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U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

EPA Did Not Conduct 

Thorough Biennial 

User Fee Reviews 

Report No. 14-P-0129 March 4, 2014 

Scan this mobile 

code to learn more 

about the EPA OIG. 
 

 

Report Contributors: Paul Curtis 

 Arthur Budelier 

 Sheree James 

 Denise Patten 

 Wendy Swan 

Abbreviations 

CFO Chief Financial Officer 

CFO Act Chief Financial Officers Act of 1990 

EPA U.S. Environmental Protection Agency 

FY Fiscal year 

GAO U.S. Government Accountability Office 

IOAA Independent Offices Appropriation Act 

NPDES National Pollutant Discharge Elimination System 

OCFO Office of the Chief Financial Officer 

OFM Office of Financial Management 

OIG Office of Inspector General 

OMB Office of Management and Budget 

ORD Office of Research and Development 

SFFAS Statement of Federal Financial Accounting Standards 

Hotline Suggestions for Audits or Evaluations 

To report fraud, waste or abuse, contact To make suggestions for audits or evaluations, 

us through one of the following methods: contact us through one of the following methods:
 

email: OIG_Hotline@epa.gov email: OIG_WEBCOMMENTS@epa.gov 

phone: 1-888-546-8740 phone: 1-202-566-2391 

fax: 1-202-566-2599 fax: 1-202-566-2599 

online: http://www.epa.gov/oig/hotline.htm online: http://www.epa.gov/oig/contact.html#Full_Info 

write:	 EPA Inspector General Hotline write: EPA Inspector General Hotline 

1200 Pennsylvania Avenue, NW 1200 Pennsylvania Avenue, NW 

Mailcode 2431T Mailcode 2431T 

Washington, DC 20460
 Washington, DC 20460 
 

 

U.S. Environmental Protection Agency 14-P-0129 

March 4, 2014 Office of Inspector General 

At a Glance 

Why We Did This Review 

We performed this audit to 

determine whether the 

U.S. Environmental Protection 

Agency (EPA) conducts 

biennial reviews of the 

agency’s user fees and 

royalties programs, and 

reviews all agency programs 

to determine whether fees 

should be assessed for 

government services they 

provide. 

The Chief Financial Officers 

Act of 1990 (CFO Act) directs 

the Chief Financial Officer 

(CFO) to review, on a biennial 

basis, the agency’s fees and 

other charges for services 

provided. Office of 

Management and Budget 

(OMB) Circular A-25 provides 

for federal user fee reviews. 

The EPA’s Office of the Chief 

Financial Officer (OCFO) 

oversees the EPA program 

offices’ biennial user fee 

reviews. 

This report addresses the 

following EPA theme: 

 Embracing EPA as a high 

performing organization. 

For further information, 

contact our public affairs office 

at (202) 566-2391. 

The full report is at: 

www.epa.gov/oig/reports/2014/ 

20140304-14-P-0129.pdf 

EPA Did Not Conduct Thorough 

Biennial User Fee Reviews 

What We Found 

The EPA did not conduct thorough biennial user The EPA may not have fee reviews for fiscal years 2008–2009 and 2010– recovered all program costs 

2011, and did not review all agency programs to and collected millions of 

determine whether they should assess fees for dollars that could have been 

available to reduce the government services they provide. The EPA did federal budget deficit. not fully comply with the requirements to: 

 Conduct cost reviews to determine the full cost of providing a service. 

 Report biennial review results to OMB. 

 Request user fee exceptions by letter to the OMB Director. 

 Review all programs for fee potential. 

The EPA’s OCFO did not fully oversee the biennial reviews or provide internal 

review guidance, and the EPA’s program offices were not fully aware of biennial 

review requirements. Consequently, the EPA may not have recovered millions of 

dollars in program costs and collected funds that could have been available to 

reduce the federal budget deficit. We identified an EPA program—the Office of 

Water’s National Pollutant Discharge Elimination System (NPDES) program—with 

the potential to charge fees up to $8.9 million per year to recover its costs of 

providing a service. 

The EPA began improving its biennial review process with the fiscal years 2012– 

2013 review by issuing a biennial user fee review guide, training user fee program 

personnel on biennial reviews, and increasing headquarters oversight of reviews.

 Recommendations and Planned Agency Corrective Actions 

We recommend that the CFO discuss biennial user fee results in the Agency 

Financial Report, coordinate requests for an exception to charging fees, and 

request fee exception programs to provide complete information about program 

fees and costs and help determine whether fees should be assessed. We also 

recommend that the Office of Water conduct an analysis to determine the EPA’s 

full cost of issuing NPDES permits and determine whether it should charge fees 

for the permits. We had also recommended that the Office of Water propose a 

regulation to allow the EPA to charge NPDES permit fees, as appropriate. 

The agency concurred and provided acceptable corrective actions and milestone 

completion dates for all recommendations except one—to propose a regulation to 

allow the EPA to charge NPDES permit fees. We revised our recommendation by 

removing the proposal for a regulation to charge NPDES fees and adding the 

option for requesting an exception to fees, to which the Office of Water agreed. 
 

 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

March 4, 2014 

MEMORANDUM 

SUBJECT:	 EPA Did Not Conduct Thorough Biennial User Fee Reviews 

 Report No. 14-P-0129 

FROM:	 Arthur A. Elkins Jr. 

