quality,
and robustness of program implementation and effectiveness data.
Agency Response: EPA acknowledges that state oversight is a very complex and changeable
arena. Through federal statutes, implementing regulations, and program design, states are
allowed flexibility in how they manage and implement environmental programs. Within EPA,
national program managers are directly responsible for state oversight of individual programs.
The Agency has committees, workgroups, special projects and initiatives to continuously
improve Agency programs delegated to states. Below are a few examples of these programs
and the efforts made to enhance oversight or correct issues with state delegation.
Improving Oversight through the State Review Framework:
As noted by OIG, the Enforcement Program's collaboration with the States to develop and
implement the State Review Framework (SRF) is the cornerstone of efforts in that program to
improve oversight. The SRF is a program management tool used to provide consistent
assessment of EPA and State core Clean Water Act, Clean Air Act, and Resources
Conservation and Recovery Act enforcement and compliance assurance programs. The
Framework enables assessment of program effectiveness and identification of areas for
management improvement that is consistent across all EPA Regions and States. The
Framework was designed collaboratively by EPA and the Environmental Council of the States in
2004.
Based on the data and information from the SRF evaluations, on July 2, 2009, the Administrator
asked the Office of Enforcement and Compliance Assurance, and Office of Water, in
consultation with the States, to identify concrete steps that EPA can take to enhance public
transparency about water enforcement programs, strengthen program performance, and
transform the information systems that support both water quality and compliance programs.
A Clean Water Action Plan was subsequently developed, finalized and submitted to the
Administrator on October 15, 2009. The Plan proposed three main actions to address water
pollution challenges: (1) revamp the water enforcement program to focus on the pollution
sources that present the greatest threat to water quality; (2) strengthen oversight of state
permitting and enforcement programs to improve results and provide greater consistency; and
(3) improve transparency and accountability, and invest in 21st century technology to provide
more accurate and useful information to the public and increase pressure for better compliance
performance. On June 22, 2010, OECA and OW jointly issued interim guidance to the regions
and the states to immediately initiate and implement certain actions, as outlined in the Plan, to
strengthen performance in the NPDES program.
Strengthening State-EPA Implementation of Water Programs:
Beginning in June 2008, ECOS Officers asked the Agency to provide more collaboration at the
national level to meet the challenges of increasing workload and declining resources. In
November of 2008 work with the States culminated in the creation of the Partnership Council of
the Office of Water and States (PCOWS) to 'test' the early and ongoing engagement of the
States in planning, budgeting, and implementation activities for the national water program.
Since its creation, PCOWS has met four times to discuss strategic priorities with the States, to
ensure that core and key program activities are given appropriate priority in budget decisions,
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and to identify opportunities to maximize resources and reduce barriers in support of key joint
priorities.
Improving State-EPA Collaborations through the NEPPS
Through the National Environmental Performance Partnership System EPA and the states have
developed a working relationship based on a clearer understanding of mutual issues and
priorities and improved allocation of roles and responsibilities. Building on this successful
platform, EPA and the states are working together to share the workload more efficiently and
effectively to achieve environmental and public health outcomes. In FY2011, EPA and states
will be collaborating on a focused effort to identify opportunities for enhanced work sharing and
resource and workload flexibility in order to maintain the effectiveness of core programs,
particularly in light of widespread state budget reductions due to the economic downturn.
Safe Reuse of Contaminated Sites
Summary of Challenge: EPA places increasing emphasis on the reuse of contaminated or
once-contaminated properties and has a performance measure to define a population of
contaminated sites that are ready for reuse. EPA faces "significant and increasing" challenges
in this area, however, due to the common practice of not removing all sources of contamination
from hazardous sites; a regulatory structure that places key responsibilities for monitoring and
enforcing the long-term safety of contaminated sites on non-EPA parties that may lack
necessary resources, information, and skill; changes in site risks as site conditions change over
time; and existing weaknesses in EPA's oversight of the long-term safety of sites. EPA will
continually need to assess challenges it faces as well as challenges among the diverse group of
non-EPA parties it must work with to ensure sites are safely reused. To address the challenges,
these assessments should include consideration of new or expanded authorities and
regulations, organization structures, and dedicated funding and resources.
Agency Response: According to OIG, many contaminated sites, such as Superfund sites,
must be monitored in the long term (i.e. 30 years or more) because known contamination is
often not removed or remediated and controls that prevent prohibited activities at sites must be
maintained and enforced. New controls or monitoring may be required if previously undetected
or new contaminants emerge, which can happen directly as a result of a change in the site
brought about by reuse. The lack of effective long-term monitoring and enforcement of reuse
controls at contaminated sites can pose significant risks to human health and the environment.
For sites remediated under CERCLA, where waste is left in place above levels that allow for
unlimited use and unrestricted access, EPA performs five year reviews (FYRs) to ensure that
sites remain protective. One of the primary functions of the FYR is to determine whether new
information about contaminants e.g., new toxicity data, or exposure pathways (e.g., a change in
land use) at the site is available, that would compromise the protectiveness of the site. If such a
change is found to compromise protectiveness, additional action will be taken to ensure that the
public is protected. With the vapor intrusion pathway, many Regions did not wait for the FYR to
consider the importance of this potential exposure pathway and prioritized sites for investigation
before the next FYR. Superfund can take remedial action even at sites that have been deleted
from the National Priorities List (NPL).
This process addresses the vast majority of "emerging "contaminant situations that we observe
at NPL sites. Most so called emerging contaminant issues result from changes in toxicity values
or changes in detection levels, both of which will be addressed in the FYR. In the rare situation
where a site is not subject to FYR, EPA has information resources such as CERCLIS, a
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searchable database for records of decision that can be used to identify sites where new
contaminant information may lead to questions of long-term protectiveness. In these situations,
EPA can relook at sites and determine whether additional action is warranted.
EPA is actively involved in working with stakeholders to promote site reuse, such as with our
Return to Use Initiative. The Agency makes specific inquiry of the site managers and other
stakeholders about new issues that might affect site risks if the site goes into reuse. Vapor
intrusion is routinely examined as a potential concern at such sites. In addition, for sites further
along in the cleanup process, we always review the most recent Five Year Reviews to help
determine whether there are changed conditions or anything else that might affect site safety
during reuse. Site safety never takes a back seat to promotion of site reuse.
