U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

EPA Is Not Recovering 

All Its Costs of the 

Lead-Based Paint Fees 

Program 

Report No. 13-P-0163 February 20, 2013 

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code to learn more 

about the EPA OIG. 
 

 

Report Contributors: Paul Curtis 

 Arthur Budelier 

 Sheree James 

 Guillermo Mejia 

Abbreviations 

CFO Chief Financial Officer 

CFO Act Chief Financial Officers Act of 1990 

CG&E Contracts, Grants, and Expenses 

EPA U.S. Environmental Protection Agency 

FY Fiscal year 

GAO U.S. Government Accountability Office 

IFMS Integrated Financial Management System 

IOAA Independent Offices Appropriation Act 

OCFO Office of the Chief Financial Officer 

OCSPP Office of Chemical Safety and Pollution Prevention 

OECA Office of Enforcement and Compliance Assurance 

OFS Office of Financial Services 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPPT Office of Pollution Prevention and Toxics 

RRP Renovation, Repair, and Painting 

SFFAS Statement of Federal Financial Accounting Standards 

TSCA Toxic Substances Control Act 

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: 

1-888-546-8740 

202-566-2599 

1200 Pennsylvania Avenue, NW 

Mailcode 2431T 

online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460 
 

 

U.S. Environmental Protection Agency 13-P-0163 

February 20, 2013 Office of Inspector General 

At a Glance
 

Why We Did This Review 

We performed this review to 

evaluate the U.S. Environmental 

Protection Agency’s (EPA’s) 

assessment and collection of 

accreditation and certification fees 

for its lead-based paint program. 

Our objectives were to determine 

whether EPA is recovering its 

costs of administering the leadbased paint program, and whether 

EPA has effective internal controls 

over the assessment and 

collection of fees. 

The Toxic Substances Control Act 

(TSCA) directs EPA to address 

the general public’s risk of 

exposure to lead-based paint 

hazards. EPA’s Office of Pollution 

Prevention and Toxics (OPPT) 

administers the national training 

and certification systems for lead 

abatement and renovation 

activities. TSCA authorizes EPA to 

establish fees to recover the costs 

of administering and enforcing the 

standards and requirements 

applicable to lead-based paint 

training programs and contractors. 

This report addresses the 

following EPA Goal or 

Cross-Cutting Strategy 

 Strengthening EPA’s workforce 

and capabilities. 

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/ 

20130220-13-P-0163.pdf 

EPA Is Not Recovering All Its Costs of the 

Lead-Based Paint Fees Program 

What We Found 

EPA is not recovering all its costs of administering the lead-based paint program. 

Our analysis, based on the Agency’s rough cost estimates, showed unrecovered 

costs of $16.4 million for fiscal years (FY) 2010 through 2014 combined. 

Although collections exceeded costs by $8.9 million in FY 2010, for FYs 2011 

through 2014 costs exceeded collections by $25.3 million, thus the net difference 

of $16.4 million. In a 2009 final rule, EPA established a fee schedule under the 

authority of TSCA to recover the program costs incurred over a 5-year 

certification cycle. However, EPA is not recovering all its costs because: 

 Renovation, Repair, and Painting firm participation is lower than projected. 

 EPA has not conducted a biennial cost review to determine its actual costs 

and decide whether it needs to adjust fees to reflect changes in costs. 

 The fees structure does not take into account all indirect costs needed to 

recover the full cost of administering the lead-based paint program. 

By not recovering all of its program costs, the federal government did not collect 

funds that otherwise could have been available to offset the federal budget 

deficit. A fees rule update could result in additional revenue of up to 

$16.4 million per 5-year cycle. 

EPA’s internal controls over the assessment and collection of fees are generally 

effective. 

 Recommendations and Planned Agency Corrective Actions 

We recommend that the Assistant Administrator for Chemical Safety and 

Pollution Prevention update the March 2009 fees rule to reflect the amount of 

fees necessary to recover the program costs, and apply indirect cost rates to all 

applicable direct costs to obtain the full cost of the program (the Chief Financial 

Officer has agreed to develop the indirect cost rates). We also recommend that 

the Chief Financial Officer conduct biennial cost reviews of the lead-based paint 

fee collections and the full cost of operating the program to determine whether 

EPA is recovering its costs, and determine the appropriate Agency indirect cost 

rates to be used for EPA’s user fee programs. 

EPA agreed with all our recommendations. EPA said it will update the 2009 fees 

rule, modify cost analysis procedures as appropriate, conduct biennial cost 

reviews, and develop appropriate indirect cost rates for user fee programs. The 

two recommendations to the Assistant Administrator for Chemical Safety and 

Pollution Prevention are unresolved pending receipt of estimated completion 

dates. 
 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

February 20, 2013 

MEMORANDUM 

SUBJECT:	 EPA Is Not Recovering All Its Costs of the Lead-Based Paint Fees Program 

 Report No. 13-P-0163 

FROM:	 Arthur A. Elkins, Jr. 