TO:	 Maryann Froehlich, Acting Chief Financial Officer 

Office of the Chief Financial Officer 

Nancy K. Stoner, Acting Assistant Administrator 

 Office of Water 

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems 

the OIG has identified and corrective actions the OIG recommends. The offices we identified with 

primary jurisdiction over the audit issues and the responsibility for taking corrective action are the 

Office of the Chief Financial Officer’s Office of Financial Management and the Office of Water’s 

Office of Wastewater Management. This report represents the opinion of the OIG and does not 

necessarily represent the final EPA position. Final determinations on matters in this report will be made 

by EPA managers in accordance with established audit resolution procedures. 

Action Required 

The agency agreed with recommendations 1 through 4 and completed the corrective actions. These 

recommendations are closed and no further action is required. The agency stated that it agrees with our 

revised recommendation 5 and took the corrective action to request the Office of Management and 

Budget (OMB) for an exception to charging National Pollutant Discharge Elimination System program 

fees. Therefore, you are not required to provide a written response for recommendation 5. However, it 

will remain open until the OMB approves your request. Should you choose to provide a final response, 

we will post your response on the OIG’s public website, along with our memorandum commenting on 

your response. You should provide your response as an Adobe PDF file that complies with the 

accessibility requirements of Section 508 of the Rehabilitation Act of 1973, as amended. We will post 

this report to our website at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Richard Eyermann, 

acting Assistant Inspector General for Audit, at (202) 566-0565 or eyermann.richard@epa.gov; 

or Paul Curtis, Product Line Director for Financial Statement Audits, at (202) 566-2523 or 

curtis.paul@epa.gov. 
 

 

 

 

 

 

 

 

 

EPA Did Not Conduct Thorough 14-P-0129 

Biennial User Fee Reviews 

Table of Contents 

Chapters 

1 Introduction ........................................................................................................ 1

 Purpose ....................................................................................................... 1 

Background ................................................................................................. 1 

 Scope and Methodology .............................................................................. 3 

2 EPA Should Conduct More Thorough Biennial User Fee Reviews .............. 4 

EPA Programs Generally Did Not Conduct Cost Reviews .......................... 4 

EPA Reports to OMB Were Not Complete .................................................. 6 

EPA Did Not Follow OMB Policy to Request User Fee Exceptions ............ 7 

EPA Did Not Review All Its Programs for Fee Potential .............................. 7 

Improvements Made for FYs 2012–2013 Biennial Review .......................... 8 

Conclusion................................................................................................... 8 

 Recommendations ...................................................................................... 9 

 Preliminary Agency Actions ......................................................................... 9 

Agency Comments and OIG Evaluation ...................................................... 9 

3 NPDES Permit Program Should Consider Charging Fees ............................. 10 

EPA Did Not Propose NPDES Fees Since Early 1990s .............................. 10 

Conclusion................................................................................................... 11 

 Recommendations ...................................................................................... 11 

Agency Comments and OIG Evaluation ...................................................... 11 

Status of Recommendations and Potential Monetary Benefits.............................. 12
 

Appendices 

A Details on Scope and Methodology.................................................................. 13
 

B Agency Response to Draft Report.................................................................... 16
 

C Distribution ......................................................................................................... 19
 
 

 

 

Chapter 1

Introduction 

Purpose 

We performed this audit to evaluate the U.S. Environmental Protection Agency’s 

(EPA’s) biennial user fee reviews. With the Administration’s current focus on 

reducing the federal budget deficit, we wanted to determine whether the EPA was 

conducting effective reviews of its user fee programs. The objectives of our audit 

were to determine whether the EPA: 

 Conducts biennial reviews of the EPA’s user fees and royalties programs. 

 Reviews all agency programs to determine whether fees should be 

assessed for government services they provide. 

Background 

In recent Office of Inspector General (OIG) reviews of two EPA user fee 

programs, we found that the programs were not conducting biennial cost reviews1 

as required by the Chief Financial Officers Act of 1990 (CFO Act) and as directed 

by Office of Management and Budget (OMB) Circular A-25. Without a cost 

study, the EPA programs did not have the cost data necessary to determine 

whether they should adjust their fees. Based on the findings in those reports, 

we conducted this additional work to determine the extent of biennial user fee 

reviews for all EPA fee programs. 

For budget purposes, the U.S. Government Accountability Office (GAO) defines 

user fees as fees assessed on users for goods or services provided by the federal 

government.2

 User financing, in the form of user fees, is one approach to 

financing federal programs or activities. User fees assign part or all of the costs of 

these programs and activities—the cost of providing a benefit that is above and 

beyond what is normally available to the general public—to readily identifiable 

users of those programs and activities. Because user fees represent a charge for a 

service or benefit received from a government program, payers may expect a tight 

link between their payments and the cost of providing services. 

1

 EPA OIG reports, EPA Should Update Its Fees Rule to Recover More Motor Vehicle and Engine Compliance
 

Program Costs, Report No. 11-P-0701, September 23, 2011; and EPA Is Not Recovering All Its Costs of the 

Lead-Based Paint Fees Program, Report No. 13-P-0163, February 20, 2013. 2

 See GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP (Washington, D.C.: 

September 2005). 

14-P-0129 1 
 

 

Statutory Authorities 

The Independent Offices Appropriation Act (IOAA) of 1952 authorizes federal 

agencies to charge fees for the services they provide. The IOAA requires that each 

charge be fair and based on the costs to the government, the value of the service 

to the recipient, the public policy or interest served, and other relevant facts. 

The IOAA states that each service provided by a federal agency should be selfsustaining to the extent possible. In many instances, Congress has provided 

specific statutory authority to federal agencies to assess user fees. 

