U.S. ENVIRONMENTAL PROTECTION AGENCY

( 

OFFICE OF INSPECTOR GENERAL

U.S. Chemical Safety and 

Hazard Investigation Board 

Complied With 

Reporting Requirements of 

the Improper Payments 

Elimination and Recovery Act 

Report No. 13-P-0177 March 12, 2013 

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to learn more about 

the EPA OIG. 
 

Report Contributors: Marcia Hirt-Reigeluth

 Gloria Taylor-Upshaw 

 Michael Davis 

Abbreviations 

BPD Bureau of the Public Debt 

CSB U.S. Chemical Safety and Hazard Investigation Board 

FY Fiscal year 

IPERA Improper Payments Elimination and Recovery Act 

IPIA Improper Payments Information Act 

OIG Office of Inspector General 

OMB Office of Management and Budget 

PAR Performance and Accountability Report 

Hotline 

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

e-mail: OIG_Hotline@epa.gov write: EPA Inspector General Hotline 

phone: 

fax: 

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Mailcode 2431T 

online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460 
U.S. Environmental Protection Agency 

Office of Inspector General 

At a Glance

U.S. Environmental Protection Agency 13-P-0177 

March 12, 2013 Office of Inspector General 

At a Glance 

Why We Did This Review	 U.S. Chemical Safety and Hazard Investigation Board 

Complied With Reporting Requirements of the The Office of Management and 

Budget’s (OMB’s) guidance for Improper Payments Elimination and Recovery Act

implementation of the 2010 

Improper Payments Elimination What We Found 

and Recovery Act (IPERA) 

specified responsibilities of 

agencies and inspectors 

general. Agencies are required 

to report on improper payments, 

and inspectors general are 

required to determine whether 

the agency complies with 

IPERA. As the inspector general 

for the U.S. Chemical Safety 

and Hazard Investigation Board 

(CSB), the U.S. Environmental 

Protection Agency Office of 

Inspector General undertook this 

review of CSB’s compliance with 

IPERA. 

This report addresses the 

following CSB Goal: 

 Preserve the public trust by 

maintaining and improving 

organizational excellence. 

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/ 

20130312-13-P-0177.pdf 

CSB is fully compliant with the reporting requirements of IPERA, which require 

all agencies to periodically review all programs and activities that may be 

susceptible to significant improper payments. As required, CSB has published 

its fiscal year 2012 Performance and Accountability Report on its website, and 

we have determined that CSB programs do not meet the minimum risk 

assessment threshold that would require the CSB to perform a risk assessment. 

OMB Memorandum M-11-16, Part I B, requires agencies to make a 

determination on cost effectiveness of performing recovery audits on those 

activities that expend $1 million or more annually. In February 2012, CSB 

performed an analysis, as stipulated in the OMB memorandum, and found that it 

would not be cost effective to perform recovery audits. 

In evaluating the accuracy and completeness of CSB’s reporting and 

performance in preventing, reducing, and recapturing improper payments, we 

determined that CSB should improve its review of the Bureau of the Public 

Debt’s (BPD’s) testing results of CSB’s improper payments. BPD provides 

reimbursable administrative and information technology services to government 

agencies through its Administrative Resource Center. In addition, BPD helps 

government agencies reduce the number of improper payments issued. CSB 

considers improper payments a low-risk item and relies on BPD to ensure 

payments are correct. BPD has a performance metric of less than 1 percent for 

improper payments for all of its customer agencies, which is stated in its 

interagency agreement with CSB. Although the amount may be minimal, CSB 

should have knowledge of BPD’s analysis for improper payments and whether 

these improper payments are correctly handled by BPD. 

