Financial Management, Audit of EPA’S Fiscal 1999 Financial Statements, Audit Report 00100231, February

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OFFICE OF INSPECTOR GENERAL
AUDIT REPORT
FINANCIAL MANAGEMENT
AUDIT OF EPA’S FISCAL 1999
FINANCIAL STATEMENTS
Audit Report 00100231
February 29, 2000New York, New York
(Yosemite National Park)
Financial Audit Division
Cover Photo by Alan Bogus
Agency-wide Involved:
Regional and Program Offices
Washington, D.C.
ADP Audits and Assistance Staff
Dallas, Texas
Central Audit Division
San Francisco, California
Western Audit Division
Eastern Audit Division
Cincinnati, Ohio
Chicago, Illinois
Northern Audit Division
Research Triangle Park, NC
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 DivisionsAudit Report No. 00100231
/
Assistant Inspector General for Audit (2421)
TO:
report deals primarily with financial management issues, we are requesting the Acting Chief
with a written response to the audit report within 90 days of the final audit report date. Since this
In accordance with EPA Order 2750, the primary action official is required to provide us
Liability Act (CERCLA) to recover costs incurred not inconsistent with the NCP.
Justice under Section 107 of the Comprehensive Environmental Response, Compensation, and
audit report are not binding in any enforcement proceeding brought by EPA or the Department of
the standards established by the National Contingency Plan (NCP). The findings contained in this
In this particular audit, the OIG did not measure the audited offices’ performance against
the Agency’s environmental programs.
for external reporting purposes, as well as on an ongoing basis for the day-to-day management of
financial reporting processes to ensure that timely and reliable information is available at year-end
process. Our work shows, however, that further improvements are needed in the Agency’s
recognizes the efforts that were made to improve the Agency’s financial statement preparation
Attached is our audit report on the Agency's fiscal 1999 financial statements. The report
Enforcement and Compliance Assurance (2201A)
Assistant Administrator for
Steven A. Herman
Administration and Resources Management (3101A)
Assistant Administrator for
Romulo L. Diaz, Jr.
Acting Chief Financial Officer (2710A)
Michael W.S. Ryan
signed James O. Rauch / FROM:
EPA’s Fiscal 1999 Financial Statements SUBJECT:
MEMORANDUM
February 29, 20002

cc: See Report Distribution List
Attachment
Alan Bogus of his staff at 260-4943.
Gekosky, Divisional Inspector General for Audit, Financial Audit Division, at 260-1072, or
Should you or your staff have any questions about the report, please contact Edward
the public.
EPA or the Department of Justice. We have no objections to the further release of this report to
described in this audit report are not binding upon EPA in any enforcement proceeding brought by
in accordance with established EPA audit resolution procedures. Accordingly, the findings
EPA position. Final determinations on matters in this audit report will be made by EPA managers
opinion of the OIG, and the findings contained in this report do not necessarily represent the final
has identified and corrective actions the OIG recommends. This audit report represents the
This audit report contains findings that describe problems the Office of Inspector General
report in our audit tracking system.
date, reference to specific milestone dates will assist us in deciding whether or not to close this
written response to this report. For corrective actions planned but not completed by the response
Financial Officer, as the primary action official, take the lead in coordinating and providing us a1
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OBJECTIVES
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RESULTS IN BRIEF
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Audit Report 00100231
i
EPA’s Fiscal 1999 Financial Statements
Budgetary Resources, Statement of Financing, Statement of Custodial Activity, and the Notes to the Principal Statements.
s principal financial statements consist of the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of 1 EPA
and Other which in our opinion does not adequately address the source or composition of these
28 to the financial statements discloses these differences as Custodial Liability Reclassifications
Financing Sources for the Superfund Trust Fund and the Agency as a whole. In addition, Note
The Agency was unable to provide support in a timely manner for the composition of Other
Opinions on EPA’s Fiscal 1999 Financial Statements
principal financial statements.
the Agency complied with applicable laws and regulations that could materially affect the
adequate internal controls related to the principal financial statements were in place, and
the principal financial statements,
s Management Discussion and Analysis is consistent with information presented in EPA
are fairly presented, s principal financial statements EPA
Our primary objectives were to determine whether:
managing Federal programs.
management practices, systems and controls so that timely, reliable information is available for
financial audited financial statements was enacted to help bring about improvements in agencies
s financial statements each year. The requirement for Inspector General (OIG) audit the Agency
requires the Environmental Protection Agency (EPA or the Agency) prepare, and the Office of
We performed this audit in accordance with the Government Management Reform Act which
INTRODUCTION
EXECUTIVE SUMMARYAudit Report 00100231
ii
EPA’s Fiscal 1999 Financial Statements
data Agency managers have available for decision making.
present the information by goal. Weaknesses in this area also affect the quality of cost accounting
present EPA’s costs for the Superfund Trust Fund and All Other Appropriated Funds rather than
about the Agency’s ability to fairly present its costs by goal, Agency management decided to
originally planned to present its Statement of Net Cost by goal. After we expressed concern
accumulating costs by goal could not be relied upon to fairly state costs by goal. The Agency had
tracking the cost to achieve each of its goals. We found that the Agency’s methodology for
public. To do this, EPA developed a strategic plan with ten goals and during fiscal 1999 began
information gathered, and communicate information about performance to Congress and the
intended accomplishments, measure how well it is doing, make appropriate decisions based on the
In addition, the Government Performance and Results Act requires EPA to develop plans on
issues in order for the Agency to obtain the best possible opinions by March 1, 2000.
the Agency in improving the presentation of the financial statements and to resolve preparation
supplemental information by the agreed upon dates. Significant audit effort was needed to assist
being unable to provide us with complete, accurate and reliable statements, footnotes and
the Agency’s process for preparing the fiscal 1999 financial statements that resulted in the Agency
Although we were able to render opinions on EPA’s financial statements, weaknesses existed in
Statement of Financing, the fiscal 1999 Agency-wide financial statements are fairly presented.
effects on Equity and Net Costs of Operations, and the amounts reported as “Other” in the
reported as Other Financing Sources in the Statement of Changes in Net Position and the related
Except for the effects, if any, of adjustments that may have been necessary to correct the amounts
Other Appropriated Funds are fairly presented.
reported as “Other” in the Statement of Financing, the fiscal 1999 financial statements for All
Except for the effects, if any, of adjustments that may have been necessary to correct the amounts
Superfund Trust Fund are fairly presented.
effects on Equity and Net Costs of Operations, the fiscal 1999 financial statements for the
reported as Other Financing Sources in the Statement of Changes in Net Position and the related
Except for the effects, if any, of adjustments that may have been necessary to correct the amounts
presentation of these line items.
Therefore, we were unable to apply audit procedures to satisfy ourselves as to the fair
Statement of Financing for the All Other Appropriated Funds and the Agency as a whole.
amounts. The Agency was also unable to provide support for the composition of “Other” in the=
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Audit Report 00100231
iii
EPA’s Fiscal 1999 Financial Statements
Our work continues to show significant deficiencies for fiscal 1999. As a result, we continue to
financial systems were not compliant with Federal financial management system requirements.
The Office of Inspector General previously reported concerns that security plans for EPA’s core
available on an ongoing basis throughout the year to manage EPA’s environmental programs.
information used to prepare financial statements after the end of the year, as well as the data that is
These improvements should be designed to improve the accuracy and reliability of financial
The Agency needs to make further improvements in its financial statement preparation process.
preparation issues in order for the Agency to obtain