The CFO Act requires the Chief Financial Officer (CFO) to review, on a biennial 

basis, the fees, royalties, rents and other charges imposed by the agency for 

services and things of value it provides. The CFO shall make recommendations 

on revising those charges to reflect costs incurred by the agency in providing 

those services and things of value. 

Federal Policy, Standards and Guidance 

OMB Circular A-25, User Charges, dated July 8, 1993, implements Title V of the 

IOAA. It establishes federal policy regarding charges for government goods and 

services that convey special benefits to recipients beyond those accruing to the 

general public. It establishes that user charges should be set at a level sufficient to 

recover the full cost of providing the service, resource or good. It requires the 

agency to review the user charges for agency programs biennially, to include 

(1) assurance that existing charges are adjusted to reflect unanticipated changes in 

costs or market values, and (2) a review of all other agency programs to determine 

whether fees should be assessed for government services or the user of 

government goods or services. Agencies will generally implement user charges 

through the promulgation of regulations. When there are statutory prohibitions or 

limitations on charges, agencies should propose legislation to permit charges to be 

established. Agencies should discuss the results of the biennial review of user fees 

and any resultant proposals in the Agency Financial Report. 

The Statement of Federal Financial Accounting Standards (SFFAS) No. 4, 

Managerial Cost Accounting Standards and Concepts, dated July 31, 1995, 

provides that full cost should be considered as a primary basis for setting fees for 

government goods and services. The full cost of an output is the total amount of 

resources used to produce the output, including direct and indirect costs. Indirect 

costs are costs that are jointly or commonly used to produce two or more types of 

outputs but are not specifically identifiable with any of the outputs. Typical 

examples of indirect costs include general and administrative services; general 

research and technical support; security; rent; employee health and recreation 

facilities; and operating and maintenance costs for buildings, equipment and 

utilities. 

14-P-0129 2 
 

 

The GAO’s Standards for Internal Controls in the Federal Government requires 

that internal controls provide reasonable assurance of reliable financial reporting. 

GAO’s report, Federal User Fees – A Design Guide, GAO-08-386SP, dated 

May 2008, states that agencies must substantively review and report on their fees 

on a regular basis. This is to ensure that Congress, stakeholders and agencies have 

complete information about changing program costs and whether authorized 

activities align with program activities. Transparent processes for reviewing and 

updating fees help assure payers and other stakeholders that fees are set fairly and 

accurately and are spent on the programs and activities Congress intended. 

Responsible Offices 

The offices we identified with primary jurisdiction over the audit issues and the 

responsibility for taking corrective action on our recommendations are the Office 

of Financial Management within the Office of the Chief Financial Officer 

(OCFO) and the Office of Wastewater Management within the Office of Water. 

Scope and Methodology 

We conducted this audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. We conducted our audit from February through 

August 2013. Appendix A contains details on our scope and methodology. 

14-P-0129 3 
 

 

Chapter 2

EPA Should Conduct More Thorough 

Biennial User Fee Reviews 

The EPA did not conduct thorough biennial user fee reviews for fiscal years 

(FYs) 2008–2009 and 2010–2011. Although the EPA prepared a biennial user fee 

review report, the EPA did not fully comply with the requirements to: 

 Conduct cost reviews to determine the full cost of providing a service.
 

 Report biennial review results to OMB.
 

 Request user fee exceptions by letter to the OMB Director.
 

 Review all programs for fee potential.
 

The CFO Act and OMB Circular A-25 require the agency to perform biennial cost 

reviews of agency user fee program charges and make recommendations on 

revising those charges to reflect agency costs incurred. The EPA’s OCFO did not 

fully oversee the biennial reviews or provide internal review guidance, and EPA 

program offices were not fully aware of the biennial review requirements. By not 

performing fully compliant biennial user fee reviews, the EPA may not have 

recovered all related program costs and collected funds that otherwise could have 

been available to reduce the federal budget deficit. We identified an EPA 

program—the Office of Water’s National Pollutant Discharge Elimination System 

(NPDES) program—with the potential to charge fees up to $8.9 million per year 

to recover its costs of providing a service. The EPA began improving its biennial 

review process with the FYs 2012–2013 review by issuing a biennial user fee 

review guide, training user fee program personnel to perform biennial reviews, 

and increasing headquarters oversight of the reviews. 

EPA Programs Generally Did Not Conduct Cost Reviews 

The EPA’s programs that charge user fees, and programs with exceptions from 

charging user fees, generally did not conduct cost reviews to determine the full 

cost of providing a service. The programs need cost reviews to determine their 

actual costs and decide whether they need to adjust fees to reflect changes in costs 

or propose new charges, as required by OMB Circular A-25. 

OCFO’s Office of Financial Management (OFM) had oversight responsibility for 

the EPA’s biennial user fee reviews but did not provide sufficient oversight. OFM 

requested the EPA’s programs to provide updated fee descriptions and indicate 

whether fees (1) recover the full cost of the service provided, and (2) were revised 

or adjusted to reflect changes in the cost or value of the service. Since the user fee 

programs generally did not conduct cost reviews, the programs could not indicate 

whether they recovered the full cost of the service provided or revised fees to 

14-P-0129 4 
 

 

reflect changes in the costs. OFM did not fully evaluate the information it 

received or follow up with the programs to obtain all the cost information it 

needed. OFM’s biennial user fee report to OMB did not indicate whether fees 

recovered the full cost of the service provided, and for some types of fees whether 

the fees were revised or adjusted. 