EPA places a high priority on the implementation of appropriate institutional controls (ICs) in
working with site stakeholders considering site reuse. For example, one of the objectives of our
Return to Use Initiative is to evaluate and, if necessary, modify and implement requirements for
ICs. Also, our guidance for issuing Ready for Reuse Determinations requires that ICs be in
place. Finally, our Sitewide Ready for Anticipated Use GPRA performance measure counts only
sites that have required ICs fully implemented.
EPA has also found that supporting and encouraging reuse can facilitate the successful
implementation and enforcement of appropriate ICs. Specifically, EPA signs a State Superfund
Contract (SSC) with the State, which outlines roles and responsibilities, including
implementation and enforcement of ICs, roles and responsibilities for operations and
maintenance of engineering controls. Under CERCLA, States are responsible for O&M
activities, including oversight of work done by potentially responsible parties. Nevertheless, EPA
is responsible for performing FYRs at sites where waste is left in place above levels that allow
for unlimited use and unrestricted access, regardless of who is performing Operations and
Maintenance (O&M). This periodic review is an excellent mechanism for providing long-term
stewardship of sites. In the event of natural disasters (earthquakes, hurricanes), EPA routinely
makes special reviews of sites to ensure that protectiveness has not been compromised.
Long-term stewardship considerations are important factors in developing enforcement
agreements with responsible parties or with parties redeveloping sites. Long-term response
costs are important considerations in determining the present worth value of remedial
alternatives. We are working to ensure that the implementation costs associated with ICs is
considered as part of the remedy selection process.
In addition, EPA is developing tools to make 1C information more readily available to the public,
including developers. Again, under CERCLA much of this responsibility resides with the States
by law, but EPA works with the States so that they understand the long-term stewardship needs
of the remedies chosen for sites.
The OIG overstates the level of threat associated with the site reuse issues and does not
demonstrate that the process is not protective. In general, site reuse, limited recreation use
along a bike path, was not inconsistent with the implemented site remediation. Recreational use
is not unrestricted use and does not assume unlimited access. The "new" contamination that the
OIG cites is noted in the previous FYR, so is not truly a new contaminant, nor was it found at a
level that posed a threat to human health and the environment. In addition, institutional controls
for the site worked to require a property owner who acquired a portion of the site to consult with
EPA and obtain permission from the State before performing any construction on the site.
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EPA cannot constantly monitor all reuse plans at all sites. EPA routinely reviews reuse plans
brought to them by owners, developers, and other parties to ensure they are consistent with the
remedy. The onus is on the developer to share plans with EPA. EPA does not control land use
and EPA cannot dictate or monitor reuse plans. However, EPA can and does work with owners
to ensure appropriate reuse when those plans are brought to the Agency's attention.
Generally, deleted sites with waste left in place are monitored through Five Year Reviews,
which evaluate reuse activities on and near the site, as well as changed site conditions, to
determine if the remedy remains protective. If no waste is left in place there should be no need
to monitor site reuse.
A Ready for Reuse (RfR) Determination should not be issued for every site. The Agency has
found that they appear to be most useful at sites where Superfund stigma is a significant barrier
to site reuse. Stigma can affect the willingness of developers to work with a site, lenders to lend
funds for site redevelopment, or prospective site users to feel comfortable visiting the site. The
RfR Determination does describe appropriate use and limitations on site use; however, this
information is also available and taken from other documents in the site repository.
OIG asserts that EPA's management of the long-term oversight and monitoring requirements for
the safe reuse of contaminated sites has lagged behind the Agency's marketing of site reuse
opportunities and its showcasing of successes. This gap promises to increase substantially as
EPA continues to heavily promote the reuse of contaminated sites without investing in the tools
needed to ensure the safe, long-term use of these sites. Promoting reuse sends a strong
message to communities that EPA is a necessary participant in the dialogue. Seeing EPA as a
collaborator rather than an impediment means that communities involve EPA in the reuse
process, which allows EPA to communicate key messages about protectiveness. Once
communities are ready to engage in a dialogue about using a site, EPA can offer a number of
tools to ensure the reuse is appropriate and will enhance long-term protectiveness. Below are a
few of the tools EPA actively promotes to ensure appropriate and safe reuse of sites:
• Ready for Reuse Determinations are environmental status reports that reiterate the
limitations and opportunities associated with the reuse of sites. As noted in the OIG report,
these are not mandatory for each site, but may be useful for sharing information about the
site to a broader audience. EPA Headquarters consistently uses opportunities to educate
remedial project managers about where and how it can be used, most recently at the 2010
National Association of Remedial Project Manager's conference.
• Comfort and status letters are issued by Regions to convey the status of the site
remediation, describe site limitations and protectiveness issues and clarify liability issues.
• Prospective purchaser inquiry calls provide consistent and reliable information about
limitations and opportunities at sites. Frequently, these calls result in prospective purchasers
determining that sites are not appropriate. However, this outcome is not deemed a failure
since it provided information that future users would need to understand before using a site.
• EPA-funded reuse planning offers communities and key stakeholders the opportunity to
engage in an educated and realistic dialogue about the reuse of sites. EPA project
managers serve as information resources during these exercises, where information about
institutional controls and long-term stewardship are integrated into the reuse planning
process.
• Site reuse fact sheets provide key information to parties interested in the reuse of sites.
These single-page fact sheets highlight critical remedial components in place, long term
maintenance activities, and institutional controls.
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• CERCLIS provides detailed information about the institutional controls in place at sites, in
addition to their eligibility to meet performance measures that affirm all remedial components
and institutional controls are in place.
The Site Wide Ready for Anticipated Use (SWRAU) and Cross Program Revitalization Measure
(CPRM) Ready for Anticipated Use (RAU) performance measures have explicit criteria that are
used to evaluate whether a site is protective. These measures can communicate when EPA
feels that all remedial components and institutional controls are in place such that the site can
accommodate its reasonably anticipated future land use.
We believe that through these measures and tools we do an effective job of communicating site
risks and remedies, and information site users need to know to be able to use the sites without
compromising protectiveness. We will continue to explore new tools and approaches to sharing
this information to ensure that our sites remain safe in their future uses.
Limited Capability to Respond to Cyber Security Attacks
Summary of Challenge. OIG believes that EPA has limited capacity to effectively respond to
external network threats and needs to develop an Agency-wide action plan to investigate and
combat current threats. Although EPA currently monitors network traffic to identify hostile traffic
at its Internet choke points, the Agency remains challenged because it does not have the
resources (in equipment or staff) to adequately assess attacks against its infrastructure. The
Agency needs to aggressively enhance its cyber security capabilities and address security
weaknesses to strengthen its ability to detect and respond to network attacks.
