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The EPA Should 

Improve Monitoring of 

Controls in the Renewable 

Fuel Standard Program

Report No. 13-P-0373 September 5, 2013

U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL
Report Contributors: Patrick Gilbride

Erin Barnes-Weaver

Luke Stolz

Stephanie Wake

Abbreviations

CAA Clean Air Act

CFR Code of Federal Regulations

EISA Energy Independence and Security Act of 2007

EMTS EPA Moderated Transaction System

EPA U.S. Environmental Protection Agency

EPAct Energy Policy Act of 2005

OECA Office of Enforcement and Compliance Assurance

OIG Office of Inspector General

OTAQ Office of Transportation and Air Quality

QAP Quality Assurance Plan

RFS Renewable Fuel Standard

RIN Renewable Identification Number

Cover photo: Photos taken from the EPA’s Renewable Fuel Standard website: 

http://www.epa.gov/otaq/fuels/renewablefuels/.

Hotline

To report fraud, waste, or abuse, contact us through one of the following methods:

email:

phone:

fax:

online:

OIG_Hotline@epa.gov

1-888-546-8740

202-566-2599

http://www.epa.gov/oig/hotline.htm

write: EPA Inspector General Hotline 

1200 Pennsylvania Avenue, NW

Mailcode 2431T

Washington, DC 20460
 

13-P-0373

September 5, 2013

Why We Did This Review

The U.S. Environmental 

Protection Agency Office of 

Inspector General conducted 

an audit of the Renewable Fuel 

Standard program as a result of 

millions of dollars of 

fraudulently generated 

Renewable Identification 

Numbers. We sought to 

determine whether the EPA 

has assessed program risks 

and designed necessary 

controls in the RFS program.

RFS program regulations 

require that independent third 

parties complete certain 

reporting requirements.

According to the EPA, the RFS 

program lays the foundation for 

achieving significant reductions 

in greenhouse gas emissions 

from the use of renewable 

fuels. The EPA’s Office of Air 

and Radiation listed RFS 

program implementation as a 

priority in fiscal year 2013.

This report addresses the 

following EPA Goals or

Cross-Cutting Strategies:

Taking action on climate 

change and improving air 

quality.

Enforcing environmental 

laws.

For further information, contact 

our Office of Congressional and 

Public Affairs at (202) 566-2391.

The full report is at:

www.epa.gov/oig/reports/2013/ 

20130905-13-P-0373.pdf

 

The EPA Should Improve Monitoring of Controls 

in the Renewable Fuel Standard Program

 What We Found

The EPA has worked with external RFS program stakeholders to develop 

additional controls to reduce fraud in the program. The EPA has assessed risks 

and implemented a number of control activities in the RFS program through 

regulations. The main control activities we identified include independent thirdparty engineering reviews, the EPA Moderated Transaction System, and attest 

engagements. However, the agency does not meet the control standard for 

monitoring some of these control activities. The EPA does not track submission 

of third-party engineering reviews or annual attest engagements because the 

agency lacks an electronic monitoring system for these reports. Until the EPA 

tracks submitted materials, the agency cannot be sure that program participants 

comply with applicable regulations, which affects program integrity and could 

lead to additional fraud cases. The EPA recently implemented electronic 

reporting requirements for attest engagements and has stated that it intends to 

implement electronic reporting for engineering reviews by the end of this year.

We could not determine whether overlap existed in parties completing third-party 

engineering reviews and attest engagements. Program regulations require that 

independent third parties complete third-party engineering reviews and attest 

engagements. Additionally, the EPA’s quality assurance program proposed in a 

new rule would require that independent third parties complete voluntary quality 

assurance plans to validate RIN generation. Current and proposed regulations do 

not preclude the same third party from completing multiple requirements as well 

as other reporting responsibilities for renewable fuel producers or importers, 

allowing for possible overlap. The EPA does not track and monitor 

independence, including whether the same party completes multiple reporting 

requirements for a renewable fuel producer or importer. If the same third party 

completes multiple reporting requirements, the party could potentially review its 

own work, which could result in a conflict of interest.

 Recommendations and Planned Corrective Actions

We recommend that the Office of Air and Radiation modify existing electronic 

systems to track the submission of reporting requirements to ensure that all 

participants comply with applicable RFS program regulations. To assist with 

tracking, we recommend requiring electronic submittal of all reporting 

requirements for the RFS program, particularly third-party engineering reviews 

and attest engagements. We also recommend that the office determine whether 

potential conflicts of interest exist from allowing the same third party to complete 

multiple reporting requirements and monitor potential conflicts for any negative 

impacts to program integrity, and revise regulations as appropriate to include 

specificity on independence requirements. The Office of Air and Radiation agreed 

with our recommendations and is taking steps to address them.