Some fee programs—including pesticides maintenance, pesticides registration, 

Clean Air Act Part 71 Operating Permits and Freedom of Information Act— 

performed a cost analysis to comply with reporting requirements other than the 

biennial review requirement. Some of these cost analyses did not include all 

indirect costs to obtain the full cost of their services, as directed by SFFAS No. 4 

and OMB Circular A-25. 

EPA’s Office of Research and Development (ORD) did not conduct biennial cost 

reviews for its programs that collected licensing fees and royalties. However, 

ORD may not be subject to the OMB Circular A-25 requirement to biennially 

review program costs because ORD does not base its licensing fees and royalties 

on total program costs. OMB Circular A-25 provides guidance regarding the 

assessment of user charges under statutes other than the IOAA, but only to the 

extent permitted by law and not inconsistent with the statute. ORD programs 

generally establish their fees by individual agreement, based on specific statutory 

authority instead of full cost recovery guidance in SFFAS No. 4 and 

OMB Circular A-25. For example: 

	 The Stevenson–Wydler Technology Innovation Act of 1980 promotes the 

use of federally funded technology developments by state and local 

governments and the private sector. ORD collects licensing fees and 

royalties from negotiated license agreements on patented technologies that 

the EPA owns. ORD receives an up-front negotiated licensing fee and 

annual royalties based on a percentage or amount of the licensee’s profit 

from sale or use of the technology. 

	 The Environmental Research, Development, and Demonstration 

Authorization Act of 1980 (42 U.S. Code § 4370), Reimbursement for Use 

of Facilities, authorizes the Administrator to allow appropriate use of EPA 

research and test facilities by outside groups or individuals and allows the 

agency to receive reimbursement for costs incurred or waive 

reimbursement for nonprofit private or public entities when the 

Administrator finds this to be in the public interest. ORD uses outside 

user’s agreements to charge users for use of its research and test facilities. 

	 The Federal Technology Transfer Act of 1986 authorizes government 

laboratories to enter into cooperative research and development 

agreements with universities and the private sector for technological 

transfer for commercial purposes. These agreements are for joint research 

projects where both parties receive benefits. When a fee is involved, it 

14-P-0129 5 
 

 

usually reimburses the EPA only for the cost of supplies, travel or 

contractor costs. 

From the EPA’s list of programs with user fee exceptions, we identified the 

NPDES program as a potential fee program. The NPDES program has the 

potential to charge fees up to $8.9 million per year to recover its costs of issuing 

permits. Chapter 3 discusses the NPDES permit program’s potential for proposing 

fees. 

EPA Reports to OMB Were Not Complete 

The EPA’s biennial user fee reports to OMB were not complete. The EPA 

included a summary biennial user fees report, Biennial User Fees, in the 

Agency Financial Report, and submitted more detail in a memorandum to OMB 

describing the programs with existing fees, proposed fees and fee exceptions. The 

EPA’s summary report in the FY 2011 Agency Financial Report did not discuss 

the results of the biennial review and any resultant fee proposals. Further, the 

EPA’s more detailed memorandum report to OMB provided incomplete cost 

information. According to OMB Circular A-25, agencies should discuss the 

results of the biennial review of user fees and any resultant proposals in the 

Agency Financial Report. However, the EPA’s reports were not complete because 

the fee programs updated the fee descriptions from the prior biennial review 

without conducting a thorough cost review, and OCFO did not provide sufficient 

oversight and validate those reviews. Without complete information, the reports to 

OMB did not clearly present the condition of EPA fee programs and provide 

stakeholders with complete information. Transparent processes for reviewing and 

updating fees help assure payers and others that fees are set fairly and accurately. 

We found the following areas where the EPA’s reports were not complete: 

	 The EPA’s FY 2011 Agency Financial Report did not discuss the results 

of the biennial reviews. 

	 Prior to FY 2010, the EPA reported its financial performance in the annual 

Performance and Accountability Report but its FY 2009 Performance and 

Accountability Report did not include a biennial user fee report. 

	 The EPA’s FYs 2008–2009 and 2010–2011 detailed biennial user fee 

reports included the revenue collected for each existing fee program but 

not the related program costs. Programs that requested an exception from 

charging fees did not report their program costs. 

	 The EPA could not provide documentation to support its transmittal of the 

FY 2011 detailed biennial user fees memorandum report to OMB. 

14-P-0129 6 
 

 

 

EPA Did Not Follow OMB Policy to Request User Fee Exceptions 

The EPA did not follow the OMB Circular A-25 procedure for requesting user fee 

exceptions by letter to the OMB Director for programs that did not charge fees. 

OMB Circular A-25 provides that agency heads request an exception by letter to 

the OMB Director. EPA program managers and staff did not have the EPA 

Administrator request fee exceptions by letter to the OMB Director because they 

were not aware of the OMB requirement to do so. By not getting fee exception 

approval from OMB, the EPA did not have OMB’s assurance that fees were not 

necessary. The EPA may not have charged appropriate fees in programs to reduce 

the federal budget deficit. 

The OCFO stated it included the programs reporting exceptions in each biennial 

review detailed report to the OMB. Since the OCFO did not receive feedback 

from the OMB on its detailed reports, the OCFO believed that its method of 

reporting agency user fee activities was acceptable to OMB. However, when we 

asked the OMB about EPA user fee exceptions, the OMB stated that it had not 

received or granted user fee exceptions to the EPA in recent years. The OMB 

stated that agency heads may request an exception by letter to the OMB Director. 