TO:	 Jim Jones 

Acting Assistant Administrator for Chemical Safety and Pollution Prevention

 Barbara J. Bennett 

 Chief Financial Officer
 

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. 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 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 60 calendar days. You should include a corrective actions plan for agreed-upon 

actions, including milestone dates. Your response will be posted on the OIG’s public website, 

along with our memorandum commenting on your response. Your response should be provided 

as an Adobe PDF file that complies with the accessibility requirements of Section 508 of the 

Rehabilitation Act of 1973, as amended. The final response should not contain data that you do 

not want to be released to the public; if your response contains such data, you should identify the 

data for redaction or removal. We have no objections to the further release of this report to the 

public. 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 

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

curtis.paul@epa.gov. 
 

 

 

 

 

 

 

 

 

EPA Is Not Recovering All Its Costs 13-P-0163 

of the Lead-Based Paint Fees Program 

Table of Contents 

Chapters 

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

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

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

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

2 EPA’s Lead-Based Paint Program Is Not Recovering All Its Costs............... 5
 

Program Costs Exceed Fee Collections ...................................................... 5 

RRP Firm Participation Is Lower Than Projected ........................................ 8 

EPA Has Not Conducted a Biennial Cost Review ....................................... 9 

Fees Structure Does Not Take Into Account All Indirect Costs 

Needed for Full Cost Recovery ................................................................ 9 

Internal Controls Over Fee Assessments and Collections Were 

Generally Effective ................................................................................... 10 

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

 Preliminary Agency Actions ......................................................................... 11 

 Recommendations ...................................................................................... 12 

Agency Comments and OIG Evaluation ...................................................... 12 

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

Appendices 

A Details on Scope and Methodology.................................................................. 15 

B Lead-Based Paint Program Cost Estimates .................................................... 17 

C Agency Response to Draft Report.................................................................... 18 

D Distribution ......................................................................................................... 26 
 

 

Chapter 1

Introduction 

Purpose 

We performed this review to evaluate the U.S. Environmental Protection 

Agency’s (EPA’s) assessment and collection of accreditation and certification 

fees for its lead-based paint program. With the Administration’s current focus on 

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

charging sufficient fees to recover its costs. The objectives of our review were to 

determine whether EPA: 

	 Is recovering its cost of administering and enforcing the standards and 

requirements applicable to lead-based paint training programs and 

contractors. 

	 Has effective internal controls over the assessment and collection of lead 

fees. 

Background 

Title IV of the Toxic Substances Control Act (TSCA) directs EPA to regulate the 

training and certification of lead-based paint activities. These activities include 

the Lead-Based Paint Activities Program (Abatement) and the Renovation, 

Repair, and Painting (RRP) program. The Abatement program, which became 

effective in March 2000, requires all lead-based paint activities to be conducted 

according to work practice standards. The RRP program, which became fully 

effective in April 2010, requires RRP activities that disturb lead-based paint to be 

conducted using lead-safe work practices. The Abatement and RRP programs 

both require training providers to be accredited and individuals and firms 

conducting lead-based paint activities or renovations in target housing and childoccupied facilities to be trained and certified. 

EPA’s Office of Pollution Prevention and Toxics (OPPT), within the Office of 

Chemical Safety and Pollution Prevention (OCSPP), administers the national 

training and certification systems for lead abatement and renovation activities. 

OPPT also performs outreach activities to increase contractor awareness of the 

RRP program requirements and consumer awareness of the hazards of lead paint. 

EPA’s Office of Enforcement and Compliance Assurance (OECA) enforces the 

lead-based paint program under TSCA. 

The Abatement and RRP programs allow states, tribes, and territories to become 

authorized to administer and enforce the program in place of EPA. Currently, 

EPA has authorized 39 states, the District of Columbia, Puerto Rico, and 3 tribes 

13-P-0163 1 
 

 

for the Abatement program, and 12 states for the RRP program. EPA administers 

the Abatement program in 11 non-authorized states and the RRP program in 

38 non-authorized states, the District of Columbia, and all territories and tribes. 

EPA charges fees in the non-authorized states, territories, and tribes for training 

programs seeking accreditation, renovation firms seeking certification, and 

individuals or firms engaged in lead-based paint activities seeking certification. 

EPA does not charge fees in authorized states. 

Statutory Authorities and Guidance 

EPA collects fees for the lead-based paint programs under the authority of the 

following statutes: 

	 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 be 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 self-sustaining to the 

extent possible. 

	 TSCA Section 402 (15 U.S. Code § 2682) authorizes EPA to collect 

accreditation and certification fees to cover the costs of administering and 

enforcing the lead-based paint activities training and certification 

program. 

	 The Chief Financial Officers Act of 1990 (CFO Act) requires the Chief 

Financial Officer (CFO) to review, on a biennial basis, the fees 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 it in providing those services and things of value. 

The following federal policies and standards provide guidance for implementing 

EPA’s lead fee user charges: 

	 Office of Management and Budget (OMB) Circular A-25, User Charges, 

dated July 8, 1993, implements the IOAA. It provides for charges for 

government goods and services that convey special benefits to recipients 

beyond those accruing to the general public. It also establishes that user 

charges should be set at a level sufficient to recover the full cost of 

providing the service, resource, or property. It requires the Agency to 

review the user charges for Agency programs biennially. Biennial reviews 

will include assurance that existing charges are adjusted to reflect 

unanticipated changes in costs or market values. Agencies should discuss 

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

in the CFO’s Annual Report required by the CFO Act. 