U.S. Environmental Protection Agency

Office of Inspector General

At a Glance
September 5, 2013 

MEMORANDUM

SUBJECT: The EPA Should Improve Monitoring of Controls in the 

Renewable Fuel Standard Program 

 Report No. 13-P-0373 

FROM: Arthur A. Elkins Jr. 

TO: Janet McCabe, Acting Assistant Administrator 

 Office of Air and Radiation 

This is our report on the subject examination conducted by the Office of Inspector General of the 

U.S. Environmental Protection Agency. This report contains findings that describe problems the OIG has 

identified and corrective actions the OIG recommends. This report represents the opinion of the OIG and 

does not necessarily represent the final EPA position. In accordance with established audit-resolution 

procedures, EPA managers will make final determinations on matters in this report.

Action Required 

You are not required to provide a written response to this final report because you agreed to all 

recommendations and provided corrective actions and planned completion dates that meet the intent of our 

recommendations. The recommendations remain open with corrective actions ongoing. Please update the 

EPA’s Management Audit Tracking System as you complete the planned corrective actions for these 

recommendations and notify my staff if there is a significant change in the agreed-to corrective actions. 

We will post this report on our website at http://www.epa.gov/oig.

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

assistant inspector general for the Office of Audit, at (202) 566-0565 or Eyermann.Richard@epa.gov; 

or Patrick Gilbride, director for Risk and Program Performance Audits, at (303) 312-6969 or 

Gilbride.Patrick@epa.gov.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

THE INSPECTOR GENERAL
The EPA Should Improve Monitoring of Controls 13-P-0373

in the Renewable Fuel Standard Program

Table of Contents

Chapters

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

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

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

Noteworthy Achievements ......................................................................... 4

Scope and Methodology ............................................................................ 4

2 The EPA Should Improve Monitoring of Control Activities 

in the RFS Program .......................................................................................... 6

The EPA Does Not Currently Monitor Some 

 Internal Control Activities ..................................................................... 6

Conclusion................................................................................................. 9

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

Agency Comments and OIG Evaluation..................................................... 10

3 Independence Requirements for Reporting May Not Be Met 

in the RFS Program .......................................................................................... 11

The EPA Does Not Currently Monitor Overlap in

Independence Requirements ............................................................... 11

Conclusion................................................................................................. 12

Recommendation....................................................................................... 12

Agency Comments and OIG Evaluation..................................................... 13

Status of Recommendations and Potential Monetary Benefits ............................. 14

Appendices

A Agency Comments on Draft Report ................................................................ 15

B Distribution ....................................................................................................... 18
13-P-0373 1

Chapter 1

Introduction

Purpose

The U.S. Environmental Protection Agency Office of Inspector General 

conducted an audit of the Renewable Fuel Standard program as a result of 

millions of dollars of fraudulently generated Renewable Identification Numbers.

We sought to determine whether the EPA has assessed program risks and 

designed necessary controls in the RFS program.

Background

Laws and Regulations

The Energy Policy Act of 2005

The Energy Policy Act of 20051amended Section 211 of the Clean Air Act to 

create the Renewable Fuel Program.

2

The EPAct established the first renewable 

fuel volume mandate in the United States. The original RFS program created 

under the EPAct was referred to as RFS1 and required that 7.5 billion gallons of 

renewable fuel be blended into gasoline by 2012. The EPAct required the EPA to 

promulgate RFS program regulations to ensure that gasoline sold or introduced 

into commerce in the United States contained an “applicable” volume3of 

renewable fuel. The EPAct required the EPA’s regulations to include a credit 

program that allowed for the generation of an appropriate amount of credits by 

any person who refines, blends or imports gasoline that contains a quantity of 

renewable fuel. These credits are referred to as Renewable Identification 

Numbers, or “RINs.”

According to the EPA, the RIN system was developed as a market-based 

alternative to a direct blending requirement. The RIN system provides obligated 

parties4 with flexibility in satisfying their responsibility to ensure that a specified 

volume of renewable fuels is used as transportation fuel in the United States each 

year. Each RIN generated by a producer or importer of renewable fuel represents 

a volume of renewable fuel measured in terms of ethanol-equivalent gallons, and 

each RIN can be transferred from one party to another. The RIN system within 

the RFS program is a “buyer beware” program, meaning all parties must take 

 

1

Pub.L. 109-58.

2 The EPA’s website refers to this program as the Renewable Fuel Standard program, which is what we refer to 

throughout our report.

3 Applicable volume refers to the number of billion gallons of renewable fuel required to be used in a calendar year.

4 An obligated party is any refiner that produces gasoline or diesel fuel within the 48 contiguous states or Hawaii, or 

any importer that imports gasoline or diesel fuel into the 48 contiguous states or Hawaii during a compliance period.
13-P-0373 2

steps to verify the validity of RINs they acquire. Additionally, all parties are liable 

for transferring or using invalid RINs.