 Recommendation and Planned Corrective Action 

We recommended that the CSB Chairperson receive and review the results of 

BPD’s testing for CSB improper payments on, at a minimum, a semiannual 

basis. CSB concurred with our recommendation and stated that BPD will be 

providing its testing results to CSB every 6 months, although the actual start 

date for when this will commence has not been provided. Until CSB establishes 

a date to begin review of BPD’s testing for CSB improper payments, the 

recommendation remains unresolved. We evaluated CSB’s intended planned 

action for this recommendation and concluded that the planned action should 

correct the concern identified. 
 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

March 12, 2013 

The Honorable Rafael Moure-Eraso, Ph.D. 

Chairperson and Chief Executive Officer 

U.S. Chemical Safety and Hazard Investigation Board 

2175 K Street, NW, Suite 400 

Washington, D.C. 20037-1809 

Dear Dr. Moure-Eraso: 

This is our report on the U.S Chemical Safety and Hazard Investigation Board’s (CSB’s) 

compliance with reporting requirements of the Improper Payments Elimination and Recovery 

Act. This report represents the final position of the Office of Inspector General (OIG) on the 

subject reported. It contains a finding that describes the issues the OIG has identified and the 

corrective action the OIG recommends. This report represents the opinion of the OIG and does 

not necessarily represent the final CSB position. CSB managers will make the final 

determinations on matters in this report. 

The Improper Payments Elimination and Recovery Act and Office of Management and Budget 

guidance require the OIG to distribute this report to the following individuals and organizations: 

 The Senate Homeland Security and Government Affairs Committee. 

 The House Committee on Oversight and Governmental Reform. 

 The Comptroller General. 

 The Controller of the Office of Management and Budget. 

We are providing the report to these individuals and organizations under a separate transmittal. 

In responding to the draft report, the Board provided its intended corrective action for addressing 

the recommendation but did not provide a milestone for completion. Therefore, a response to the 

final report is needed within 60 days. 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 Melissa Heist, 

Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or 

Michael Davis, Director, at (513) 487-2363 or davis.michaeld@epa.gov. 

Sincerely, 

Arthur A. Elkins Jr. 
 

 

U.S. Chemical Safety and Hazard Investigation Board 13-P-0177 

Complied With Reporting Requirements of the 

Improper Payments Elimination and Recovery Act 

Table of Contents 

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

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

Scope and Methodology............................................................................................. 2 

Results of Review ....................................................................................................... 3
 

CSB Complies With IPERA .................................................................................. 3 

CSB Needs to Review Results of BPD’s Testing for Improper Payments ........... 5 

Recommendation........................................................................................................ 7
 

CSB Response and OIG Evaluation .......................................................................... 7
 

Status of Recommendations and Potential Monetary Benefits.............................. 8 

Appendices 

A CSB Response.................................................................................................... 9 

B Distribution ......................................................................................................... 11 
 

 

 

 

Purpose 

The Improper Payments Elimination and Recovery Act (IPERA) became law on 

July 22, 2010, amending the Improper Payments Information Act of 2002 (IPIA).1 

On April 14, 2011, the Office of Management and Budget (OMB) issued 

government-wide guidance for implementation.2

 The guidance updated the 

requirements for measuring and remediating improper payments. The OMB 

guidance requires agencies to report on improper payments and requires 

inspectors general to review agency reporting. The U.S. Environmental Protection 

Agency’s Office of Inspector General (OIG) is the inspector general for the 

U.S. Chemical Safety and Hazard Investigation Board (CSB). Our objective for 

this review was to determine whether CSB complies with IPERA. 

Background 

IPERA requires that each agency periodically review and identify all programs 

and activities that may be susceptible to significant improper payments. The Act 

significantly increased requirements for payment recapture efforts by expanding 

the types of payments that could be reviewed. It also lowered to $1 million the 

threshold of annual outlays for each program and activity for which agencies are 

required to conduct recovery audits, if the agency determines that conducting such 

audits would be cost effective. 