13-P-0163 2 
 

 

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

Managerial Cost Accounting Standards and Concepts, dated July 31, 

1995, states 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 administrative services; general research and 

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

and operating and maintenance costs for buildings, equipment, and 

utilities. 

EPA issued the following final rules related to the Abatement and RRP program 

fees: 

	 EPA’s final rule of June 9, 1999, Lead; Fees for Accreditation of Training 

Programs and Certification of Lead-Based Paint Activities Contractors, 

establishes fees for the Abatement program. EPA’s February 26, 1999, 

report, Economic Analysis of the Final TSCA Section 402(a)(3) LeadBased Paint Accreditation and Certification Fee Rule, supports the 1999 

final rule. 

	 EPA’s final rule of April 22, 2008, Lead; Renovation, Repair, and 

Painting Program, addresses lead-based paint hazards created by 

renovation, repair, and painting activities that disturb lead-based paint in 

target housing and child-occupied facilities. The rule establishes RRP 

requirements for training renovators, other renovation workers, and dust 

sampling technicians; for certifying renovators, dust sampling technicians, 

and renovation firms; for accrediting providers of renovation and dust 

sampling technician training; for renovation work practices; and for 

recordkeeping. EPA prepared a March 2008 report, Economic Analysis for 

the TSCA Lead Renovation, Repair, and Painting Program Final Rule for 

Target Housing and Child-Occupied Facilities. The report presents an 

economic analysis of alternative regulatory options for the final rule. The 

economic analysis estimated the universe of affected entities for the April 

2008 final rule. 

	 EPA’s final rule of March 20, 2009, Lead; Fees for Accreditation of 

Training Programs and Certification of Lead-Based Paint Activities and 

Renovation Contractors, revised the existing fees for EPA’s Abatement 

regulations and establishes fees for the RRP rule. The rule requires that 

EPA establish and implement a fee schedule to recover for the U.S. 

Treasury the Agency’s costs of administering and enforcing the standards 

and requirements applicable to lead-based paint training programs and 

13-P-0163 3 
 

 

contractors. EPA prepared a January 27, 2009, report, Economic Analysis 

for the TSCA Section 402 Lead-Based Paint Program Accreditation and 

Certification Fee Rule, to support the fees schedule. The economic 

analysis estimated the costs of the Abatement and RRP programs and the 

number of accreditation and certification applicants, and developed the 

fees schedule. 

EPA deposits lead fees collected into the Environmental Services Special Fund in 

the U.S. Treasury. The receipts in the special fund are to remain available for 

appropriation to carry out the Agency’s activities for which the fees were 

collected. However, Congress has not appropriated the special fund receipts. 

Congress has been appropriating general funds, without specifying the 

Environmental Services Special Fund, to the Environmental Program & 

Management and State and Tribal Assistance Grants appropriations to finance the 

lead Abatement and RRP programs. The special fund balance grew to 

$303 million, including $43 million from lead fees, at the end of fiscal year 

(FY) 2011. Although Congress has not appropriated the special fund to finance 

the environmental programs that generated the receipts, the fund remains 

available for appropriation and offsets the federal budget deficit. 

Scope and Methodology 

We conducted this review in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the review 

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

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

evidence obtained provides a reasonable basis for our findings and conclusions 

based on our review objectives. We conducted our review from December 2011 

through July 2012. Appendix A contains details on our scope and methodology. 

13-P-0163 4 
 

 

Chapter 2

EPA’s Lead-Based Paint Program 

Is Not Recovering All Its Costs 

EPA is not recovering all its costs of administering the lead-based paint program. 

Our analysis, based on the Agency’s rough cost estimates, showed unrecovered 

costs of $16.4 million for FYs 2010 through 2014 combined. Although collections 

exceeded costs by $8.9 million in FY 2010, for FYs 2011 through 2014 costs 

exceeded collections by $25.3 million, thus the net difference of $16.4 million. 

TSCA Section 402 (15 U.S. Code § 2682) authorizes the EPA Administrator to 

establish fees to cover the costs of administering and enforcing the standards and 

regulations of the program. In a 2009 final rule, EPA established a fee schedule 

designed to recover the program costs incurred over a 5-year certification cycle. 

However, EPA is not recovering all its costs because: 

 RRP firm participation is lower than projected. 

 EPA has not conducted a biennial cost review to determine its actual costs 

and decide whether it needs to adjust fees to reflect changes in costs. 

	 The fees structure does not take into account all applicable indirect costs 

and therefore does not provide for recovering the full cost of administering 

the program. 

By not recovering all of its costs of the program, the federal government did not 

collect funds that otherwise could have been available to offset the federal budget 

deficit. A fees rule update could result in potential additional revenue of up to 

$16.4 million per 5-year cycle. 

Program Costs Exceed Fee Collections 

Although EPA is collecting the fees authorized in the 2009 final rule, it is not 

recovering all its costs of administering the program. EPA’s economic analysis 

for the 2009 rule formed the basis for the fee structure in the final rule. The 

economic analysis supports the fees development for the Abatement and RRP 

programs. The economic analysis projected the program activity and costs for a 

5-year cycle to correspond with the RRP program requirement for renovation 

firms to re-certify every 5 years. Because the RRP program was new, EPA 

estimated the number of RRP applications from firms and training providers to be 

much greater in the first year than in the 4 subsequent years of the 5-year cycle. 