The Energy Independence and Security Act of 2007

The Energy Independence and Security Act of 20075further amended CAA 

Section 211 and expanded the RFS program to include diesel in addition to 

gasoline, and increased the volume of renewable fuel required to be blended into 

transportation fuel to 36 billion gallons by 2022. EISA also established new 

categories of renewable fuel and set volume requirements for each one. 

Additionally, it required the EPA to ensure that each category of renewable fuel 

emits fewer greenhouse gases than the petroleum fuel it replaces. The RFS 

program expanded under EISA is referred to as RFS2.

Code of Federal Regulations – Regulation of Fuels and Fuel Additives

As mentioned above, the EPAct required the EPA to promulgate regulations for 

the RFS program, which the agency codified in the Code of Federal Regulations 

in Title 40 – Protection of the Environment, Part 80 – Regulation of Fuels and 

Fuel Additives, Subpart M – Renewable Fuel Standard (40 CFR 80). The 

regulations detail RFS program requirements and include some of the controls we 

discuss later in this report.

Proposed Rule – RFS RIN Quality Assurance Program

On January 31, 2013, the EPA issued a notice for proposed rulemaking to 

establish a voluntary quality assurance program for verifying the validity of RINs. 

The EPA published the proposed rule in the Federal Register on 

February 21, 2013. The EPA proposed this rule as a result of cases of fraudulently 

generated RINs which led to inefficiencies and a significant reduction in the 

overall liquidity in the RIN market. The proposed rule establishes an additional 

control in the RFS program that would create a new category of regulated entities 

– third-party auditors – that can execute the EPA-approved Quality Assurance 

Plans to validate RIN generation. QAP auditors would register with the EPA and 

have their QAPs approved by the agency.

6 A QAP is a list of elements that an 

independent third-party auditor would check to verify the validity of the RINs 

generated by a renewable fuel producer or importer. The QAPs would be facility 

specific and could be performed under two voluntary alternative compliance 

approaches – Option A and Option B. The current “buyer beware” approach in the 

RFS program continues as an option under the proposed rule. The following 

provides a brief overview of both QAP options:

 

5

Pub.L. 110-140.

6 The EPA is proposing that the quality assurance program would be applicable at the beginning of 2013 and, as of 

June 19, 2013, the EPA has already pre-registered QAPs for six companies.
13-P-0373 3

Option A More rigorous – much of the monitoring performed on a continuous 

basis.

Provides obligated parties with an affirmative defense7if they meet 

certain criteria.

Obligated parties would not replace invalid RINs; instead, RINs not 

replaced by the producer or importer would be replaced by the auditor 

who verified the RINs up to a certain threshold.

8

Option B Continuous monitoring not required – most of the monitoring would be 

done on a quarterly basis.

Also provides obligated parties with an affirmative defense if they 

meet certain criteria.

Obligated parties would be required to replace any invalid RINs not 

replaced by the renewable fuel producer or importer.

The EPA is also proposing a number of new regulatory requirements that will 

modify exporter provisions of the RFS program to try to ensure that an 

appropriate number and type of RINs are retired whenever renewable fuel is 

exported. Also, the EPA is proposing new regulatory provisions to address RINs 

that become invalid after being sold by a renewable fuel producer or importer.

Fraud Cases

The EPA has pursued and is continuing to pursue enforcement actions against 

renewable fuel producers and importers that generated invalid RINs. The 

following describes three cases involving fraudulently created RINs:

Clean Green, LLC The owner generated and sold over 32 million RINs, amounting 

to approximately $9 million, without producing or importing any 

renewable fuel. The owner was found guilty of wire fraud, money 

laundering, and violating the CAA on June 25, 2012, and was 

sentenced to 12 years in prison.

Absolute Fuels, 

LLC

The owner generated over 48 million invalid biomass-based 

diesel RINs without producing any qualifying renewable fuel and 

transferred the majority of these RINs to others. The owner pled 

guilty to an indictment on counts of wire fraud, money 

laundering, and violating the CAA, and was sentenced to 188 

months (nearly 16 years) in prison for selling more than 

$40 million in fraudulent RINs.

Green Diesel, LLC The EPA issued a Notice of Violation on April 30, 2012, alleging 

the company generated more than 60 million invalid biomassbased diesel RINs without producing any qualifying renewable 

fuel and transferred the majority of these invalid RINs to others.

 

7 An affirmative defense means that the obligated party would be held harmless against civil violations for 

transferring or retiring invalid RINs if the RINs were verified under a QAP.

8 To reduce the costs associated with the Option A QAP, the EPA is proposing a cap on RIN replacement for 

Option A auditors. The EPA is proposing to cap the auditor’s RIN replacement responsibility at 2 percent of 

Option A RINs verified by the auditor in the current year and the previous 4 years.
13-P-0373 4

The RFS Program’s Effect on Greenhouse Gas Emissions

According to the EPA, the RFS program lays the foundation for achieving 

significant reductions in greenhouse gas emissions from the use of renewable 

fuels. The agency estimates that the RFS program will reduce greenhouse gas 

emissions by 138 million metric tons by 2022. The EPA’s Office of Air and 

Radiation listed the implementation of the RFS program as a priority in fiscal year 

2013.