IPERA defines an improper payment, in relevant part, as any payment that should 

not have been made or that was made in an incorrect amount, any payment to an 

ineligible recipient for an ineligible good or service, a duplicate payment, a 

payment for a good or service not received, or a payment that does not account for 

credit for applicable discounts. OMB Memorandum M-11-16 expanded the 

improper payment definition to include payments without sufficient 

documentation. Under OMB Memorandum M-11-04,3 agencies are to report on 

improper payments that are: 

 Voluntarily returned by contractors. 

 Used to offset future payments. 

 Identified and returned to the agency through OIG efforts, such as audits, 

reviews, or tips from the public. 

 Identified and recovered through management post payment reviews and 

close-out. 

1 In OMB Memorandum M-11-16, Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123, issued 

April 14, 2011, the term “IPIA” implies “IPIA, as amended by IPERA,” but the authorizing legislation is still named 

IPIA. 

2 OMB April 14, 2011, Memorandum M-11-16, revised OMB Circular A-123 Parts I and II. 

3

 OMB Memorandum M-11-04, Increasing Efforts to Recapture Improper Payments by Intensifying and Expanding 

Payment Recapture Audits, issued November 16, 2010, provides guidance on expanding the types of payments that 

can be reviewed and lowering the threshold of annual outlays that requires agencies to conduct payment recapture 

audit programs. 

13-P-0177 1 
 

 

Each fiscal year, an agency’s inspector general is required to determine whether 

the agency complies with IPERA. Compliance means that the agency has: 

 Published a Performance and Accountability Report (PAR) for the most 

recent fiscal year and posted it on the agency website. 

 Identified programs and activities that are susceptible to significant 

improper payments—defined as gross improper payments exceeding 

2.5 percent of program outlays and $10 million of all program or activity 

payments made during the fiscal year reported, or $100 million—and 

conducted a specific risk assessment for each identified program. 

	 Determined the cost effectiveness of conducting recovery audits on each 

program and activity of the agency that expends $1 million or more 

annually. 

If an agency does not meet one or more of these requirements, it is not compliant. 

The inspector general is required to evaluate (1) the accuracy and completeness of 

agency reporting; and (2) agency performance in preventing, reducing, and 

recapturing improper payments. The inspector general should include any 

recommendations to improve the agency’s performance in reducing improper 

payments. 

The Bureau of the Public Debt (BPD) provides reimbursable administrative and 

information technology services to government agencies through its 

Administrative Resource Center. In addition, BPD helps government agencies 

reduce the number of improper payments issued. CSB has an interagency 

agreement with the BPD. Under this agreement, the BPD processes financial 

transactions, makes administrative payments, and prepares various financial 

reports for the CSB. 

Scope and Methodology 

We conducted this compliance audit from December 2012 to February 2013 in 

accordance with generally accepted government auditing standards, issued by the 

Comptroller General of the United States. 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. 

To determine whether CSB is compliant with IPERA, we reviewed CSB’s 

FY 2012 PAR and accompanying materials. We interviewed CSB’s Director of 

Financial Operations to gain an understanding of what actions CSB took to 

comply with IPERA. We also reviewed CSB’s interagency agreement with BPD 

to obtain a better understanding of the division of financial responsibilities 

between the two agencies. 

13-P-0177 2 
 

 

Results of Review 

CSB is fully compliant with the reporting requirements of IPERA, which require 

all agencies to periodically review all programs and activities that may be 

susceptible to significant improper payments. As required, CSB has published its 

PAR on its website, and we have determined that CSB programs do not meet the 

minimum risk assessment threshold that would require CSB to perform a risk 

assessment. OMB Memorandum M-11-16, Part I B, requires agencies to make a 

determination on cost effectiveness of performing recovery audits on those 

activities that expend $1 million or more annually. In February 2012, CSB 

performed an analysis, as stipulated in the memorandum, and found that it would 

not be cost effective to perform recovery audits. 

In evaluating the accuracy and completeness of CSB’s reporting and performance 

in preventing, reducing, and recapturing improper payments, we determined that 

CSB should improve its review of BPD’s testing results of improper payments. 