EPA designed its fee structure to recover the anticipated program costs at the 

estimated activity levels for the 5-year cycle. Table 1 illustrates the economic 

analysis 5-year cost estimates for the Abatement and RRP programs. 

13-P-0163 5 
 

 

 

 

 

Table 1: Summary of estimated Abatement and RRP costs ($ in millions) 

Year 1 

FY 2010 

Year 2 

FY 2011 

Year 3 

FY 2012 

Year 4 

FY 2013 

Year 5 

FY 2014 Total 

Abatement $1.2 $1.2 $1.2 $1.2 $1.2 $6.0 

RRP 61.5 22.2 22.1 22.0 21.9 149.7 

Total $62.7 $23.4 $23.3 $23.2 $23.1 $155.7 

Source: EPA’s Economic Analysis for the TSCA Section 402 Lead-Based Paint Program 

Accreditation and Certification Fee Rule, dated January 27, 2009, Executive Summary, 

tables ES-4 and ES-8. 

EPA had not conducted a formal cost study to determine its actual program costs. 

At our request, OPPT, with assistance from OECA, developed a rough estimate of 

its actual costs for FYs 2010 and 2011 based on spending and labor use. OPPT 

stated that the estimated amounts were tentative because EPA prepared them 

quickly without performing a thorough cost analysis. Although tentative, the 

rough estimate was the most useful program cost information available at the time 

to help determine whether EPA is recovering its program costs. EPA’s cost 

estimate, including Office of Inspector General (OIG) calculations for indirect 

costs, was $19.2 million for FY 2010 and $20.3 million for FY 2011. Appendix B 

contains details of the cost estimate. EPA’s lead fee collections recorded in the 

Integrated Financial Management System (IFMS), the Agency’s accounting 

system, totaled $22.0 million for FY 2010 and $9.1 million for FY 2011. 

Therefore, EPA’s initial rough cost estimate indicated that EPA did not recover 

$8.5 million of its costs for the 2 years combined, as illustrated in table 2. 

Table 2: Summary of fee collections and estimated program costs ($ in millions) 

FY 2010 FY 2011 Total 

Fee collections $22.0 $9.1 $31.1 

Estimated costs 19.2 20.3 39.6 

Excess fees / (unrecovered costs) $2.8 $(11.2) $(8.5) 

Source: OIG analysis of EPA data. (The numbers in the table may not add up due to rounding.) 

EPA’s January 2009 economic analysis projected the level of Abatement and 

RRP applications and program costs to remain about the same for the final 4 years 

of the 5-year cycle. EPA expects to achieve some future cost reductions through 

improvements in the program’s database and applications processing, and some 

cost increases in program enforcement. However, EPA did not project the amount 

of expected future cost reductions. If the fee collections and overall costs 

experienced in the second year remain at approximately the same levels in the 

final 3 years of the cycle, the estimated unrecovered costs for the 5-year cycle 

would be $42 million, as illustrated in table 3. We present the amounts in table 3 

to provide a perspective on the potential magnitude of the unrecovered costs. The 

amounts are based on estimates and projections, and actual results may vary. 

13-P-0163 6 
 

 

 

 

 

 

Table 3: Estimated unrecovered costs for the 5-year cycle ($ in millions) 

FY 

2010 

FY 

2011 

FY 

2012 

FY 

2013 

FY 

2014 Total 

Fee collections $22.0 $9.1 $9.1 $9.1 $9.1 $58.4 

Program costs 19.2 20.3 20.3 20.3 20.3 100.4 

Total $2.8 $(11.2) $(11.2) $(11.2) $(11.2) $(42.0) 

Source: OIG analysis of EPA data. 

OCSPP was concerned that OIG based its findings on the preliminary data from 

OPPT’s rough cost estimate. According to OCSPP, the preliminary rough cost 

estimate was not an authoritative and complete statement of program costs. 

Therefore, OCSPP conducted a second, more refined cost estimate to provide a 

more accurate picture of the lead program costs. OCSPP presented its revised 

estimate for the 5-year cycle to OIG on October 3, 2012, as an attachment to 

EPA’s response to OIG’s draft report (Appendix C). The revised cost estimate 

showed unrecovered costs of $16.4 million for FYs 2010 through 2014 combined, 

as illustrated in table 4. The fee collections are the actual amounts for FY 2010 

and FY 2011. OCSPP derived the 2012 amounts from the Agency’s FY 2012 

operating plan and 2013 amounts from the President’s FY 2013 Budget. OCSPP 

estimated the 2014 amounts from the FY 2013 figures. 

Table 4: Revised estimated unrecovered costs for the 5-year cycle ($ in millions) 

FY 

2010 

FY 

2011 

FY 

2012 

FY 

2013 

FY 

2014 Total 

Fee collections $22.0 $8.7 $4.1 $4.7 $4.9 $44.3 

Program costs 13.1 14.3 10.9 11.2 11.2 60.6 

Total $8.9 $(5.6) $(6.8) $(6.5) $(6.3) $(16.4) 

Source: OIG analysis of EPA data. (The numbers in the table may not add up due to rounding.) 

Although EPA’s revised estimate reduced the unrecovered costs for the 5-year 

cycle from $42 million to $16.4 million, our findings did not change. EPA’s leadbased paint program is not recovering all its costs. The significant variance in 

calculated program costs between the two estimates underscores the need for EPA 

to conduct a biennial cost review to determine its actual costs. 

