Financial Management, Audit OF EPA’S Fiscal 2000 Financial Statements, Audit Report 2001-1-00107, February

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OFFICE OF INSPECTOR GENERAL
AUDIT REPORT
FINANCIAL MANAGEMENT
AUDIT OF EPA’S FISCAL 2000
FINANCIAL STATEMENTS
Audit Report 2001-1-00107
FEBRUARY 28, 2001
New York, New York
Photo of Grand Teton National Park
Financial Audit Division
by Roland Cyr
Agency-wide Involved:
Regional and Program Offices
Washington, D.C.
Information Technology Audits Staff
San Francisco, California
Western Audit Division
Dallas, Texas
Kansas City, Kansas
Central Audit Division
Eastern Audit Division
Cincinnati, Ohio
Chicago, Illinois
Northern Audit Division
Research Triangle Park, North Carolina
Atlanta, Georgia
Southern Audit Division
Philadelphia, Pennsylvania
Mid-Atlantic Audit Division Assist Divisions:
Washington, D.C.
Financial Audit Division Lead Division:
Conducting the Audit:
Inspector General DivisionsTO:

this audit report are not binding in any enforcement proceeding brought by EPA or the
the standards established by the National Contingency Plan (NCP). The findings contained in
In this particular audit, the OIG did not measure the audited offices’ performance against
have no objections to the further release of this report to the public.
upon EPA in any enforcement proceeding brought by EPA or the Department of Justice. We
resolution procedures. Accordingly, the findings described in this audit report are not binding
this audit report will be made by EPA managers in accordance with established EPA audit
report do not necessarily represent the final EPA position. Final determinations on matters in
This audit report represents the opinion of the OIG, and the findings contained in this
recommends.
issues the Office of Inspector General has identified and corrective actions the OIG
standard, and your opposing view. The audit report also contains other findings that describe
view that the Agency is not in substantial compliance with the managerial cost accounting
the Agency’s environmental programs. Of even greater significance, the report reflects our
external reporting purposes, as well as on an ongoing basis for the day-to-day management of
statement preparation processes to ensure that accurate and timely information is available for
Our work shows, however, that further improvements are needed in the Agency’s financial
resulted in an unqualified audit opinion.
financial statements compared to prior year efforts. I am happy to say that the extensive effort
recognizes that the Agency significantly improved the preparation process for the fiscal 2000
Attached is our audit report on the Agency's fiscal 2000 financial statements. The report
Administration and Resources Management (3101A)
Acting Assistant Administrator for
Dave O’Connor
Deputy Chief Financial Officer (2710A)
Michael W.S. Ryan
Financial Audit Division (2422)
Divisional Inspector General
signed/ Edward Gekosky / FROM:
Audit Report on EPA’s Fiscal 2000 Financial Statements SUBJECT:
MEMORANDUM
February 28, 2001the NCP.
In accordance with EPA Order 2750,
260-4943.
2
cc: See Appendix IV, Report Distribution List
Attachment
260-1072, or either of the following staff: Paul Curtis at 260-8442 or Alan Bogus at
Should you or your staff have any questions about the report, please contact me at
will assist us in deciding whether or not to close this report in our audit tracking system.
actions planned but not completed by the response date, reference to specific milestone dates
address all issues and recommendations contained in Attachments 1 and 2. For corrective
lead in coordinating and providing us a written response to this report. The response should
we are requesting the Deputy Chief Financial Officer, as the primary action official, take the
the final audit report date. Since this report deals primarily with financial management issues,
official is required to provide us with a written response to the audit report within 90 days of
, the primary action Audit Management Process
Compensation, and Liability Act (CERCLA) to recover costs incurred not inconsistent with
Department of Justice under Section 107 of the Comprehensive Environmental Response,Introduction
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Review of EPA’s Required Supplemental Stewardship
Audit Report 2001-1-00107i
Management Discussion and Analysis, and reviewed this information for consistency with
Supplemental Stewardship Information (RSSI), Required Supplemental Information, and
We inquired of EPA’s management as to their methods of preparing its Required
Management Discussion and Analysis
Information, Required Supplemental Information, and
accordance with generally accepted accounting principles.