The EPA’s Organization

The mission of the Office of Transportation and Air Quality, within the EPA’s 

Office of Air and Radiation, includes reducing air pollution and greenhouse gas 

emissions from mobile sources and the fuels that power them as well as 

advancing clean fuels. OTAQ administers the RFS program.

The EPA’s Office of Enforcement and Compliance Assurance works with the 

regional offices, state and tribal governments, and other federal agencies to 

enforce the nations’ environmental laws, including the CAA. Within OECA, the 

Office of Civil Enforcement develops and prosecutes administrative civil cases.

OECA’s Office of Criminal Enforcement, Forensics, and Training provides 

investigative services on violations of environmental laws.

Noteworthy Achievements

The EPA has worked with external RFS program stakeholders to develop

additional controls to reduce fraud in the program. Prior to issuing the notice for 

proposed rulemaking, the EPA sought industry perspectives on possible controls 

to include in the new rule. In addition, the EPA continues to work with industry as 

it pre-approves QAPs prior to the agency’s issuance of the final rule.

Scope and Methodology

We conducted this audit from November 2012 to June 2013 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 

objective. We believe that the evidence obtained provides a reasonable basis for 

our findings and conclusions based on our audit objective.

To determine whether the EPA has assessed program risks and designed 

necessary controls in the RFS program, we reviewed relevant laws and 

regulations to understand the complexities of the program as well as the EPA’s 

responsibilities over it. These laws and regulations include the CAA, EPAct, 

EISA, and 40 CFR 80 Subpart M. We also interviewed staff from OTAQ, as well 

as OECA’s Office of Civil Enforcement and Office of Criminal Enforcement,
13-P-0373 5

Forensics, and Training, to further understand the RFS program and each office’s 

roles and responsibilities. In addition, we reviewed information from the closed 

fraud cases and also reviewed the proposed rule on the RFS RIN quality 

assurance program. We also reviewed previous OIG and Government 

Accountability Office reports relevant to our audit.

We focused the scope of our audit on internal controls over RINs created by

producers and importers of renewable fuel. We focused on this because producers 

perpetrated the fraud in the three cases discussed earlier in this chapter.

To test key controls we selected two samples:

1. Documentation of third-party engineering reviews. We selected a

random sample from a list of renewable fuel producers who produced 

renewable fuel in calendar year 2012 and determined whether

documentation of third-party engineering reviews existed for selected 

producers.

2. Documentation of attest engagements. We selected a random sample 

from a list of renewable fuel producers and importers who generated RINs 

in calendar year 2011. We determined whether attest engagements were 

documented and whether they contained information specified within the 

RFS program regulations.

We pulled both samples from lists based on information entered into the EPA 

Moderated Transaction System. We did not perform testing over data entered into 

EMTS or the quality of the data because we only used this information to identify 

samples for our verification of documentation. We do not believe this limitation 

affected our findings and conclusions.
13-P-0373 6

Chapter 2

The EPA Should Improve Monitoring of 

Control Activities in the RFS Program

The EPA has assessed risks and implemented a number of control activities in the 

RFS program through regulations. The main control activities we identified are

independent third-party engineering reviews, the EMTS, and attest engagements. 

However, we identified that the agency does not meet the control standard for

monitoring some of the control activities. The EPA does not track submission of

third-party engineering reviews or annual attest engagements because the agency 

lacks a monitoring system. Until the EPA tracks submitted materials, the agency 

cannot be sure that program participants comply with applicable regulations,

which affects program integrity and could lead to additional fraud cases.

The EPA Does Not Currently Monitor Some Internal Control Activities

The Government Accountability Office’s Standards for Internal Control in the 

Federal Government9describes the implementation of internal control as a key 

factor in helping achieve agencies’ missions and program results. Internal control 

provides reasonable assurance on effective and efficient operations, and that the 

agency complies with applicable laws and regulations. Internal control also serves 

as the first line of defense in safeguarding assets and preventing and detecting 

fraud. Control standards include assessing program risk, establishing control 

activities to ensure actions are taken to address risk, and monitoring performance.

The EPA has assessed risks and implemented a number of control activities 

through regulations. Based on a review of regulations and relevant laws, 

we identified the following as main control activities in the RFS program: 

independent third-party engineering reviews, the EMTS, and attest engagements.

Independent Third-Party Engineering Reviews

The RFS program regulations require renewable fuel producers to submit to the 

EPA an independent third-party engineering review 60 days before generating

RINs, and update the review every 3 years thereafter.

10 The reviews must include 

a description of the types of renewable fuels or ethanol that the producer intends 

to produce at the facility, and that the facility is capable of producing these types 

of renewable fuels without significant modifications. Producers must also update

engineering reviews if they make changes to their facility that would allow them 

to produce a type of renewable fuel not covered in their previous engineering 

review. 