Agency Response: EPA does not fully agree with OIG's assertion. However, it does
acknowledge that, like other federal agencies, detecting, remediating or eradicating malicious
software or Advanced Persistent Threats (APT) is a challenge for the Agency. The Agency has
taken steps to increase security awareness and will continue to manage the threat through
Agency-wide vigilance and improved detection capabilities.
Last year, the Agency affirmed a position to support continuous monitoring across the
Information Technology (IT) infrastructure, and has made significant investments in technology
to provide improve capability and increase visibility in the Agency's network. The Agency is
implementing these new capabilities across the enterprise and is on-track to roll out this
capability to -24,000 Agency workstations by the end of 2010. Also, the Agency has heightened
awareness and vigilance across the Agency's Information Security Officer (ISO) community -
sponsoring training opportunities for Agency ISOs and incorporating an entire security track into
the Agency's Skillport e-Learning portal.
In addition to in-house capabilities, EPA relies on relationships with other Federal Agencies
(e.g., Department of Homeland Security, Federal Bureau of Investigation) and the vendor
community to augment the Agency's cyber security capabilities - providing OEI information that
can be used to detect and defend Agency IT resources. This community-based approach
serves the entire Government well by providing EPA valuable information and intelligence that
may not have been obtained otherwise. In addition to these relationships, EPA is leveraging
existing contracts to augment existing contractor staff, and is pursuing additional contract
support specifically focused on the detection of Advanced Persistent Threats (APT).
The Agency relies on a community of distributed Information Security Officials to effectively
manage the security of IT resources. The Agency is working to ensure that the Information
Security Officials are properly recruited, trained and equipped to meet current and future
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security requirements. The security of Agency resources is not tied to any single tool, but rather
it is tied to a knowledgeable, trained community of security professionals who can effectively
utilize available resources to protect the integrity of Agency IT assets. EPA will develop Plans of
Actions and Milestones (POAM) to specifically address the actions required to improve how the
Agency can better recruit, develop and train the Information Security Officials throughout the
Agency.
Reducing Domestic Greenhouse Gas Emissions:
Summary of Challenge: In April 2007, the U.S. Supreme Court ruled in the Massachusetts v.
EPA case that greenhouse gases (GHGs) are air pollutants under the Clean Air Act. In
December 2009, the Agency issued an endangerment finding for six GHGs. According to OIG,
although EPA is addressing these findings through regulations, voluntary programs, and
research and development, the Agency faces significant challenges that are beyond its control,
including political and private opposition, unverifiable data, and reliance on multiagency
research. For example, EPA is developing regulations to control GHG emissions without
statutory language that specifically establishes a GHG program. Also, EPA is relying on data
from voluntary programs that may be unreliable and unverifiable, and on multiagency research
for which it has limited control over the content, conduct, and timing of the research.
Agency Response: EPA is addressing these findings through regulations, voluntary programs,
and research and development. EPA agrees that it faces significant challenges that are beyond
its control, including political and private opposition, unverifiable data, and reliance on
multiagency research. Another aspect of this management challenge may be a potential funding
challenge for the multitude of mobile source areas needing to be addressed. The Agency's
Office of Air and Radiation leads the development of multiple mobile source programs to
address GHG emissions from light-duty passenger vehicles, heavy-duty vehicles, ocean-going
vessels, aircraft and other non-road engines. This work involves extensive Agency efforts
including coordination with other federal agencies and international organizations.
EPA's Framework for Assessing and Managing Chemical Risks
Summary of Challenge: OIG and GAO believe that EPA's effectiveness in assessing and
managing chemical risks is hampered in part by limitations on the Agency's authority to regulate
chemicals under Toxic Substances Control Act (TSCA). In January 2009, GAO included EPA's
process for assessing and controlling toxic chemicals on its high-risk list. GAO notes that EPA's
ability to protect public health and the environment depends on credible and timely assessment
of the risks posed by toxic chemicals. EPA's Integrated Risk Information System (IRIS), which
contains assessments of more than 500 toxic chemicals, is at a serious risk of becoming
obsolete because EPA has been unable to keep its existing assessments current or to complete
assessments of important chemicals of concerns. OIG reports that EPA's New Chemicals
Program is limited in assessment, oversight, and transparency and that performance measures
for managing risks from new chemicals neither accurately reflect program performance nor
assure compliance.
Agency Response: GAO identified "Transforming EPA's Processes for Assessing and
Controlling Chemicals" as a high-risk area in its January 2009 High-Risk Series. EPA
acknowledges "Streamlining Chemical Assessments Under IRIS" an Agency-level weakness
under the Federal Financial Managers' Integrity Act in October 2009. In May 2010, OIG
identified "EPA's Framework for Assessing and Managing Chemical Risks as a management
challenge.
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In May 2009, the Agency released a new Integrated Risk Information System (IRIS) process
that addresses program management, transparency, and timeliness. Also, the Agency
implemented steps to reduce the IRIS backlog by focusing resources on those assessments
that were farther along in the process. The Agency continues to focus on this group of 50
assessments. Of the 50 assessments that were given high priority, 10 have been completed, 25
are in the external peer review step or the final agency and interagency review step, four are in
interagency science consultation, two are in agency review, and nine are in draft development.
In FY 2010, EPA released five major assessments for external peer review and public comment.
These assessments are being reviewed by the MAS (formaldehyde) or the EPA's SAB. The
Agency is committed to continuing to move these assessments through the IRIS process to
completion. Thus, the IRIS program has had increased success in moving assessments though
the process. When three major assessments (formaldehyde, trichloroethylene, and dioxin) that
require a large commitment of FTE are completed, EPA expects to be able to increase the total
number of standard assessments that it can perform.
To address the issue of assessments on the database that need to be updated, the Agency
established the IRIS Update Project in 2010. This project identifies toxicity values on IRIS that
are more than ten years old and screens them for the availability of new data or new
assessment methods that could change a toxicity value of a cancer descriptor. Toxicity values
will be updated in batches of 8-12 assessments and reviewed by a Federal Standing Science
Committee and a Standing External Peer Review Panel of EPA's SAB. The 2009/2010 agenda
for the IRIS Update Project was announced in a Federal Register Notice of October 21, 2009
(74 FR 54040).