EPA Did Not Review All Its Programs for Fee Potential 

Prior to the FYs 2012–2013 biennial review, the EPA did not review all agency 

programs to determine whether they should assess fees for government services 

they provide. OMB Circular A-25 directs the agency to conduct biennial reviews 

of programs with user charges and all other programs to determine whether it 

should assess fees for government services it provides. Program office personnel 

were not aware of the biennial review requirement, and OCFO did not provide 

internal guidance for reviewing all agency programs. By not reviewing all agency 

programs, the EPA may not have identified all programs eligible for user fee 

charges and may have missed an opportunity to charge appropriate fees. 

OCFO and program office personnel stated that for biennial reviews conducted 

through the FYs 2010–2011 review, they reviewed the identified user fee 

programs but did not review all other agency programs. With our own limited 

research, we identified the EPA’s Underground Injection Control permitting 

program under the Safe Drinking Water Act as a potential user fee program. The 

EPA did not include the program in the biennial review, although the program 

provided a service to specific recipients for which the EPA did not charge fees. 

This is an example of an activity that the EPA should include in the biennial 

review to determine whether user fees should be assessed. 

14-P-0129 7 
 

 

 

 

Improvements Made for FYs 2012–2013 Biennial Review 

Based on the findings of previous OIG audits of fee programs, the OCFO has 

taken action to help the EPA’s fee programs conduct a more thorough FYs 2012– 

2013 review. The OCFO issued a biennial user fee review guide on March 8, 

2013, and conducted biennial user fee review training for the user fee programs 

on March 21, 2013. The OCFO’s guidance for the FYs 2012–2013 review 

provides the roles and responsibilities, review procedures and summary cost 

worksheets for completing the review. Some significant provisions are: 

 OFM conducts the biennial user fee reviews. 

 Program offices provide the costs of the program activities. 

 Program offices review all activities for potential new users. 

 The Office of Budget collaborates with program offices to review 

opportunities for new or updated fees. 

The OCFO increased its oversight of the FYs 2012–2013 biennial review by 

assigning an OCFO staff member to each existing fee program to oversee its 

review. Based on a prior OIG audit recommendation,3 the OCFO also conducted a 

FY 2011 biennial cost review of the EPA’s Motor Vehicle and Engine 

Compliance Program in the Office of Air and Radiation. The OCFO used the 

review experience to help develop its review process for future biennial reviews. 

Conclusion 

The EPA did not conduct thorough biennial user fee reviews for FYs 2008–2009 

and 2010–2011. The EPA should follow the OMB biennial review policy to 

conduct cost reviews, include complete information in OMB reports, request user 

fee exceptions, and review all programs for fee potential. By not performing fully 

compliant biennial user fee reviews in the past, the EPA may not have recovered 

all related program costs and collected funds that otherwise could have been 

available to reduce the federal budget deficit. We believe that the EPA could help 

the federal government reduce the budget deficit by performing more thorough 

biennial user fee reviews that identify potential additional revenue. We identified 

an EPA program with the potential to charge fees up to $8.9 million per year to 

recover its costs of providing a service. 

3

 EPA OIG report, EPA Should Update Its Fees Rule to Recover More Motor Vehicle and Engine Compliance 

Program Costs, Report No. 11-P-0701, September 23, 2011, recommended that the EPA conduct biennial reviews 

of the Motor Vehicle and Engine Compliance Program. 

14-P-0129 8 
 

 

 

Recommendations 

We recommend that the Chief Financial Officer: 

1.	 Include in the Agency Financial Report a discussion of the biennial user fee 

review results and any resultant proposals, to fully comply with OMB 

Circular A-25 reporting requirements. 

2.	 Coordinate with programs that have claimed an exemption to charging fees 

under OMB Circular A-25 to have the EPA Administrator request an 

exception by letter to the OMB Director. 

3.	 Request the fee exception programs to report their program costs to OCFO 

to provide complete information about program fees and costs and to help 

determine whether fee exception programs should assess fees. 

Preliminary Agency Actions 

The OCFO issued a biennial user fee review guide that instructed the program 

offices to provide costs of the program activities and review all activities for 

potential users. The OCFO also increased its oversight of the FYs 2012–2013 

biennial review. Therefore, we make no recommendations to develop a review 

guide, conduct cost reviews, review all activities for potential users and increase 

headquarters oversight. 

Agency Comments and OIG Evaluation 

The agency agreed with our findings and recommendations and provided intended 

corrective actions and estimated completion dates. 

14-P-0129 9 
 

 

Chapter 3

NPDES Permit Program 

Should Consider Charging Fees 

The EPA did not review the NPDES program’s permit costs since the early 1990s 

to determine whether the agency should assess fees for permits in the states, 

territories and tribes in which the EPA is the permitting authority. Title V of the 

IOAA authorizes an agency to charge a fee for a service the agency provides. Due 

to other priorities, the EPA has not considered whether it should assess fees for 

NPDES permits or reintroduce a proposal for a fee regulation since the EPA 

withdrew an internal proposal from the early 1990s for a regulation to allow the 

EPA to charge fees for issuing federal NPDES permits. By not proposing the fees, 

the EPA may have missed an opportunity to charge appropriate fees to recover its 

costs. Based on the EPA’s recent cost estimate of $8.9 million per year for issuing 

federal permits, the NPDES program has the potential to charge up to $8.9 million 

in fees to recover its costs. 