EPA is not recovering all of its costs of administering the lead-based paint 

program because: 

 RRP firm participation is lower than projected. 

 EPA has not conducted a biennial cost review to determine its actual costs 

and decide whether it needs to adjust fees to reflect changes in costs. 

	 The fees structure does not take into account all applicable indirect costs 

and therefore does not provide for recovering the full cost of administering 

the lead-based paint program. 

13-P-0163 7 
 

 

RRP Firm Participation Is Lower Than Projected 

The RRP program applies to renovation activities in target housing and childoccupied facilities. Under the RRP final rule of April 22, 2008, firms that are 

subject to the regulations need to obtain EPA certification, and training providers 

must obtain accreditation for their RRP courses. EPA’s economic analysis for the 

2008 rule estimated the universe of affected entities for the final rule. EPA based 

the estimate on the number of renovations estimated to occur in rental target 

housing and child-occupied facilities. EPA’s economic analysis estimated the 

number of renovation firms as well as the number of training providers that would 

be needed to perform renovation jobs and train the needed workforce in years 

1 through 5 of the program. 

EPA’s economic analysis overestimated the level of firm participation in the 

program and the number of RRP applications. EPA’s 2009 economic analysis 

estimated the number of RRP applications from firms seeking certification to be 

approximately 212,000 for the first year, 72,000 for the second through the fourth 

year, and 71,000 for the fifth year of the 5-year cycle. Since the program became 

fully effective April 22, 2010, EPA considered the first full year to run through 

April 2011 and the second year through April 2012. EPA certified approximately 

87,000 firms the first full year and 13,000 the second year. The total number of 

firms certified for the first 2 years of the 5-year cycle was about 35 percent of the 

estimated total, as illustrated in table 5. 

Table 5: Summary of estimated and actual firm certifications 

Year 1 Year 2 Total 

Estimated certifications 212,000 72,000 284,000 

Actual certifications 87,000 13,000 100,000 

Percent of estimate realized 41% 18% 35% 

Source: OIG analysis of EPA data. 

Based on the expected applications, EPA estimated the program costs and related 

fee collections to be $61.5 million for the first year and approximately $22 million 

for each of the subsequent 4 years (table 1). The actual fee collections of 

$22.0 million for FY 2010 and $9.1 million for FY 2011 (table 2) were less than 

anticipated due to a lower-than-expected level of firm participation. 

EPA stated that when it conducted its economic analysis for the 2008 RRP final 

rule economic conditions were more favorable than when the RRP program began 

in 2010. Consequently, the demand for certified firms is less than EPA anticipated 

when it developed the rule. EPA said it is pursuing efforts to increase certification 

of renovation firms. OPPT has developed a prioritized list of outreach activities 

based on target audiences (contractors, consumers, and the health care sector). 

OPPT and OECA are implementing activities in FY 2012 to increase 

(1) contractor awareness and compliance with the RRP rule requirements, 

(2) consumer demand for certified firms, and (3) enforcement of the RRP rule. 

13-P-0163 8 
 

 

EPA Has Not Conducted a Biennial Cost Review 

EPA has not conducted a formal cost study to determine its actual lead-based 

paint program costs and decide whether it needs to adjust the fees to reflect 

changes in the costs. The CFO Act and OMB Circular A-25 require the Agency to 

review the user charges for Agency programs biennially. Agencies should discuss 

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

CFO’s Annual Report required by the CFO Act. EPA stated that it conducts an 

economic analysis to support setting fees per the notice-and-comment rulemaking. 

It also manages its costs for administering and enforcing the Abatement and RRP 

programs to ensure that annual costs are limited to the funds appropriated 

annually by Congress. However, these activities do not identify the actual 

program costs incurred. 

OPPT stated that it estimated its costs for the 2009 economic analysis but had not 

performed a biennial cost review. OPPT stated that while the Agency’s cost 

accounting system can distinguish certain types of costs (i.e., Superfund Program 

and the Working Capital Fund), EPA has not implemented an approach to track 

the lead user fee program costs. Therefore, EPA would have to conduct a manual 

cost study to determine the allocable program costs. 

EPA does not have internal guidance for conducting a biennial cost review. A 

systematic approach to reviewing user fee program costs would help EPA conduct 

biennial cost studies. Without performing the biennial cost studies prescribed by 

the CFO Act and OMB guidance, EPA does not have the cost data necessary to 

determine whether it should update the fees rule. 

EPA discussed the results of its user fees biennial review in the FY 2011 Agency 

Financial Report, as required by OMB Circular A-25. The report concluded that 

EPA’s user fees are in compliance with statutory authority, but the report did not 

discuss user fee cost reviews. In a discussion with the OIG, EPA’s Office of the 

Chief Financial Officer (OCFO) stated that it will conduct biennial cost reviews 

for EPA’s user fee programs. For the next biennial user fees report, OCFO said it 

will have EPA’s user fee programs include detail on their cost reviews. 

Fees Structure Does Not Take Into Account All Indirect Costs Needed 

for Full Cost Recovery 

When EPA prepared an economic analysis to estimate the program costs and 

develop a fee structure, it did not include all applicable indirect costs. The 2009 

economic analysis applied indirect costs to direct labor but not to other direct 

costs, such as contract costs. OMB Circular A-25 requires the Agency to recover 

the full cost of providing a service, including indirect costs. By not including all 

applicable indirect costs in its economic analysis, EPA developed a fee structure 

that did not recover the full cost of the program. 