In FY 2010, to ensure that resources focus on the greatest program needs, the Agency
expanded the role of its program and regional offices in nominating and prioritizing chemicals for
IRIS assessment. The Agency met extensively with internal program and regional offices to
better understand their assessment needs and gather input on priorities for the current IRIS
agenda. These priorities are being used to allocate resources among the assessments and
determine which assessments will be done first.
Additionally, the Agency is working with the California Environmental Protection Agency's
(CalEPA) Office of Environmental Health Hazard Assessment and the Agency for Toxic
Substances and Disease registry under separate Memoranda of Understanding. These efforts
to pool resources and share information will eventually increase the IRIS program's efficiency
and output of assessments.
The Agency has started an IRIS Logistics team that coordinates IRIS-related administrative
support. The logistics team is a matrix managed team that includes administrative personnel
who work on IRIS-related activities. Many of these activities were performed by individual
chemical managers and have now been centralized in the logistics team, increasing efficiency
and providing more time for the chemical managers to focus on scientific work.
OIG asserts that 14 years after the passage of the Food Quality Protection Act and
amendments to the SDWA, EPA has yet to regulate the endocrine-disrupting effects of any
chemicals. The Agency established a multi-stakeholder federal advisory committee, the
Endocrine Disrupter Screening and Testing Advisory Committee (EDSTAC) under the Federal
Advisory Committee Act (FACA), 5 U.S.C. App. 2, Section 9(c). This committee was asked to
provide advice to the Agency on how to design a screening and testing program for endocrine
disrupting chemicals. In 1998, the EDSTAC published their final report, which included five
fundamental recommendations:
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1) Expand the evaluation of additional modes of action beyond estrogen disruption to
include test systems that detect androgen and thyroid disruption directly and via the
hypothalamic-pituitary-gonadal (HPG) and hypothalamic-pituitary-thyroidal (HPT) axes.
2) Expand the target population beyond humans to include animal wildlife
3) Expand screening beyond pesticides (approximately 2000 chemicals) to include all
chemicals to which humans and the environment are exposed (estimated at 87,000
chemicals).
4) Incorporate a two-tiered approach: Tier 1 would identify the potential of chemicals to
interact with the estrogen, androgen and thyroid hormone systems. Tier 2 would identify
the potential hazard and establish dose-response relationships.
5) Develop a priority setting data base that would permit the selection of chemicals for
screening on the basis of both exposure and potential hazard.
EPA has had three major tasks to complete before it could issue test orders to pesticide
registrants and chemical manufacturers to commence testing. Validation to establish the
relevance and reliability of the assays was the largest of these tasks. The EPA has followed a
five-stage assay validation process that included: 1) Test development, 2) Pre-validation testing,
3) Inter-laboratory validation studies, 4) Peer review and 5) regulatory acceptance as described
at the EDSP website: (http://www.epa.gov/scipolv/oscpendo/pubs/assayvalidation/status.htm).
Each of the first three of these stages typically took a year or more to complete and had to be
completed sequentially as the knowledge developed in one stage was essential to the conduct
of the next stage. Peer review of these assays was completed in mid-2008.
A second task was the prioritization of chemicals to be screened. EPA planned on using the
high throughput in vitro assays used by the pharmaceutical industry as a means to rapidly
identify those chemicals that may interact with the endocrine system. In a demonstration with 65
chemicals conducted in 1998-99, the high throughput screens failed to correctly identify most of
the chemicals known to interact with hormone receptors; thus, EPA was forced to adopt a
different approach for selecting chemicals. A pilot demonstration of the utility of existing
information led EPA to the conclusion that this was also not a cost-effective way to prioritize and
select chemicals for screening. In 2005, EPA finally proposed and took comment on using
exposure information only to identify chemicals, primarily pesticides, in the first round of Tier 1
screening. This approach led to the proposal of the first list of chemicals for screening in 2007.
The third task was to develop the policies and procedures which would apply to test order
recipients. These include the procedures for responding to test orders, minimizing duplicative
testing, providing for data compensation, and protecting sensitive information. In addition, EPA
developed cost estimates for conducting the Tier 1 battery which formed the basis of an
Information Collection Request (ICR) submitted to OMB in 2008. The ICR was approved in the
fall of 2009 and the first test orders were issued in October 2009.
Despite the fact that the EDSP has only begun to screen chemicals, EPA has been obtaining
useful information regarding endocrine-related health effects, as documented by annual reports
to Congress. Additionally, the Agency plans on implementing the EDSP for pesticides on a
routine basis by first issuing orders for pesticides entering Registration Review. The Registration
Review program requires all pesticides currently registered to be reevaluated to ensure they
meet current scientific and regulatory standards.
Section III-Page 43
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While the complexity of the scientific and regulatory process for implementing the EDSP warrant
the designation of the EDSP as a "management challenge," the progress made this year in
issuing test orders and fully implementing the EDSP demonstrates that the EDSP should not be
regarded as a material weakness.
GAO has stated that EPA's framework for assessing and managing chemical risks has not yet
achieved the goal of protecting human health and the environment and EPA's effectiveness in
assessing and managing chemical risks is hampered in part by limitations on the Agency's
authority to regulate chemicals under TSCA. In a similar vein, OIG believes EPA needs to
transform its processes for assessing and controlling toxic chemicals.
EPA has announced its principles to strengthen US chemical management laws, and initiated a
comprehensive effort to enhance the Agency's current chemicals management program within
the limits of existing authorities. This effort includes:
• New Regulatory Risk Management Actions;
• Development of Chemical Action Plans for Chemicals of Concern;
• Obtaining Information Needed to Understand Chemical Risks; and,
• Increasing Transparency and Public Access to Information About Chemicals.
New Regulatory Risk Management Actions
The Agency is taking risk management actions to reduce exposure to and risks from a number
of chemicals of concern, including lead, mercury, formaldehyde, polychlorinated biphenyls
(PCBs), glymes, and certain carbon nanotubes. These actions include:
• Lead - Strengthening the lead paint work practice standards for renovation and remodeling,
issued in 2008, to expand coverage and eliminate the "opt out" provisions, require
clearance testing after renovation, address lead-safe work practices for public and
commercial buildings, and initiate rulemaking under section 6 of TSCA to ban the use of
lead weights in tires.
• Mercury - Initiating rulemaking under section 6 of TSCA to phase out or ban the use of
mercury in a range of switches, relays, measuring devices, and other products.