CSB considers improper payments a low-risk item and relies on BPD to ensure 

payments are correct. Although the amount may be minimal, CSB should have 

knowledge of BPD’s analysis for improper payments and whether they are 

correctly handled by BPD. 

CSB Complies With IPERA 

IPERA requires all agencies to publish and post on their website the PAR for their 

most recent fiscal year. The PAR, as described by OMB Circular A-11, 

Section 200.12, is a consolidated annual report of agency performance and 

financial results, containing the agency’s audited financial statements and detailed 

information on efforts to achieve goals during the past fiscal year. 

In its November 2012 PAR for FY 2012, CSB stated: 

The CSB has not identified any significant risk with improper 

payments. However, we recognize the importance of maintaining 

adequate internal controls to ensure proper payments, and our 

commitment to the continuous improvement in the overall 

disbursement management process remains strong. In FY 2012, the 

CSB continued our agreement with the Bureau of the Public Debt 

(BPD) to process financial transactions, make administrative 

payments, and prepare various financial reports. This agreement 

promotes the accuracy of our financial records and payments. 

Based on our review, we determined that CSB is compliant with this requirement 

of IPERA. 

IPERA also requires all agencies to conduct a specific risk assessment for each 

program or activity that may have improper payments in excess of $10 million of 

13-P-0177 3 
 

 

 

 

all program or activity payments made during the fiscal year reported and 

2.5 percent of program outlays. IPERA Section 2(f)(3) defines a payment as any 

transfer or commitment for future transfer of federal funds such as cash, 

securities, loans, loan guarantees, and insurance subsidies to any nonfederal 

person or entity that is made by a federal agency, a federal contractor, a federal 

grantee, or a governmental or other organization administering a federal program 

or activity. Interagency agreements and payroll and benefits made to federal 

agencies or employees, are excluded from consideration as a susceptible program 

or activity. 

For CSB, pursuant to IPERA Section 2(f)(3), only nonfederal expenses are 

eligible for consideration as a susceptible program or activity because they are 

payments made to a nonfederal person or entity. CSB’s FY 2012 budget of 

$11,129,165 is shown in table 1 below. 

Table 1: CSB FY 2012 budget 

Activity Amount Percentage 

Federal expenses $7,424,909 66.72% 

Nonfederal expenses 3,704,256 33.28% 

Total $11,129,165 100.00% 

Source: OIG analysis of CSB data. 

Since CSB’s FY 2012 budget for nonfederal expenses was less than $10 million, 

CSB’s nonfederal expenses did not meet the minimum dollar threshold for a risk 

assessment. 

IPERA Section 2(h)(2)(A) requires that “... the head of each agency shall conduct 

recovery audits with respect to each program and activity of the agency that 

expends $1,000,000 or more annually if conducting such audits would be costeffective.” OMB Memorandum M-11-16, Part I B, implements the requirements 

of Section 2(h) of IPERA. The OMB memorandum defines a payment recapture 

audit, also known as a recovery audit, as a review and analysis of an agency’s or 

program’s accounting and financial records, supporting documentation, and other 

pertinent information supporting its payments, that is specifically designed to 

identify overpayments. A payment recapture audit program is an agency’s overall 

plan for risk analysis and the performance of payment recapture audits and 

recovery activities. The agency head should determine the most cost-effective 

way to conduct payment recapture activities. These activities should include a 

management improvement program, if appropriate, and a copy of the program 

provided to the agency’s inspector general annually. 

According to OMB, a cost-effective payment recapture audit program is one in 

which the benefits (i.e., recaptured amounts) exceed the costs (e.g., staff time and 

resources, or payments to an audit contractor) associated with implementing and 

overseeing the program. Agencies should consider the following criteria in 

determining whether a payment recapture audit is cost effective: 

13-P-0177 4 
 

 

 The likelihood that identified overpayments will be recaptured. 

 The likelihood that the expected recoveries will be greater than the costs 

incurred to identify the overpayments. 