13-P-0163 9 
 

 

EPA’s 2009 economic analysis determined the fringe benefits and indirect costs 

applicable to direct labor by applying a multiplier of 1.6 times the direct labor. 

EPA staff stated that the multiplier accounted for both labor benefits and indirect 

costs. The application of a 1.6 multiplier was consistent with EPA’s February 

1999 economic analysis for the June 1999 lead-based paint accreditation and 

certification fee rule. However, EPA did not have supporting calculations for the 

multiplier. We believe that an indirect cost rate based on Agency cost calculations 

would be a more reliable multiplier for applying indirect costs to direct costs. 

EPA has not developed indirect cost rates specifically for its user fee programs. 

However, OCFO develops annual indirect cost rates for interagency agreements. 

OCFO annually develops interagency agreement indirect cost rates for several 

headquarters program offices and each region. OCFO posts the annual rates on 

EPA’s Office of Grants and Debarment Intranet website. Because the interagency 

agreement indirect cost rates are based on OCFO’s annual calculations, we 

consider them to be the most reliable rates available for use by user fee programs. 

OPPT’s original cost estimates for FYs 2010 and 2011 include direct costs 

incurred by OPPT for administering the lead Abatement and RRP programs and 

OECA for performing enforcement activity. To determine full cost estimates, we 

applied the interagency agreement indirect cost rates to the cost estimates. We 

applied OCSPP’s indirect cost rates of 8.63 percent for FY 2010 and 

10.24 percent for 2011 to OPPT’s direct costs, and OECA rates of 6.39 percent 

for FY 2010 and 7.61 percent for FY 2011 to OECA’s direct costs. Applying the 

indirect cost rates added $3.2 million to cost estimates for the 2 years combined. 

We included the $3.2 million indirect costs in our calculations of unrecovered 

costs for FY 2010 and FY 2011 combined and the 5-year cycle. OCSPP’s revised 

cost estimate applied the appropriate indirect costs rates to direct costs and 

included $2.2 million indirect costs. OCFO should determine whether the 

interagency agreement rates are general purpose rates and, therefore, are 

appropriate for use by user fee programs, or whether it should develop new rates 

specifically for the user fee programs. Applying appropriate indirect cost rates to 

direct costs will help EPA recover the full cost of the program. 

Internal Controls Over Fee Assessments and Collections Were 

Generally Effective 

We found EPA’s internal controls over the assessment and collection of fees to be 

generally effective. However, we identified a minor internal control issue related to 

untimely recording of collections. OMB and the U.S. Government Accountability 

Office (GAO) require federal agencies to establish and maintain internal controls. 

Internal controls are an integral component of an organization’s management that 

provide reasonable assurance that the organization achieves effectiveness and 

efficiency of operations, reliability of financial reporting, and compliance with 

applicable laws and regulations. Although EPA’s internal controls were generally 

13-P-0163 10 
 

 

effective, the minor internal control issue we found compromised EPA’s ability to 

ensure that management’s directives are followed and assets are safeguarded. 

EPA’s Office of Financial Services (OFS) did not consistently record lead 

accreditation and certification fee collections timely. We tested 45 collection 

items and found that 27 (60 percent) were recorded more than 3 working days 

after receiving notice that the U.S. Treasury received the collection. OFS recorded 

the collections, totaling $21,320, between 5 and 21 days after receiving notice of 

the collection. EPA’s Resource Management Directive System 2540-03, Cash 

Management Collections and Deposits, requires the Agency to record collections 

in the financial system within 3 working days of receiving notice of the collection. 

GAO’s Standards for Internal Control in the Federal Government states that 

transactions should be promptly recorded to maintain their relevance and value to 

management in controlling operations and making decisions. 

OFS staff stated that during the period of October 2010 through February 2011 

OFS experienced a shortage in resources due to an unexpected illness of one of 

the staff members, which impacted the timeliness of recording collections in 

IFMS. Recording fee collections untimely increases the risk of inaccurate 

information in the Agency’s accounting system. Because the untimely recording 

was temporary and OFS has procedures to record collections timely, we are not 

making a recommendation. 

Conclusion 

EPA is not recovering all its costs of administering the lead-based paint program. 

EPA should prepare a more accurate estimate of program participation and 

program costs, apply appropriate indirect costs to obtain full cost recovery, and 

update the 2009 fees rule to reflect the amount of fees necessary to recover the 

program costs. By not recovering all of its costs, the federal government did not 

collect funds that otherwise could have been available to offset the federal budget 

deficit. The President’s Budget Message for FY 2012 states that reducing the 

long-term federal deficit must be a priority. The federal government is looking for 

ways to save money and cut unnecessary costs. We believe that EPA could help 

the federal government in this endeavor by collecting more lead fees to recover 

more of its costs. A fees rule update could result in potential additional revenue of 

up to $16.4 million per 5-year cycle based on estimated revenue and program 

costs for the current cycle. A biennial cost review could provide a more precise 

determination of potential additional revenue. 