EPA Did Not Propose NPDES Fees Since Early 1990s 

Although the Clean Water Act does not address the subject of federal fees for 

federally issued NPDES permits, the IOAA authorizes federal agencies to charge 

fees for the services they provide. The EPA did not review the NPDES permit 

program costs since the EPA considered— but withdrew—a proposal from the 

early 1990s for a regulation under the authority of the IOAA to allow the EPA to 

charge fees for issuing federal NPDES permits. Due to other priorities, the Office 

of Water did not consider whether it should assess fees for NPDES permits or 

attempt a new proposed regulation to charge NPDES fees. 

The Office of Water included the NPDES permit program on the FYs 2008–2009 

and 2010–2011 user fee exceptions list that it forwarded to the OCFO for 

inclusion in the biennial user fee reports to OMB. The Office of Water believed 

that OMB approved an exception for NPDES because the Office of Water did not 

receive a response from OCFO or OMB about the exception. The Office of Water 

stated that it assumed that OCFO had received a waiver from OMB that granted 

the NPDES permit program an exception from charging fees. However, OMB 

stated that it had not received or approved any fees exception requests from the 

EPA in recent years. By not proposing NPDES fees, the EPA may have missed an 

opportunity to charge appropriate fees to recover its costs. 

On May 13, 2013, subsequent to the start of our audit, the NPDES permitting 

program provided an analysis of its estimated annual direct labor costs totaling 

$8,875,031. Due to time constraints, the cost analysis did not include other direct 

costs, such as contracts, supplies and travel. According to the Office of Water, the 

NPDES permit actions may include those types of costs, but the total amount of 

14-P-0129 10 
 

 

such costs would not significantly alter the estimate. The analysis also did not 

include indirect costs needed for full costing, as required by SFFAS No. 4 and 

OMB Circular A-25. Based on the EPA’s cost estimate for issuing federal 

permits, the NPDES program has the potential to charge up to $8.9 million 

per year in fees to recover its costs. 

Conclusion 

According to the OMB’s FY 2014 budget overview, the President is committed to 

continuing to reduce the federal budget deficit. We believe that the EPA could 

help the federal government in this endeavor by collecting fees to recover its 

NPDES permitting costs. The EPA has authority under the IOAA to charge fees 

for NPDES permits, and the OMB Circular A-25 general policy is that user 

charges will be instituted through the promulgation of regulations. Therefore, the 

EPA should consider recovering its NPDES permit program costs by charging 

fees for NPDES permits. The EPA could collect an estimated $8.9 million in fees 

per year, which would help reduce the federal budget deficit. 

Recommendations 

We recommend that the Assistant Administrator for Water: 

4.	 Conduct a cost analysis of all direct and indirect costs to determine the 

EPA’s full cost of issuing NPDES permits. 

5.	 Apply federal user fee policy in determining whether to (a) charge fees for 

issuing federal NPDES permits in which the EPA is the permitting 

authority, or (b) request an exception from OMB to charging fees. 

Agency Comments and OIG Evaluation 

The agency agreed with recommendation 4 and provided its corrective action and 

completion date. The agency did not agree with part of our original 

recommendation 5 in the draft report to propose a regulation to allow the EPA to 

charge fees, as appropriate. The Office of Water stated that it was working with 

the OCFO to request an exception from an NPDES user fee. We agreed with the 

agency’s proposed alternative action and we revised recommendation 5 

accordingly. We removed the proposal for a regulation to charge fees and added 

an option for requesting an exception to fees, to which the Office of Water stated 

that it will agree. Although the EPA requested a fees exception on December 6, 

2013, we consider recommendation 5 to be open until the OMB approves the 

request. 

14-P-0129 11 
 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

1 9 Include in the Agency Financial Report a 

discussion of the biennial user fee review results 

C Chief Financial Officer 12/31/13 

and any resultant proposals, to fully comply with 

OMB Circular A-25 reporting requirements. 

2 9 Coordinate with programs that have claimed an 

exemption to charging fees under OMB Circular 

A-25 to have the EPA Administrator request an 

exception by letter to the OMB Director. 

C Chief Financial Officer 12/31/13 

3 9 Request the fee exception programs to report their 

program costs to OCFO to provide complete 

information about program fees and costs and to 

help determine whether fee exception programs 

should assess fees. 

C Chief Financial Officer 6/30/13 

4 11 Conduct a cost analysis of all direct and indirect 

costs to determine the EPA’s full cost of issuing 

NPDES permits. 

C Assistant Administrator 

for Water 

6/30/13 

5 11 Apply federal user fee policy in determining 

whether to (a) charge fees for issuing federal 

NPDES permits in which the EPA is the permitting 

authority, or (b) request an exception from OMB to 

charging fees. 

O Assistant Administrator 

for Water 

$17,8004 

O = Recommendation is open with agreed-to corrective actions pending.
 

C = Recommendation is closed with all agreed-to actions completed.
 

U = Recommendation is unresolved with resolution efforts in progress.
 

4

 OIG’s policy is to base efficiencies from recurring events on the projected monetary benefit for the current and 

following year. The potential monetary benefit represents the recurring cost savings from a proposed regulation to 

allow the EPA to charge NPDES permit fees, based on the estimated program costs for the current and following 

year. 

14-P-0129 12 

1 
 

 

Appendix A 

Details on Scope and Methodology 

We reviewed the EPA’s processes for conducting biennial user fee reviews. To gain an 

understanding of the processes, we: 

 Reviewed the applicable laws, federal policy, standards and guidance, and relevant prior 

audit reports. 