Fund and All Other Appropriated Funds, as of and for the year ended September 30, 2000, in
of the U.S. Environmental Protection Agency and its subsidiary funds, the Superfund Trust
budgetary resources, reconciliation of net cost to budgetary obligations, and custodial activity
individual assets, liabilities, net position, net cost, net cost by goal, changes in net position,
In our opinion, the consolidating financial statements present fairly the consolidated and
Opinions on EPA’s Fiscal 2000 Financial Statements
Results in Brief
could have a direct and material effect on the financial statements.
EPA management complied with applicable laws and regulations which, if not followed, •
place; and
EPA’s internal control over financial reporting related to the financial statements were in •
generally accepted accounting principles;
s financial statements were fairly presented in all material respects in conformity with EPA •
Our primary objectives were to determine whether:
Objectives
information is available for managing Federal programs.
financial management practices, systems, and controls so that timely, reliable agencies
requirement for audited financial statements was enacted to help bring about improvements in
s financial statements each year. The Office of Inspector General (OIG) to audit, the Agency
requires the Environmental Protection Agency (EPA or the Agency) to prepare, and the
We performed this audit in accordance with the Government Management Reform Act, which
Executive SummaryForm and Content of Agency Financial Statements ,
Audit Report 2001-1-00107 ii
compliance with certain provisions of laws and regulations was not an objective of our audit.
material effect on the determination of financial statement amounts. Providing an opinion on
provisions of laws and regulations, noncompliance with which could have a direct and
were free of material misstatement, we performed tests of its compliance with certain
As part of obtaining reasonable assurance about whether the Agency’s financial statements
Tests of Compliance with Laws and Regulations
Automated Application Processing Controls for the IFMS •
Timely Repayment of Asbestos Loan Debt to Treasury •
Documentation and Approval of Journal Vouchers •
EPA’s Interagency Agreement Invoice Approval Process •
EPA’s Process for Reviewing Unliquidated Obligations •
Accounting for Capitalized Property •
Process for Preparing Financial Statements •
in the following areas which are detailed further in Attachment 1:
In evaluating the Agency’s internal control structure, we identified seven reportable conditions
However, none of the reportable conditions is believed to be a material weakness.
involving the internal control and its operation that we consider to be reportable conditions.
In evaluating the Agency's internal controls, we noted certain matters discussed below
in a timely manner by employees in the normal course of performing their assigned functions.
noncompliance in amounts material to the financial statements may occur and not be detected
internal controls do not reduce, to a relatively low level, the risk that errors, fraud or
do not express an opinion on internal controls. Material weaknesses are situations where
The objective of our audit was not to provide assurance on internal controls, accordingly, we
Evaluation of Internal Controls
records. We note that this is a government-wide issue that needs to be resolved.
other Federal agencies were unable to reconcile EPA’s reported transactions with their
assets and liabilities by federal trading partner. We did find that, through no fault of EPA,
require agencies to report, as Required Supplemental Information, their intra-governmental
amendments to OMB Bulletin No. 97-01,
Information, and Management Discussion and Analysis. The January 7, 2000, technical
financial statements and the information presented in EPA’s RSSI, Required Supplemental
We did not identify any material inconsistencies between the information presented in EPA’s
are not expressing, an opinion on this information.
the principal financial statements. However, our audit was not designed to express, and weOther Noncompliance Issue with Laws and Regulations
Audit Report 2001-1-00107iii
are few in number and, in some cases, reflect differences of professional judgement on
statements as a reportable condition. The OCFO believed that the specific examples depicted
However, the OCFO disagreed with our classifying the process for preparing financial
planned a number of corrective actions to implement most of our recommendations.
report. The O