 

9 GAO/AIMD-00-21.3.1, November 1999.

10 Third-party engineering reviews are required under RFS2 but were not required under RFS1.
13-P-0373 7

OTAQ has a process in place for receiving and reviewing independent third-party 

engineering reviews. A producer must first set up an account and self-register for 

the RFS program via the EPA’s Central Data Exchange. The producer must then 

submit their registration package, including the third-party engineering review, to 

OTAQ via hard copy for review. OTAQ has a contractor conduct an initial 

examination of the engineering review and other registration information. 

OTAQ staff then performs a final review prior to approving the producer to 

conduct transactions within EMTS. We reviewed a sample of third-party 

engineering reviews and confirmed that all of the files contained an accepted 

engineering review.

Although OTAQ has a process for receiving and reviewing third-party

engineering reviews, OTAQ does not currently track the submission of 

engineering reviews electronically. OTAQ has manually tracked the registration 

dates of producers in the past, but has not updated this list since early 2012. 

Additionally, OTAQ has not tracked the submission of required 3-year updates to 

engineering reviews. However, according to OTAQ, by the time we issued our 

draft report, OTAQ had developed a spreadsheet for tracking 3-year updates.

The EPA Moderated Transaction System

Under RFS1, the EPA tracked RINs using a 38-digit number. According to 

OTAQ, the agency found the 38-digit number confusing and management of the 

number cumbersome, prone to administrative errors, and susceptible to potentially 

illegitimate activity. Under the RFS2 regulations the EPA mandated the use of 

EMTS to screen the generation and transfer of RINs between renewable fuel 

producers, importers, exporters, obligated parties and other RIN-owners. 

Users must submit registration information, including independent third-party 

engineering reviews for producers, prior to EMTS registration. OTAQ explained 

that RINs can exist only in EMTS and compared it to a bank that holds accounts 

of RINs. OTAQ also explained that parties wishing to buy and sell RINs meet in 

an outside market and agree on a trade prior to entering it into EMTS. For EMTS

to accept a RIN trade, the trade numbers must match on both the buyer’s and 

seller’s ends. According to OTAQ, EMTS has helped reduce data input errors that 

occurred when producers recorded the 38-digit RIN number.

An OTAQ director explained that EMTS allowed the agency to put additional 

controls in place for the RFS program. For example, EMTS only allows a 

renewable fuel producer to create RINs for a type of renewable fuel they are 

registered to create. EMTS also prevents an obligated party from using retired, 

expired or duplicate RINs to meet their renewable volume obligations. In 

addition, EMTS allows a party to lock its RINs, which prevents RINs from being 

sold to other parties so that a party does not trade an invalid RIN. Locking RINs

also helps to ensure that an obligated party has enough RINs to meet its renewable 

volume obligation. EMTS also allows a party to block RINs from a specific fuel 
13-P-0373 8

producer, importer, or facility. Finally, as the RFS program is a “buyer beware” 

program, the EPA’s EMTS User’s Guide11 includes the following language:

Regulated parties are urged to conduct due diligence investigations 

and exercise caution when conducting Renewable Identification 

Number (RIN) transactions. Neither EPA nor its systems, 

including the EPA Moderated Transaction System (EMTS), certify 

or validate RINs or make any provision for parties who, despite 

good faith, transfer or receive invalid RINs. As specified in the 

regulations at 40 CFR 80.1431(b)(2), invalid RINs cannot be used 

to achieve compliance with the Renewable Volume Obligations of 

an obligated party or exporter, regardless of the party’s good faith 

belief that the RINs were valid at the time they were acquired. 

Additionally, the regulations at 40 CFR 80.1460(b)(2) prohibit the 

creation or transfer to any person of a RIN that is invalid.

Attest Engagements

The RFS program regulations include annual attest engagement requirements that 

obligated parties, exporters, renewable fuel producers, RIN-generating importers 

and other parties that own RINs must complete. The requirements differ from 

party to party and must be completed by an independent certified public 

accountant or firm of such accountants. The certified public accountant or firm

is to perform an agreed-upon procedures attest engagement of required

documentation, including RIN generation reports, RIN transaction reports and 

product transfer documents, RIN activity reports, and third-party engineering 

reviews for renewable fuel producers. Each party subject to these requirements 

must submit the attest engagement to the EPA by May 31 of the year following 

the compliance year.

OTAQ and OECA have a process in place for receiving and reviewing attest 

engagements. Parties mail attest engagements to the EPA in hard copy form with 

other reporting information. OTAQ receives attest engagements, scans all 

information into a mail log, and then boxes up the reports and sends them to the 

OECA Air Enforcement Division in the EPA’s Region 8 office in Denver, 

Colorado. The Air Enforcement Division has one environmental protection 

specialist who sorts through and reads attest engagements. The specialist might 

communicate with the auditor who performed the attest engagement, and in some 

instances the specialist may note potential violations.