 Reviewed the EPA’s biennial review procedures and biennial review reports for 

FYs 2008–2009 and 2010–2011. 

 Interviewed personnel in OCFO and program offices with user fees or royalties, proposed 

user fees and exceptions to user fees. 

 Examined OCFO’s March 2013 biennial user fee review guide and training materials. 

 Reviewed the EPA’s 13 program offices’ FY 2012 management integrity assurance 

letters for reported internal control weaknesses. 

We interviewed personnel regarding the following programs and their biennial user fee reviews: 

 Pesticides maintenance fee (Federal Insecticide, Fungicide, and Rodenticide Act). 

 Pesticides registration service fee (Pesticide Registration Improvement Extension Act). 

 Premanufacture Notice program. 

 Operating permits program (Clean Air Act, 40 Code of Federal Regulations, 

Parts 70 and 71). 

 Research and development licensing fees and royalties. 

 Freedom of Information Act. 

 NPDES permitting. 

 Acid Rain Allowance Transfer program. 

 ENERGY STAR program. 

 Resource Conservation and Recovery Act permitting.
 

We examined OCFO’s work plan and supporting documentation for its biennial user fee review 

of the FY 2011 Motor Vehicle and Engine Compliance Program. We did not verify the accuracy 

of that program’s biennial review cost analysis. 

We did not assess the reliability of data in any information systems because their use did not 

materially affect our findings, conclusions or recommendations. We accessed fee collection 

information in Compass Financials, the agency’s accounting system. We did not review the 

internal controls over Compass Financials from which we obtained financial data, but relied on 

the review conducted during the audit of the EPA’s FY 2012 financial statements. 

14-P-0129 13 
 

 

Prior Reports Reviewed 

We reviewed the prior EPA OIG and GAO reports listed in table A-1. The two EPA OIG reports 

had findings and recommendations related to fee collections and recovery of program costs. The 

three GAO reports contained information relevant to our review. We used the information and 

issues disclosed in the EPA OIG and GAO reports to help identify issues as we conducted our 

audit. 

Table A-1: Prior reports reviewed 

Report Title Report No. Date 

EPA Is Not Recovering All Its Costs of the Lead-Based 

Paint Fees Program EPA OIG 13-P-0163 February 20, 2013 

2012 Annual Report: Opportunities to Reduce 

Duplication, Overlap and Fragmentation, Achieve 

Savings, and Enhance Revenue 

GAO-12-342SP February 28, 2012 

EPA Should Update Its Fees Rule to Recover More 

Motor Vehicle and Engine Compliance Program Costs EPA OIG 11-P-0701 September 23, 2011 

Federal User Fees: A Design Guide GAO-08-386SP May 29, 2008 

Federal User Fees: Some Agencies Do Not Comply 

with Review Requirements GAO/GGD-98-161 June 30, 1998 

Source: OIG analysis. 

EPA OIG Report No. 13-P-0163 disclosed that an EPA program was not collecting enough fees 

to recover all the costs of administering its program. The EPA had not conducted a formal cost 

study to determine its actual program costs, and needed to update its fees rule to reflect the 

amount of fees necessary for the program to recover its costs. The EPA agreed with the report’s 

recommendations and said it planned to update the fees rule and conduct biennial reviews. 

GAO Report No. GAO-12-342SP presented cost savings or revenue enhancement opportunities, 

including GAO’s 2011 survey of federal agency fee reviews. The survey responses indicated that 

for most fees, agencies (1) had not discussed fee review results in annual reports, and (2) had not 

reviewed the fees and were inconsistent in their ability to provide fee review documentation. 

EPA OIG Report No. 11-P-0701 disclosed that an EPA program was not collecting enough fees 

to recover all reasonable program costs, based on the EPA’s rough cost estimate conducted 

during our audit. The program had not conducted a formal cost study since 2004 to determine its 

actual program costs, and had not updated the fees rule to recover more costs. The EPA agreed 

with the report’s recommendations and said it planned to update the fees rule and conduct 

biennial reviews. 

GAO Report No. GAO-08-386SP reported on a study of how user fee design characteristics may 

influence the effectiveness of user fees. GAO examined how the four key design and 

implementation characteristics of user fees—how fees are set, collected, used and reviewed— 

14-P-0129 14 
 

 

 

may affect the economic efficiency, equity, revenue adequacy and administrative burden of costbased fees. The principles outlined in the design guide present a framework for user fee design. 

GAO Report No. GAO/GGD-98-161 was a response to a congressional request to review 

agencies’ adherence to the user fee review and reporting requirements in the CFO Act and 

OMB Circular A-25. The report disclosed that six of the 24 agencies reviewed all of their 

reported user fees at least every 2 years as required by OMB Circular A-25 during FYs 1993 

through 1997, three reviewed all of their reported fees at least once, 11 reviewed some of their 

reported fees, and four did not review any of their reported fees during this period. The agencies 

provided various reasons for not reviewing fees, including insufficient cost data and that some of 

the fees being set by legislation could not be changed without new legislation. 