If an agency determines that it would be unable to perform a cost-effective 

payment recapture audit program for activities expending more than $1 million 

annually, it should notify OMB and the inspector general of this decision and 

provide them with the analysis used to reach this decision. The agency should also 

report in its annual PAR: 

 A list of programs and activities for which it has determined that a 

payment recapture audit program would not be cost effective. 

 A description of the justifications and analysis that it used to make that 

determination. 

In February 2012, CSB provided an analysis to determine the cost effectiveness of 

performing recapture audits on all activities with annual outlays in excess of 

$1 million. CSB concluded that a recapture audit program would not be cost 

effective and notified OMB. OMB did not reply to CSB on its analysis. 

In its November 2012 PAR for FY 2012, CSB stated: 

Finally, in FY 2012, in accordance with OMB guidance, the CSB 

conducted an analysis to determine the cost effectiveness of 

performing recapture audits on all activities with annual outlays in 

excess of $1,000,000. The CSB concluded that a recapture audit 

program would not be cost effective. 

OMB Memorandum M-11-16, Part I B, requires that agencies make a 

determination on cost effectiveness at least once every 3 years. CSB made its 

determination in February 2012, which complies with the IPERA requirement for 

FY 2012. CSB should plan to conduct its next analysis to determine the cost 

effectiveness of performing recapture audit on all activities with annual outlays in 

excess of $1 million no later than FY 2015. 

CSB Needs to Review Results of BPD’s Testing for 

Improper Payments 

OMB Circular A-123, Management’s Responsibility for Internal Control, 

Section I, states: 

[m]anagement is responsible for developing and maintaining 

effective internal control. Effective internal control provides 

assurance that significant weaknesses in the design or operation of 

internal control, that could adversely affect the agency’s ability to 

13-P-0177 5 
 

 

meet its objectives, would be prevented or detected in a timely 

manner. 

Section III identifies the IPIA of 2002 as one of the statutory requirements that 

should be part of an agency’s internal control framework. IPIA requires agencies 

to identify activities and programs that might be susceptible to significant 

improper payments. It states: 

[a]gencies must annually submit estimates of improper payments, 

corrective actions to reduce the improper payments, and statements 

as to whether its current information systems and infrastructure can 

support the effort to reduce improper payments. 

CSB has continued its agreement with the BPD to process financial transactions, 

make administrative payments, and prepare various financial reports. CSB relies 

on the BPD to perform all of the necessary testing and analysis required for 

identifying any possible improper payments. BPD has a performance metric of 

less than 1 percent for improper payments for all of its customer agencies, which 

is stated in its interagency agreement with CSB. In addition, BPD performs a 

random sampling once a month of accounts payable invoices that are equal to or 

less than $2,500 and are not subject to a secondary review prior to being 

scheduled for payment. BPD’s policy requires any accounts payable invoice 

greater than $2,500 to undergo a secondary review. BPD’s testing results are on 

its website; however, the results are not listed by each of its customers. 

From our review of BPD’s website, we cannot confirm whether CSB has any 

improper payment transactions for FY 2012. In addition, CSB does not review, 

and BPD does not provide, any results of its testing related to CSB’s improper 

payment performance through its agreement. In accordance with OMB Circular 

A-123, CSB should confirm that BPD performs the test for its improper 

payments, as stated in the terms of the agreement, and review the results to meet 

its responsibility for maintaining effective internal controls. 

CSB noted: 

 BPD receives unqualified opinions on its annual financial statement audit 

reports, which gives CSB a high degree of confidence in BPD’s work. 

 During the course of financial audits, CSB talks with auditors who travel 

to BPD, interview the staff, and review their procedures and documents. 

 The financial auditors consistently report to CSB that both BPD’s staff 

and work quality are outstanding. 

 Improper payments are a low-risk item that is handled competently and, 

therefore, verification of BPD work is not necessary. 