While OECA maintains the attest engagements files, neither OTAQ nor OECA 

tracks whether all required parties submit attest engagements and if the

engagements contained all required elements. We sampled 21 attest engagements 

from a list of producers and importers and found:

 

11 EPA420-B-12-031a, August 2012.
13-P-0373 9

OECA was able to provide attest engagements for 16 of the 21 samples,

with the other five missing. OECA stated that OTAQ’s mail log does not 

indicate that the EPA received these missing reports and noted that it was 

possible that they were never submitted.

Of the 16 attest engagements provided, three missed some requirements 

listed in the RFS regulations, such as information on feedstocks and 

third-party engineering reviews.

OTAQ stated that, in the past, they wanted to require electronic submissions for 

the 3-year updates to engineering reviews but could not accomplish this as 

resources were focused on other tasks. Both OTAQ and OECA indicated that they 

are resource constrained. Until the EPA tracks the submission of independent 

third-party engineering reviews and attest engagements, the agency cannot be sure 

that all participants of the program comply with applicable regulations. This 

affects program integrity and could lead to additional fraud cases.

The EPA is taking steps to better track RFS program submissions. The EPA 

recently published a Federal Register notice requiring that attest engagements for 

calendar year 2012 be submitted electronically by May 31, 2013, rather than hard 

copy submissions. OTAQ also indicated that they are moving toward electronic 

submission for engineering reviews and expect to implement this by the end of 

2013. Electronic submissions could also allow OTAQ to run reports on submittals 

as well as additional queries to analyze data.

Conclusion

While the EPA has control activities in place over the RFS program, monitoring 

control activities is important to ensure that the program works as intended and 

parties submit required information. The EPA could more easily monitor control 

activities by requiring electronic submittal of all RFS reporting requirements.

Recommendations

We recommend that the assistant administrator for the Office of Air and 

Radiation:

1. Modify existing electronic systems to track the submission of reporting 

requirements to ensure that all participants comply with applicable RFS 

program regulations.

2. To assist with tracking, require electronic submittal of all reporting 

requirements for the RFS program, particularly third-party engineering 

reviews and attest engagements.
13-P-0373 10

Agency Comments and OIG Evaluation

The agency agreed with our recommendations. The agency noted that as of 

May 2013 it began requiring attest engagement reports to be submitted 

electronically, and it is on track to begin the electronic collection of engineering 

reviews by the end of 2013. Appendix A contains the agency’s complete response 

to our draft report.
13-P-0373 11

Chapter 3

Independence Requirements for Reporting 

May Not Be Met in the RFS Program

During our audit, we could not determine whether overlap existed in parties 

completing third-party engineering reviews and attest engagements. The RFS 

program regulations and proposed rule require that independent third parties

complete third-party engineering reviews, attest engagements and QAPs. 

The RFS program regulations do not preclude the same party from completing 

multiple requirements as well as other reporting responsibilities for renewable 

fuel producers or importers, allowing for possible overlap. The EPA does not 

track and monitor independence, including whether the same party completes 

multiple reporting requirements for a renewable fuel producer or importer. If the 

same third party completes multiple reporting requirements, the party could 

potentially review its own work, which could result in a conflict of interest.

The EPA Does Not Currently Monitor Overlap in Independence 

Requirements

Within the RFS program regulations, both third-party engineering reviews and 

attest engagements have independence requirements. The third-party engineering 

review is required to be conducted by a professional engineer who is independent 

of the renewable fuel producer or foreign ethanol producer, or any subsidiary or 

employee of the renewable fuel producer or foreign ethanol producer. RFS 

program regulations require an independent certified public accountant or firm to 

perform attest engagements. The accountant may complete requirements with the 

assistance of internal auditors who are employees or agents of the refiner or 

importer. A refiner or importer may satisfy the attest engagement requirements if 

an auditor who is an employee completes the attestation. The internal auditor 

must be certified by the Institute of Internal Auditors and complete the internal 

audits in accordance with the Codification of Standards for the Professional 

Practice of Internal Auditing.

In addition to requirements currently in the RFS program regulations, in the 

notice for proposed rulemaking signed on January 31, 2013, the EPA proposes 

requiring that the auditor performing the QAP be independent of the renewable 

fuel producer or foreign ethanol producer, or any subsidiary or employee of the 

renewable fuel producer or foreign ethanol producer.

During our audit, we could not determine whether overlap existed in parties 

completing third-party engineering reviews and attest engagements. We sampled 

third-party engineering reviews and attest engagements and were unable to 

determine whether overlap existed in parties submitting these reports and whether 

any potential independence issues existed. We could identify the auditor that 
13-P-0373 12

completed the attest engagement, but we were not able to determine what other 

services, if any, the auditor provided. We could also identify the engineer that 

completed the third-party engineering review.