• Formaldehyde - Initiating rulemakings to implement recently enacted Title VI of TSCA
(Formaldehyde Standards for Composite Wood Products Act) governing formaldehyde
emissions from pressed wood products.
• PCBs - Initiating rulemaking under section 6 of TSCA to re-evaluate the TSCA PCB use and
distribution in commerce regulations.
• Glymes - Initiating rulemaking under section 5(a)(2) of TSCA to require prior notification to
the Agency of any new consumer use of monoglyme (CASRN 110-71-4), diglyme (CASRN
111-96-6), and ethylglyme (CASRN 629-14-1).
• Nano Materials - Carbon Nano tubes - Initiating rulemaking under section 5(a)(2) of TSCA
to require protective measures to limit exposure or otherwise mitigate the potential
unreasonable risk presented by two carbon nanotube chemical structures (P-08-177 and P-
08-328).
Development of Chemical Action Plans for Chemicals of Concern
EPA is developing chemical action plans which guide the Agency's risk management efforts on
chemicals of concern. These action plans are based on EPA's review of available hazard,
Section III - Page 44
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exposure, and use information, and outline the risks that each chemical may present and what
specific actions the Agency will take to address those concerns.
EPA intends to utilize the full array of regulatory tools under TSCA and other statutes to address
risks, including authority to label, restrict, or ban chemicals under Sections 5 and 6 of TSCA,
authority to compile a list of chemicals of concern under Section 5(b)(4) of TSCA, authority
under EPCRA to require reporting under the Toxics Release Inventory, and authorities
exercised by other Agencies such as CPSC, FDA, etc.
EPA has either developed or is in the process of developing action plans on the following
chemicals and chemical categories:
• Bisphenol A (BPA);
• Long-chain perfluorinated chemicals (PFCs);
• Penta, octa, and decabromodiphenyl ethers (PBDEs) in products;
• Phthalates;
• Short-chain chlorinated paraffins;
• Benzidine dyes;
• Hexabromocyclododecane (HBCD);
• Nonylphenol and nonylphenol ethoxylates (NP/NPE); and,
Obtaining Information Needed to Understand Chemical Risks
EPA is moving quickly to ensure that the Agency has the hazard, use, and exposure data critical
to prioritizing chemicals for review and making risk management decisions. These activities
include a number of new actions under sections 4, 5, and 8 of TSCA to:
• Require that companies submit information to fill the remaining gaps in basic health and
safety data on High Production Volume Chemicals.
• Make the reporting of chemical use information more transparent, more current, more
useful, and more usable by the public
• Require additional reporting on nanoscale chemical substances, and consider how to
address new and existing nanoscale substances under TSCA.
Specific actions in each of these areas are described below.
High Production Volume (HPV) Chemicals Hazard Data
The HPV Challenge Program challenged companies to submit basic screening level hazard
data on HPV chemicals. Some HPV chemicals did not have sponsors for submitting health and
safety data under the HPV Challenge program, and some of the sponsoring companies failed to
submit all the data they had committed to provide on their chemicals. EPA plans to fill the
current gaps in health and safety data on HPV chemicals by:
• Publishing test rules under section 4 of TSCA on unsponsored chemicals and to fill current
gaps in data on sponsored but unfulfilled chemicals.
• Continuing to develop and post hazard characterizations. EPA posted new hazard
characterizations on 100 HPV chemicals in September 2009.
• Initiating action to require notification and possible follow-up testing that would be triggered
under significant new use rules under section 5(a)(2) on additional HPV chemicals.
Section III - Page 45
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Inventory Update Reporting (IUR)
The IUR requires companies to report production volume, processing, and use information on
chemicals. The proposed modifications to the IUR rule under section 8 of TSCA offer a range of
options to make the reporting of chemical use information more transparent, more current, more
useful, and more useable by the public.
Nanoscale Chemical Substances
Many nanoscale chemical materials are regarded as "chemical substances" under TSCA and
EPA is reviewing how to address them under TSCA. In January 2009, EPA released an interim
report on the Nanoscale Materials Stewardship Program (NMSP), noting that a number of the
environmental health and safety data gaps the Agency hoped to fill through the NMSP still exist.
To address those gaps, EPA is developing:
• A proposed rule under section 8(a) of TSCA to require companies to report data on existing
uses, production volumes, specific physical properties, chemical and structural
characteristics, methods of manufacture and processing, exposure and release information,
and available health and safety data on nanoscale materials.
• A proposed rule under section 4 of TSCA to require companies to test several manufactured
nanomaterials for health and environmental effects.
Increasing Transparency and Public Access to Information About Chemicals
To fulfill Administrator Lisa P. Jackson's commitment to increase transparency and public
access to information on chemicals, EPA has been taking a series of aggressive actions,
including adopting a more stringent review of confidentiality claims by industry and making the
public portion of the TSCA inventory available free of charge on the agency's Web site. EPA
intends to continue to take additional actions to further increase chemical information available
to the public. EPA is committing in its Strategic Plan make all TSCA health and safety
information for chemicals in commerce available to the public to the extent allowed by law,
including newly submitted information as well as previously submitted information.
Section III-Page 46
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IMPROPER PAYMENTS INFORMATION ACT OF 2002 REPORTING
DETAILS
As required by the Improper Payments Information Act (IPIA) of 2002, EPA reviewed its
programs and activities for improper payments. EPA is committed to improving program
performance by reviewing programs that are susceptible to improper payments. The IPIA
defines an improper payment as any payment that should not have been made or that was
made in an incorrect amount (including overpayments and underpayments) under statutory,
contractual, administrative, or other legally applicable requirements. Improper payment reviews
are conducted in accordance with the OMB Circular A-123, Management's Responsibility for
Internal Control, Appendix C, Requirements for Effective Measurement and Remediation of
Improper Payments.
Risk Assessments
EPA's programs continue to demonstrate that they are not susceptible to "significant erroneous
payments," which is defined by OMB Circular A-123, Appendix C, as payments exceeding $10
million and 2.5 percent of program payments. EPA reviews and reports on the Clean Water and
Drinking Water State Revolving Funds (SRFs), since they are former Section 57 programs for
which OMB has requested information. EPA currently has an SRF improper payment target of
0.30 percent and has been consistent in meeting this goal. Improper payment rates for the
SRFs are as follows:
Program: Clean Water and Drinking Water SRFs
Fiscal Year
2006
2007
2008
2009*
2010
Outlays
$2.3 billion
$2.3 billion
$2.1 billion
$1.9 billion
$4.8 billion
Erroneous Payments
$3.5 million
$1.64 million
$8.3 million
$1.1 million
$1.8 million
Error Rate
0.15 percent
0.07 percent
0.39 percent
0.06 percent*
0.04 percent
* The FY 2009 figures have been revised from $0.509 million in erroneous payments and a 0.027% error rate, to
$1.1 million in erroneous payments and a 0.06% error rate. In FY 2010, an external auditor conducted an A-123
review of EPA's FY 2009 improper payments submission. During its review, the auditor identified a $600,000
overpayment by the state of Michigan. This overpayment had been quickly detected by EPA and was corrected by
the state, but due to an oversight, it went unreported in EPA's 2009 IPIA submission.