Preliminary Agency Actions 

In response to our prior audit report, EPA Should Update Its Fees Rule to Recover 

More Motor Vehicle and Engine Compliance Program Costs (Report No. 

11-P-0701, dated September 23, 2011), OCFO agreed to issue guidance to EPA’s 

user fee programs for conducting biennial reviews. Therefore, we make no 

recommendation for OCFO to issue user fee guidance. 

13-P-0163 11 
 

 

OPPT plans to update the fees rule in conjunction with other regulatory changes 

in the lead program, e.g., rules underway to address renovation activities in other 

buildings. Accomplishing that initiative should provide additional recurring 

annual revenue in future years. 

During our field work, EPA addressed the level of program participation by planning 

outreach activities in FY 2012 to increase certification of renovation firms. 

Recommendations 

We recommend that the Assistant Administrator for Chemical Safety and 

Pollution Prevention: 

1.	 Update the March 20, 2009, fees rule to reflect the amount of fees 

necessary for the program to recover the costs of implementing and 

enforcing the program. 

2.	 Modify its lead-based paint program cost analysis procedures to apply 

indirect cost rates to all applicable direct costs in order to obtain the full 

costs of the program. (The CFO will develop the indirect cost rates.) 

We recommend that the Chief Financial Officer: 

3.	 Conduct biennial cost reviews of the lead-based paint program fee 

collections and the full cost of operating the program to determine whether 

EPA is recovering its costs. 

4.	 Determine the appropriate Agency indirect cost rates to be used for EPA’s 

user fee programs. 

Agency Comments and OIG Evaluation 

EPA agreed with the recommendations and provided its intended corrective 

actions. EPA provided estimated completion dates for recommendations 3 and 4. 

Recommendations 1 and 2 are unresolved pending receipt of the estimated 

completion dates. 

EPA was concerned that the OIG based its findings on the preliminary data from 

OPPT’s rough cost estimate. The preliminary data was not an authoritative and 

complete statement of program costs. Therefore, EPA conducted a more refined 

cost analysis. It presented a projected shortfall over 5 years that was significantly 

lower than the shortfall in the initial rough cost estimate. At EPA’s request, we 

included the results of EPA’s second cost analysis in this report. The second cost 

analysis did not change the conditions we had previously identified, and we did 

not change our findings and conclusions. 

13-P-0163 12 
 

 

EPA stated that it would need to conduct a much more accurate cost study after 

implementing the program for a full 5-year certification cycle. We agree that EPA 

needs a more accurate cost study. However, EPA should obtain a cost study every 

other year by conducting biennial cost reviews. EPA agrees and plans to conduct 

a biennial cost review of the lead-based paint program in FY 2013. 

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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 12 Update the March 20, 2009, fees rule to reflect the 

amount of fees necessary for the program to 

recover the costs of implementing and enforcing 

the program. 

U Assistant Administrator for 

Chemical Safety and 

Pollution Prevention 

$42,0002 $16,400 

2 12 Modify its lead-based paint program cost analysis 

procedures to apply indirect cost rates to all 

applicable direct costs in order to obtain the full 

costs of the program. (The CFO will develop the 

indirect cost rates.) 

U Assistant Administrator for 

Chemical Safety and 

Pollution Prevention 

3 12 Conduct biennial cost reviews of the lead-based 

paint program to determine whether EPA is 

recovering its costs. 

O Chief Financial Officer 11/15/13 

4 12 Determine the appropriate Agency indirect cost 

rates to be used for EPA’s user fee programs. 

O Chief Financial Officer 9/30/133 

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 

2 The potential monetary benefit represents the cost savings from a fees rule update for a subsequent 5-year certification cycle, based on the estimated and 

projected unrecovered program costs for the current 5-year cycle ending September 30, 2014. We based the claimed amount on OCSPP’s original cost estimate 

and the agreed-to amount on the second cost estimate. 

3 EPA originally provided a planned completion date of December 31, 2012, in its response to the draft report and subsequently updated it to September 30, 2013. 

13-P-0163 14 
 

 

Appendix A 

Details on Scope and Methodology 

We reviewed EPA’s processes for the assessment and collection of lead accreditation and 

certification fees. To gain an understanding of the processes, we: 

 Reviewed the applicable laws, regulations, fees rules and supporting economic analyses, 

and program information 

 Reviewed program operating procedures 

 Interviewed OPPT, OCFO, and OECA personnel 

 Examined the federal lead-based paint program database 

We obtained fee collections and roughly estimated program operating costs for FYs 2010 and 

2011 and determined whether the collections were sufficient to recover all program operating 

costs. We examined EPA’s economic analyses and their projections of program activity and 

related program costs. 

We tested FY 2011 fee transactions to determine whether EPA assessed the proper fee amount, 

collected the fee before issuing an accreditation or certification, and recorded the collection 

timely. We determined whether EPA approved and paid the proper refund amounts. We used the 

monetary unit method of statistical sampling to test 45 fee collections totaling $53,420, 

5 fee credit transactions totaling $76,900, and 10 refund transactions totaling $2,085. The fee 

collections universe included 32,686 transactions totaling $9,837,066, and the refunds universe 

included 3,079 transactions totaling $776,653. We used random sampling to test 45 accreditation 

and certification applications out of 29,779 applications in FY 2011 to search for accreditations 

and certifications issued with no corresponding fee collection. 