The regulations and proposed new rule do not preclude the same party from 

completing multiple reporting requirements, allowing for possible overlap and

potential conflicts of interest. For example, the regulations and proposed rule 

allow the same individual or firm to conduct the third-party engineering review, 

attest engagement, and QAP audit for a renewable fuel producer as long as they 

meet the other requirements in the regulations. In addition, the regulations do not 

prohibit an agent who completes other reporting responsibilities (i.e., in EMTS 

and in quarterly and annual reports) for a renewable fuel producer from 

completing the other reporting requirements.

The EPA does not track and monitor overlap in services to determine whether

potential conflicts of interest exist. An OTAQ compliance division director 

explained that there is a lack of a definition of independence. OTAQ staff also

explained that some businesses which conduct attest engagements currently say 

they cannot perform a QAP for the same company because they are not 

independent, while others say they are independent and can complete both 

requirements. If the same third party completes multiple reporting requirements, 

the party could potentially review its own work, which could result in a conflict of 

interest.

Conclusion

To help ensure the goals and integrity of the RFS program, parties completing 

reporting requirements must be independent. Whether third parties must be 

independent from each other remains to be determined. By tracking the third 

parties that complete RFS program reporting requirements, the EPA could 

determine whether any potential conflicts between third parties adversely impact 

RFS program integrity and adjust the program accordingly, if needed.

Recommendation

We recommend that the assistant administrator for the Office of Air and 

Radiation:

3. Track reporting submissions to determine whether potential conflicts of 

interest exist from allowing the same third party to complete multiple 

reporting requirements and monitor the potential conflicts to determine 

whether they negatively impact RFS program integrity. Based on that 

determination, revise regulations as appropriate to include specificity on 

whether the same third party can conduct multiple reviews or reporting 

requirements for the same producer or importer.
13-P-0373 13

Agency Comments and OIG Evaluation

The agency provided a qualified agreement with our third recommendation. In our 

draft report, our third recommendation required that the EPA:

Track reporting submissions to determine whether potential 

conflicts of interest exist as a result of allowing the same third 

party to complete multiple reporting requirements. Based on that 

determination, revise regulations as appropriate to include 

specificity on whether the same third party can conduct multiple 

reviews or reporting requirements for the same producer or 

importer.

We discussed that recommendation with agency staff and, based on that 

discussion, revised our language accordingly. As the EPA notes in its response to 

our draft report, we made this revision to our recommendation so that, in the 

future, the agency can determine whether it finds a greater degree of 

noncompliance where third parties are not independent from each other. If the 

agency decides that the same party may not fulfill multiple roles, the agency 

indicated that it will put in safeguards to ensure that parties meet independence 

requirements. 

Appendix A contains the agency’s complete response to our draft report.
13-P-0373 14

Status of Recommendations and 

Potential Monetary Benefits

RECOMMENDATIONS

POTENTIAL MONETARY 

BENEFITS (in $000s)

Rec. 

No.

Page 

No. Subject Status1 Action Official

Planned 

Completion 

Date

Claimed 

Amount

Agreed-To 

Amount

1 9 Modify existing electronic systems to track the 

submission of reporting requirements to ensure 

that all participants comply with applicable RFS 

program regulations.

O Assistant Administrator, 

Office of Air and Radiation

06/30/2015

2 9 To assist with tracking, require electronic submittal 

of all reporting requirements for the RFS program, 

particularly third-party engineering reviews and 

attest engagements.

O Assistant Administrator, 

Office of Air and Radiation

12/31/2013

3 12 Track reporting submissions to determine whether 

potential conflicts of interest exist from allowing the 

same third party to complete multiple reporting 

requirements and monitor the potential conflicts to 

determine whether they negatively impact RFS 

program integrity. Based on that determination, 

revise regulations as appropriate to include 

specificity on whether the same third party can 

conduct multiple reviews or reporting requirements 

for the same producer or importer.

O Assistant Administrator, 

Office of Air and Radiation

06/30/2015

1 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
13-P-0373 15

Appendix A

Agency Comments on Draft Report

August 1, 2013

MEMORANDUM

SUBJECT: Response to Office of Inspector General Draft Project No. OA-FY13-0009

“The EPA Should Improve Monitoring of Controls in the Renewable Fuel 

Standard Program,” dated July 2, 2013

FROM: Janet G. McCabe

Acting Assistant Administrator

TO: Arthur A. Elkins, Jr.

Inspector General

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

report. Following is a summary of the agency’s overall position, along with its position on each 

of the report recommendations. 

The agency agrees with report recommendations 1 and 2 and we have provided high-level 

intended corrective actions and estimated completion dates to the extent we can. The emphasis of 

these two recommendations is on electronic reporting and tracking of third-party controls in the 

Renewable Fuel Standard (RFS) program, specifically third-party engineering reviews and attest 

engagements. As reflected in the report, the Office of Transportation Air Quality has manually 

tracked these controls in the past but had limited resources to implement electronic tracking. As 

of May 2013, the agency began requiring attest engagement reports to be submitted 

electronically12, and we are on track to begin the electronic collection of engineering reviews by 

the end of 2013. The system functionality that allows us to track the electronic submissions will 

be part of future EPA Moderated Transaction System (EMTS) development that has a targeted 

completion date of FY 2015 Q3. 