Statistical Sampling Process
The American Recovery and Reinvestment Act of 2009 (ARRA) provided the SRFs with an
additional $6 billion of spending authority. As a result, for the FY 2010 reporting cycle, EPA
broadened the scope of its sampling process to include a review of state expenditures of ARRA
funds. The sampling of ARRA funds involves the testing of four cash draws per state - twice per
year. Similarly, the sampling of regularly appropriated funds involves the testing of at least two
cash draws per state per year. A cash draw is a disbursement from Treasury for the payment of
state grants. Each disbursement may be based on a single invoice or batch of invoices, which
are reviewed for improper payments. Of the total $4.8 billion in SRF expenditures in FY 2010,
approximately $3.3 billion consisted of ARRA funds. And of the $1.8 million of improper
payments identified, 47 percent were ARRA-related, and 53 percent were non-ARRA-related. In
summary, the SRF programs remain well below the OMB threshold for significant erroneous
payments.
Section III-Page 47
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Corrective Action Plans
In an effort to meet OMB's objective on improper payments, EPA continues to conduct internal
control reviews on grants, contracts, and travel/purchase cards, with the objective being to
identify and measure high-risk areas. Updated information on each of the areas follows.
Grants
EPA continues to monitor grantee awards to ensure payment accuracy and recover improper
payments. Since FY 2006, the Agency has tracked erroneous payments by grant recipient in the
Grantee Compliance Database.
In FY 2010, EPA conducted a review and statistical sampling of 60 nonprofit grantee recipients.
These reviews were based on active grants during calendar year (CY) 2009. Of these 60
grantees, 17 were identified as having potential erroneous payments, and six had actual
erroneous payments upon financial resolution. Results from the past five years are provided in
the table below. The table also updates information on results from the appeals process for
these years.
Nonprofit Grantees
Review/Audit
Results
Total dollars drawn
All potential
erroneous payments
cited
Questioned costs
determined
allowable
Actual erroneous
payments
(unallowable costs)
Costs that have
been recovered
Costs still in
recipient appeal
process
Percent of
erroneous payments
CY 2005
Review
$20,222,035
$1,016,967
$329,378
$687,589*
$57,791*
$0
3.400%
CY 2006
Review
$29,373,772
$562,394
$523,227
$39,167
$14,185
$0
0.133%
CY 2007
Review
$22,544,462
$384,352
$370,919**
$13,433
$13,433
$0
0.059%
CY 2008
Review
$120,209,284
$577,611
$471 ,343
$106,268
$54,459
$0
0.088%
CY 2009
Review
$10,258,129
$361,590
$281,343
$80,247
$0
$0
0.782%
* Of the $687,589 in final erroneous payments identified for CY 2005, $629,798 (or 91.6 percent) was associated with
a single earmark award. But for this one earmark, erroneous payments for sampled grants during CY 2005 were
$57,791, equal to 0.2857 percent of total disbursements for sampled grants and well below EPA's target metric of 1
percent of total disbursements. In response to the Agency's findings, the earmark grant has been terminated and the
recipient suspended and debarred, as shown on the U.S. General Services Administration's (GSA's) Excluded
Parties List System. The recipient no longer exists thus funds cannot be recovered.
** Corrects a transposed digit. This amount should be $370,919 instead of $307,919.
Contracts
EPA uses an internal process to detect and recover improper payments. This internal review
captures the number of improper payments per month and provides information on each
improper payment, including its cause and recovery status. For FY 2010, EPA did not conduct
Section III-Page 48
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an external recovery audit due to the low error rate demonstrated in prior years. Improper
payment data for FY 2006 through FY 2010 are summarized below.
Results of EPA's Improper Contract Payments Report
Fiscal Year
2006
2007
2008
2009
2010
Number of Erroneous
Payments
25 (of 28,098)
14 (of 29,828)
12 (of 32,043)
31 (of 35,929)
35 (of 39,060)
Erroneous Payments
(Dollars in Thousands)
$406.5
$65.3
$324.0
$716.4
$882.6
Error Rate for
Dollars
0.03%
0.01%
0.03%
0.05%
0.08%
Commodity Payments
EPA continues to take appropriate action as needed to reduce or eliminate any improper
payments. The improper commodity payments are attributed to product returns not deducted,
duplicate payments due to keypunch errors and vendor number errors, cash discounts not
taken, and state and local tax exemptions not taken.
The Agency will continue using the monthly Improper Commodities Payment Report as the tool
for monitoring these payments; improper payment data for FY 2006 through FY 2010 is
summarized in the table below.
Results of EPA's Improper Commodity Payments Report
Fiscal Year
2006
2007
2008
2009
2010
Number of Erroneous
Payments
102 (of 50,665)
63 (of 45, 859)
48 (of 43,629)
32 (of 41, 585)
34 (of 39,571)
Erroneous Payments
(Dollars in Thousands)
$695.5
$176.5
$215.4
$193.7
$166.3
Error Rate for
Dollars
0.23%
0.06%
0.08%
0.07%
0.05%
Travel Card/Purchase Card
The Agency continues to monitor travel and purchase charge card transactions in accordance
with its policies and procedures. In addition, EPA monitors the issuance of purchase cards to
ensure that spending limits and span of control are kept to a minimum. The Agency continues
its monitoring program, which requires each Senior Resource Official to perform biennial
reviews of the purchases made within their program offices. These reviews ensure the integrity
of the purchase card program. EPA continues to use several additional controls:
• Daily e-mail notification of the card holder's approving official for each purchase.
• Routine reviews of various transactions.
• Review Agency Atypical Report, which identifies airline ticket purchase without
authorizations.