14-P-0129 15 
 

 

 

 

 

Appendix B 

Agency Response to Draft Report 

(Received September 27, 2013) 

MEMORANDUM 

SUBJECT:	 Response to Office of Inspector General Draft Report, Project No. OA-FY13-0103 

“EPA Did Not Conduct Thorough Biennial User Fee Reviews,” dated August 12, 

2013 

FROM: Maryann Froehlich /s/ 

 Acting Chief Financial Officer 

Nancy K. Stoner, Acting Assistant Administrator /s/ 

Office of Water 

TO:	 Richard Eyermann, Acting Assistant Inspector General 

Office of Audit 

Thank you for the opportunity to respond to the issues and recommendations in the subject audit 

report. The following is a summary of the agency’s overall position, along with our responses on 

each of the report recommendations. For those report recommendations with which the agency 

agrees, we have provided high-level intended corrective actions and estimated completion dates. 

AGENCY’S OVERALL POSITION 

The agency concurs with the OIG’s overall recommendations. During FY 2013, the EPA 

improved its biennial review process by issuing a biennial user fee review; conducting webinars 

to train personnel on the review process, and increasing oversight of these reviews. As part of 

our implementation guidance we also evaluated the cost of providing the government services 

and fees for both existing and potential programs. 

The agency will: 

	 Discuss the results of the FY 2013 biennial user fee review in the Agency’s Financial 

Report. 

	 Make recommendations, to the Office of Management and Budget Director, for 

exceptions to charge user fees for the EPA programs that meet the criteria outlined in the 

OMB Circular A-25, Section 6c. 

However, the Office of Water does not concur with the recommendation to propose a regulation 

to allow the EPA to charge fees. 

14-P-0129 16 
 

 

 

CONTACT INFORMATION 

If you have any questions regarding this response, please contact Stefan Silzer, Director of the 

Office of Financial Management on (202) 564-5389 or Sheila Frace, Deputy Office Director, 

Office of Wastewater Management, Office of Water on (202) 564-0748. 

Attachment 

cc: David Bloom 

Joshua Baylson 

Stefan Silzer 

John O’Connor 

Carol Terris 

Jeanne Conklin 

Meshell Jones-Peeler 

Dale Miller 

Sandy Dickens 

Barbara Freggens 

Janet McCabe 

Betsy Shaw 

Maureen Hingeley 

 Jim Jones 

Mike Shapiro 

Andrew Sawyers 

 Sheila Frace 

Deborah Nagle 

Brian Frazer 

Louis Eby 

 Marilyn Ramos

 Lek Kadeli 

 Arthur Elkins 

Charles Sheehan 

Aracely Nunez-Mattocks 

Alan Larsen 

Carolyn Copper 

Patricia Hill 

Patrick F. Sullivan

 Paul Curtis 

Arthur Budelier 

Susan Barvenik 

 Wendy Swan 

 Sheree James 

14-P-0129 17 
 

 

AGENCY’S RESPONSE TO REPORT RECOMMENDATIONS
 

No. Recommendation 

High-Level Intended 

Corrective Action(s) 

Estimated Completion 

by Quarter and 

Fiscal Year 

1 

Include in the Agency 

Financial Report a discussion 

of the biennial user fee 

review results and any 

resultant proposals, to fully 

comply with OMB Circular 

A-25 reporting requirements. 

The Office of the Chief 

Financial Officer concurs with 

the overall recommendation. 

The EPA will include a 

discussion of the results of the 

biennial user fee review in the 

FY 2013 Agency Financial 

Report AFR. 

1st Quarter FY 2014 

2 Coordinate with programs 

that have claimed an 

exemption to charging fees 

under OMB Circular A-25, 

section 6c (2) or (3) to have 

the EPA Administrator 

request an exception by letter 

to the OMB Director. 

The OCFO concurs with the 

overall recommendation. The 

agency will submit a request to 

the Director of the OMB for 

exceptions to charge user fees 

for the EPA programs that meet 

the criteria outlined in Circular 

A-25, Section 6c. 

1st Quarter FY 2014 

3 Request the fee exception 

programs to report their 

program costs to OCFO to 

provide complete 

information about program 

fees and costs and to help 

determine whether fee 

exception programs should 

assess fees. 

The OCFO concurs with the 

overall recommendation. 

During the agency’s FY 2013 

biennial user fee review, the 

agency requested and received 

the estimated costs from its 

existing and potential fee 

programs. 

Completed 

3rd Quarter FY 2013 

4 Conduct a cost analysis of all 

direct and indirect costs to 

determine the EPA’s full cost 

of issuing National Pollutant 

Discharge Elimination 

System permits. 

The Office of Water concurs 

with the overall 

recommendation. The OW 

conducted the required NPDES 

cost analysis. 

Completed 

3rd Quarter FY 2013 

5 Apply federal user fee policy 

in determining whether to 

charge fees for issuing 

federal NPDES permits in 

which the EPA is the 

permitting authority and 

propose a regulation to allow 

the EPA to charge fees, as 

appropriate. 

The OW does not concur with 

the recommendation to propose 

a regulation to allow the EPA to 

charge fees. We are working 

with OCFO to request an 

exception from a NPDES user 

fee. 

1st Quarter FY 2014 

14-P-0129 18 
 

 

Appendix C 

Distribution 

Office of the Administrator 

Chief Financial Officer 

Assistant Administrator for Water 

Agency Follow-Up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Education 

Deputy Chief Financial Officer 

Principal Deputy Assistant Administrator for Water 

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

Deputy Director, Office of Financial Management, Office of the Chief Financial Officer 

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

Deputy Director, Office of Financial Services, Office of the Chief Financial Officer 

Audit Follow-Up Coordinator, Office of the Chief Financial Officer 

Audit Follow-Up Coordinator, Office of Water 

Audit Follow-Up Coordinator, Office of Financial Management, Office of the 

Chief Financial Officer 

14-P-0129 19