With regard to recommendation 3, concerning independence requirements associated with the 

third-party reporting and the agency’s tracking of third-party submissions, the agency is in partial 

or qualified agreement with the recommendation, as explained below. Based on discussions with 

OIG staff, it is our understanding that the intent of this recommendation is not necessarily that 

the agency require third parties to be independent from each other (for performing services for a 

given producer or importer). Rather, our understanding is that OIG’s recommendation is that the 

agency track whether or not third parties performing such services for each producer or importer 

are independent from one another, so that in the future the agency can determine whether or not 

 

12 78 FR 23927; April 23, 2013. 
13-P-0373 16

we find a greater degree of noncompliance in the RFS program where third parties are not 

independent from each other versus the degree of noncompliance that we find where third parties 

are independent from each other. 

The agency expects to make a policy decision concerning third-party independence in the final 

rule to establish a voluntary quality assurance program (QAP) for verifying the validity of 

renewable identification numbers. In the QAP proposal, the agency sought comment on the value 

of requiring separate, independent third parties versus the benefit of reduced costs from 

consolidating roles and responsibilities and not requiring independence. If the agency decides 

that it may be appropriate for the same third party to conduct multiple reviews and reporting 

requirements (e.g., engineering reviews, attest engagements, and QAP audits) the Agency will 

track and monitor the potential conflicts to determine if they negatively impact RFS program 

integrity consistent with recommendation 3. On the other hand, if the Agency decides that the 

same party may not fulfill multiple roles, the agency will put in safeguards to ensure the 

independence requirements are met. EMTS development to support either approach has a 

targeted completion date of FY 2015 Q3.

AGENCY’S OVERALL POSITION

The OIG has worked collaboratively with my staff to make recommendations that we mutually 

agree are helpful to improve monitoring of controls in the RFS program. 

AGENCY’S RESPONSE TO REPORT RECOMMENDATIONS

No. Recommendation High-Level Intended 

Corrective Action(s)

Estimated 

Completion by 

Quarter and FY

1 Modify existing electronic systems 

to track the submission of reporting 

requirements to ensure that all 

participants comply with applicable 

RFS program regulations

1. Incorporate into 

development and 

modifications to EMTS and 

associated data systems.

3

rd Quarter 

FY 2015

2 To assist with tracking, require 

electronic submittal of all reporting 

requirements for the RFS program, 

particularly third-party engineering 

reviews and attest engagements

2.1 Attest engagements 

completed. Electronic 

collection is already required 

as of May 2013.

2.2 Engineering Reviews –

deployment of electronic 

template 

2.1 May 31, 2013

2.2 1st Quarter 

FY 2014
13-P-0373 17

3 Track reporting submissions to 

determine whether potential 

conflicts of interest exist as a result 

of allowing the same third party to 

complete multiple reporting 

requirements. Based on that 

determination, revise regulations as 

appropriate to include specificity on 

whether the same third party can 

conduct multiple reviews or 

reporting requirements for the same 

producer or importer

3. Incorporate into 

development and 

modifications to EMTS, and 

associated data systems.

3

rd Quarter FY 

2015

CONTACT INFORMATION

If you have any questions regarding this response, please contact John Weihrauch, Fuels 

Compliance Center Director of the Office of Transportation and Air Quality’s Compliance 

Division, at 

(202) 343-9477. 

Attachment 

cc: Betsy Shaw

Joel Beauvais

Chris Grundler

Byron Bunker

Mary Manners

John Weihrauch

Venu Ghanta

Maureen Hingeley

Luke Stoltz

Patrick Gilbride

Erin Barnes-Weaver
13-P-0373 18

Appendix B

Distribution

Office of the Administrator

Assistant Administrator for Air and Radiation

Assistant Administrator for Enforcement and Compliance Assurance

Agency Follow-Up Official (the CFO)

Agency Follow-Up Coordinator

General Counsel

Associate Administrator for Congressional and Intergovernmental Relations

Associate Administrator for External Affairs and Environmental Education

Deputy Assistant Administrator, Office of Air and Radiation

Principal Deputy Assistant Administrator, Office of Enforcement and Compliance Assurance

Director, Office of Transportation and Air Quality, Office of Air and Radiation

Director, Office of Transportation and Air Quality, Compliance Division, Office of Air 

and Radiation

Director, Air Enforcement Division, Office of Enforcement and Compliance Assurance

Audit Follow-Up Coordinator, Office of Air and Radiation

Audit Follow-Up Coordinator, Office of Enforcement and Compliance Assurance