Section III-Page 49
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Improper Payment (IP) Reduction Outlook FY 2006-FY 2010
(Dollars in Millions)
Program
Clean
and
Drinking
Water
SRFs
FY 2006 FY FY
Outlays |p% |p$
0.40
target
$2,303 $3.5
0.15
actual
°«" % %
0.35
target
$2,344 $1.60
0.07
actual
FY2008 FY FY
Outlays |p% |p$
0.30
to 143 tar9et
*2'143 $8.3
0.39
actual
FY 9nnq FY FY
Outlavs 2009 2009
Outlays |p% |p$
0.30
$1,884 tar9et $1 r
0.06*
actual
FY201° 2o7o 2o7o
Outlays |p% |p$
0.30
$4,758 target $1 g
0.04
actual
FY FY
2011 2011
Outlays IP%
0.30
[$3,981]
-------
Conclusions
The Agency continues to demonstrate a low level of risk for the SRF programs through random
statistical sampling of direct payments and targeted state reviews. In addition, EPA's primary
funding streams - grants and contracts - exhibit low risk of improper payments.
For FY 2011, EPA commits to the following activities:
• Increase the sampling of regularly appropriated SRF funds to four cash draws per state per
year.
• Conduct sampling of state disbursements and report on FY 2011 SRF erroneous payments.
Section III - Page 51
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ffy
ERA'S FY 2010
Agency Financial Report
Appendix A:
Public Access
This document is one chapter from the Fiscal Year 2010 Agency Financial Report, U.S.
Environmental Protection Agency (EPA-190-R-10-003), published on November 15, 2010. This
document is available at: www.epa.gov/ocfo/financialperformancereports.htm. Printed copies of
EPA's FY2010 Agency Financial Report are available from EPA's National Service Center for
Environmental Publications at 1-800-490-9198 or by e-mail at nscep@bps-lmit.com.
Appendix A - Public Access - Page 1
-------
EPA invites the public to access its newly redesigned website at www.epa.gov to obtain the latest
environmental news, browse EPA topics, learn about environmental conditions in their communities,
obtain information on interest groups, research laws and regulations, search specific program areas, or
access EPA's historical database.
American Recovery and Reinvestment Act of 2009: www.epa.gov/recovery
EPA newsroom: www.epa.gov/newsroom
• News releases: www.epa.gov/newsroom/newsreleases.htm
• Regional newsrooms: www.epa.gov/newsroom/tfregions
Laws, regulations, guidance, and dockets: www.epa.gov/lawsregs
• Major environmental laws: www.epa.gov/lawsregs/laws/index.html
• EPA's Federal Register Web site: www.epa.gov/fedrgstr
Where you live: www.epa.gov/epahome/whereyoulive.htm
• Search your community: www.epa.gov/epahome/commsearch.htm
• EPA regional offices: http://www.epa.gov/epahome/regions.htm
Information sources: www.epa.gov/epahome/resource.htm
• Hotlines and clearinghouses: www.epa.gov/epahome/hotline.htm
• Publications: www.epa.gov/epahome/publications.htm
Education resources: www.epa.gov/epahome/students.htm
• Teaching Center: www.epa.gov/teachers
• Office of Environmental Education: www.epa.gov/enviroed
About EPA: www.epa.gov/epahome/aboutepa.htm
• EPA organizational structure: www.epa.gov/epahome/organization.htm
EPA programs: www.epa.gov/epahome/abcpgram.htm
• Programs with a geographic focus: www.epa.gov/epahome/places.htm
Partnerships: www.epa.gov/partners
• Central data exchange: www.epa.gov/cdx
• Business Guide to Climate Change Partnerships:
www.epa.gov/partners/Biz guide to epa climate partnerships.pdf
EPA for business and nonprofits: www.epa.gov/epahome/business.htm
• Small business gateway: www.epa.gov/smallbusiness
• Grants, fellowships, and environmental financing: www.epa.gov/epahome/grants.htm
Budget and performance: www.epa.gov/performance/
Careers: www.epa.gov/careers
• EZ Hire: www.epa.gov/ezhire
• Student opportunities: www.epa.gov/careers/stuopp.html
EPA en Espahol: www.epa.gov/espanol
: www.epa.gov/chinese
: www.epa.gov/chinese/simple/
EPA tiing Viet: www.epa.gov/vietnamese
EPA S"^"0!: www.epa.gov/korean
Environmental Kids Club: www.epa.gov/kids
Appendix A - Public Access - Page 2
-------
ERA'S FY 2010
Agency Financial Report
Appendix B:
Acronyms and Abbreviations
This document is one chapter from the Fiscal Year 2010 Agency Financial Report, U.S.
Environmental Protection Agency (EPA- 190-R-10-003), published on November 15, 2010. This
document is available at: www.epa.gov/ocfo/financialperformancereports.htm. Printed copies of
EPA's FY2010 Agency Financial Report are available from EPA's National Service Center for
Environmental Publications at 1-800-490-9198 or by e-mail at nscep@bps-lmit.com.