	 If BPD found an improper payment was made, it would inform CSB so 

that CSB could take appropriate action regarding the improper payment 

and avoid future improper payments. 

13-P-0177 6 
 

 

 

	 BPD receives annual reviews in accordance with the Statement on 

Standards for Attestation Engagements No. 16, Reporting on Controls at a 

Service Organization, which provide its customer agencies with 

independent verification that BPD’s controls, including disbursement 

controls, are in place and are operating effectively. 

Recommendation 

We recommend that the Chairperson, U.S. Chemical Safety and Hazard 

Investigation Board: 

1.	 Receive and review the results of BPD’s testing for CSB improper 

payments on, at a minimum, a semiannual basis. 

CSB Response and OIG Evaluation 

CSB concurred with our recommendation and stated that BPD will be providing 

its testing results to CSB every 6 months. CSB has not provided a milestone for 

completion. Until CSB establishes a date to begin review of BPD’s testing for 

CSB improper payments, this recommendation remains unresolved. We evaluated 

CSB’s intended planned action for this recommendation and concluded that the 

planned action should correct the concern identified. 

. 

13-P-0177 7 
 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATION BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

1 7 Receive and review the results of BPD’s testing 

for CSB improper payments on, at a minimum, a 

semiannual basis. 

U Chairperson, U.S. Chemical 

Safety and Hazard 

Investigation Board 

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-0177 8 

1 
 

 

Appendix A 

CSB Response 

U.S. Chemical Safety and 

Hazard Investigation Board 

Rafael Moure-Eraso, Ph.D. 

Chairperson 

Mark Griffon 

Board Member 

Beth J. Rosenberg, ScD, MPH 

Board Member 

March 4, 2013 

Melissa M. Heist 

Assistant Inspector General for Audits 

Office of Inspector General 

U.S. Environmental Protection Agency 

Washington, DC 20460 

Dear Ms. Heist: 

Thank you for the opportunity to review and comment on the draft report on the CSB’s 

compliance with the Improper Payments Elimination and Recovery Act (IPERA). We are 

pleased that you found CSB fully compliant with IPERA’s reporting requirements. 

The draft report states that the CSB should improve its review of the Bureau of the Public Debt’s 

(BPD’s) testing results of improper payments. However, the draft does not acknowledge that 

BPD, a shared service provider, receives annual reviews in accordance with the Statement on 

Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service 

Organization. This review gives the CSB and other customer agencies independent verification 

that BPD’s controls, including disbursement controls, are in place and are operating effectively. 

The most recent report is publically available at 

https://arc.publicdebt.treas.gov/docs/OIG12068.pdf. 

CSB is comfortable relying on the independent auditors’ report that found BPD’s controls are in 

place and effective, but your office is recommending that CSB also receive and review the 

results of BPD’s testing for CSB improper payments on, at a minimum, a semiannual basis. 

While we do not think this level of review is necessary, BPD will start providing us with their 

testing results every six months. 

13-P-0177 9 
 

 

Finally, BPD asked that we clarify with you that the 1% metric mentioned in several places in 

your draft report is a measure for all customer agencies and is not calculated at the individual 

customer level. If you or your staff have any questions about this response, please feel free to 

contact Anna Brown, Audit Liaison, at 202-261-7639. 

Sincerely, 

Rafael Moure-Eraso, Ph.D. 

Chairperson 

13-P-0177 10 
 

Appendix B 

Distribution 

Chairperson and Chief Executive Officer, U.S. Chemical Safety and Hazard Investigation Board 

Managing Director, U.S. Chemical Safety and Hazard Investigation Board 

Deputy Managing Director, U.S. Chemical Safety and Hazard Investigation Board 

Counselor to the Chair, U.S. Chemical Safety and Hazard Investigation Board 

Director of Financial Operations, U.S. Chemical Safety and Hazard Investigation Board 

Director of Administration, U.S. Chemical Safety and Hazard Investigation Board 

13-P-0177 11