Appendix B - Acronyms and Abbreviations - Page 1
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ACS Annual Commitment System
AEGL Acute Exposure Guideline Levels
AFO Animal Feeding Operation
AFR Agency Financial Report
AOC Area of Concern
APG Annual Performance Goal
APR Annual Performance Report
AQCD Air Quality Criteria Document
AQI Air Quality Index
AQS Air Quality System
ARRA American Recovery and Reinvestment Act
ASSERT Automated System Security Evaluation and Remediation Tracking
BMP Best Management Practice
BOSC Board of Scientific Counselors
BTU British Thermal Unit
CAMR Clean Air Mercury Rule
CARE Community Action for a Renewed Environment
CASTNet Clean Air Status and Trends Network
CCMPs Comprehensive Conservation and Management Plans
CCSP Climate Change Science Program
CDC Centers for Disease Control and Prevention
CDX Central Data Exchange
GEMS Continuous Emission Monitoring System
CFC Chlorofluorocarbon
CFO Chief Financial Officer
CO Carbon Monoxide
CO2 Carbon Dioxide
CRT Cathode Ray Tube
CWA Clean Water Act
CY Calendar Year
DCAA Defense Contract Audit Agency
DDT Dichloro-Diphenyl-Trichloroethane
DfE Design for the Environment
DHS U.S. Department of Homeland Security
DOE U.S. Department of Energy
DOT U.S. Department of Transportation
DST Decision Support Tool
DWSRF Drinking Water State Revolving Fund
EGOS Environmental Council of the States
EDSP Endocrine Disrupter Screening Program
EHPV Extended High Production Volume
EIA Energy Information Agency
EMP Environmental Management Practice
EMS-HAP Emissions Modeling System for Hazardous Air Pollutants
EPA U.S. Environmental Protection Agency
EPEAT Electronics Products Environmental Assessment Tool
ET Evapotranspiration
ETS Emissions Tracking System
ETV Environmental Technology Verification Program
FEMA Federal Emergency Management Agency
FFMIA Federal Financial Management Improvement Act of 1996
Appendix B - Acronyms and Abbreviations - Page 2
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FFRRO Federal Facilities Restoration and Reuse Office
FISMA Federal Information Security Management Act
FMFIA Federal Managers' Financial Integrity Act of 1982
FMSD Facilities Management and Services Division
FQPA Food Quality Protection Act
FTE Full Time Equivalent
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GAO Government Accountability Office
GAP General Assistance Program
GHG Greenhouse Gas
CIS Geographical Information System
GLRI Great Lakes Restoration Initiative
GM Genetically Modified
GMRA Government Management Reform Act
GPRA Government Performance and Results Act of 1993
GSA U.S. General Services Administration
GSN Green Suppliers Network
GWP Global Warming Potential
H2E Hospitals for Healthy Environment
HABs Harmful Algal Blooms
HCFC Hydrochlorofluorocarbon
HFC Hydrofluorocarbon
HPV High Production Volume
HPVIS High Production Volume Information System
HUC Hydrologic Unit Code
IAQ Indoor Air Quality
lAQTfS Indoor Air Quality Tools for Schools
ICIS Integrated Compliance Information System
IPIA Improper Payments Information Act
IPT Integrated Project Team
IRIS Integrated Risk Information System
ISSC Interstate Shellfish Sanitation Conference
LoB Line of Business
LUST Leaking Underground Storage Tank
MACT Maximum Achievable Control Technology
MCO Mission Critical Occupation
MD&A Management's Discussion and Analysis
MIA Management Integrity Advisor
MMBTU Million Metric British Thermal Unit
MMTCE Million Metric Tons of Carbon Equivalent
MNA Monitored Natural Attenuation
MSW Municipal Solid Waste
NAAQS National Ambient Air Quality Standards
NAPL Non-Aqueous Phase Liquids
NAS National Academy of Sciences
NATA National-Scale Air Toxics Assessment
NEI National Emissions Inventory
NEP National Estuary Program
NESHAP National Emission Standard for Hazardous Air Pollutants
Appendix B - Acronyms and Abbreviations - Page 3
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NO2 Nitrogen Dioxide
NOAA National Oceanic and Atmospheric Administration
Non Road Cl Non Road Compression Ignition
NOx Nitrogen Oxides
NPAP National Performance Audit Program
NPDES National Pollutant Discharge Elimination System
NPEP National Partnership for Environmental Priorities
NPL National Priorities List
NRC Nuclear Regulatory Commission
NSR New Source Review
NTI National Toxics Inventory
NWI National Wetlands Inventory
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
ODS Ozone-Depleting Substance
OECD Organization for Economic Cooperation and Development
OEI Office of Environmental Information
OFM Office of Financial Management
OIG Office of the Inspector General
OMB Office of Management and Budget
OPAA Office of Planning, Analysis and Accountability
ORD Office of Research and Development
P2RX Pollution Prevention Resource Exchange
P3 People, Prosperity and the Planet
PAR Performance and Accountability Report
PARS Performance Appraisal and Recognition System
PART Program Assessment Rating Tool
Pb Lead
PBDEs Polybrominated Diphenyl Ethers
PCBs Polychlorinated Biphenyls
PCFV Partnership for Clean Fuels
PCS Permit Compliance System
PFC Perfluorocarbon
PFOA Perfluorooctanoic Acid
PM Particulate Matter
PM Performance Measure
PMA President's Management Agenda
PMN Pre-Manufacture Notice
PMO Program Management Office
PPM Parts Per Million
PPRTV Provisional Peer Reviewed Toxicity Value
PRP Potential Responsible Parties
PWSS Public Water System Supervision
QA/QC Quality Assurance/Quality Control
R&D Research and Development
RA Remedial Action
RCA Reports Consolidation Act of 2000
RCRA Resource Conservation and Recovery Act
RCRA CA Resource Conservation and Recovery Act Corrective Action
READ Registry of EPA Applications, Models and Datasets
RED Registration Eligibility Decision
RERT Radiological Emergency Response Team
Appendix B - Acronyms and Abbreviations - Page 4
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RfC Reference Concentrations
RFS Renewable Fuels Standard
RSEI Risk Screening Environmental Indicators
RTP Research Triangle Park
SAB Science Advisory Board
SAV Submerged Aquatic Vegetation
SDWA Safe Drinking Water Act
SDWIS Safe Drinking Water Information System
SEMARNAT Secretariat of Environment & Natural Resources
SEP Supplemental Environmental Project
SES Senior Executive Service
SFO Servicing Finance Office
SIDS Screening Information Data Sets
SIMS Shellfish Information Management System
SIP State Implementation Plans
SITE Superfund Innovative Technology Evaluation
SLAMS State and Local Air Monitoring Stations
SO2 Sulfur Dioxide
SOC Significant Operational Compliance
SOL Statute of Limitations
SPCC Spill Prevention, Control and Countermeasures
SRF State Revolving Fund
SSC Superfund State Contracts
TAG Technical Assistance Grant
TASWER Tribal Association of Solid Waste and Emergency Response
TMDL Total Maximum Daily Load
TOSC Technical Outreach Services for Communities
TPEA Tribal Program Enterprise Architecture
TRI Toxic Release Inventory
TRI-ME Toxic Release Inventory Made Easy
TSCA Toxic Substances Control Act
TSE Technology for a Sustainable Environment
TWG Targeted Watershed Grants
DIG Underground Injection Control
UNEP United Nations Environment Programme
URE Unit Risk Estimate
USTs Underground Storage Tanks
UV Ultraviolet
VCCEP Voluntary Children's Chemical Evaluation Program
VOC Volatile Organic Compound
WHAT If Watershed Health Assessment Tools Investigating Fisheries
WIPP Waste Isolation Pilot Plant
WPDG Wetland Program Development Grants
Appendix B - Acronyms and Abbreviations - Page 5
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T>
EPA-190-R-10-003
U.S. Environmental Protection Agency
Fiscal Year 2010 Agency Financial Report
November 15, 2010
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