We assessed the internal controls related to assessing, collecting, and refunding fees. We gained 

an understanding of the internal controls through interviews with OPPT and OCFO personnel, 

and examination of fees database information and the related supporting documents. We 

reviewed EPA’s OCSPP and OCFO FY 2011 management integrity assurance letters for 

reported internal control weaknesses. 

We did not assess the reliability of data in OCSPP’s information systems because their use did 

not materially affect our findings, conclusions, or recommendations. We verified fee collection, 

refund, and certification data by examining supporting documentation and accessing financial 

information in IFMS. We did not review the internal controls over IFMS from which we 

obtained financial data, but relied on the review conducted during the audit of EPA’s FY 2011 

financial statements. 

Prior Reports Reviewed 

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

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

three GAO reports contained information relevant to our review. The GAO reports included a 

13-P-0163 15 
 

 

survey of federal agency fee reviews, a study of how user fee design characteristics influenced 

the effectiveness of user fees, and a response to a congressional request about user fee reviews. 

We used the information and issues disclosed in the EPA OIG and GAO reports to help identify 

issues as we conducted our review. 

Table A-1: Prior reports reviewed 

Report Title Report No. Date 

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 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. 

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. 

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

recover all reasonable program costs. EPA 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. EPA agreed with the report’s recommendations and plans to update the fees rule and 

conduct biennial reviews. 

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—may affect the economic efficiency, equity, revenue adequacy, and administrative 

burden of cost-based fees. The principles outlined in the design guide present a framework 

for user fee design. 

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 6 of the 24 CFO 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, 3 reviewed all of their reported fees at least once, 11 reviewed some of their 

reported fees, and 4 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 because 

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

13-P-0163 16 
 

 

 

 

 

Appendix B 

Lead-Based Paint Program Cost Estimates 

Table B-1: EPA’s Initial Cost Estimates for FYs 2010 and 2011 

FY 2010 FY 2011 

OCSPP 

Personnel Compensation and Benefits $9,048,500 $8,587,900 

Travel 143,200 83,200 

Contracts, Grants, and Expenses (CG&E) – regional offices 497,000 495,000 

CG&E – State and Tribal Assistance Grants and contracts 4,647,700 5,864,900

 Subtotal $14,336,400 $15,031,000 

OCSPP Indirect Cost Rate 8.63% 10.24% 

OCSPP Indirect Costs $1,237,231 $1,539,174 

Working Capital Fund 376,000 441,800 

OCSPP Full Costs $15,949,631 $17,011,974 

OECA 

Personnel Compensation and Benefits $1,834,000 $1,828,000 

CG&E – regional offices 1,200,000 1,200,000

 Subtotal 3,034,000 3,028,000 

OECA Indirect Cost Rate 6.39% 7.61% 

OECA Indirect Costs 193,873 230,431 

Working Capital Fund 61,000 61,000 

OECA Full Costs $3,288,873 $3,319,431 

OCSPP and OECA Full Costs (total direct and indirect costs) $19,238,504 $20,331,405 

Source: OIG analysis of EPA data. 

13-P-0163 17 
 

 

 

 

Appendix C 

Agency Response to Draft Report 

(Received October 3, 2012) 

MEMORANDUM 

SUBJECT: Response to OIG Draft Report No. OA-FY12-0107 

FROM: James J. Jones 

Acting Assistant Administrator 

 Barbara J. Bennett 

 Chief Financial Officer 

TO: Arthur A. Elkins, Jr. 

Inspector General 

Thank you for the opportunity to respond to the findings and recommendations in the Office of 

Inspector General's (OIG’s) Draft Report entitled “EPA Is Not Recovering All Its Costs of the 

Lead-Based Paint Fees Program” (August 30, 2012). 

This memorandum summarizes the Office of Chemical Safety and Pollution Prevention 

(OCSPP) and the Office of the Chief Financial Officer’s (OCFO) response to the OIG’s findings, 

along with our position on each of the Draft Report’s recommendations. For those report 

recommendations with which the agency agrees, we have provided either high-level intended 

corrective actions and estimated completion dates, or reasons why we are unable to provide highlevel intended corrective actions and estimated completion dates at this time. For those report 

findings and recommendations with which the agency does not agree, we have explained our 

position. 

Overall Position: 

The cost data upon which the OIG has based its findings and recommendations was provided by 

OCSPP with the understanding that it was to be used as part of preliminary research only, and 

was hence not an authoritative and complete statement of program costs. Accordingly, OCSPP 

has significant concerns about the use of this preliminary data to make the findings presented in 

the Draft Report. OCSPP expressed this concern to OIG during discussions of its preliminary 

findings on April 10, 2012, and also informed OIG that OCSPP would be undertaking an effort 

to gather refined data for the OIG’s use in its report. 

OCSPP is providing this refined cost data to the OIG as an attachment to this memorandum. As 

this refined cost data provides a much more accurate picture of the lead program costs for FY10 

13-P-0163 18 
 

 

through FY14, it is our hope that the OIG will carefully consider the revised cost data in 

finalizing its report. 

Discussion of Findings: 

Finding 1. Program Costs Exceed Fee Collections: 

The OIG’s analysis to support this finding consists of a comparison between estimated fee 

collections and program costs for the Lead-based Paint Program for the years FY2010 to 

FY2014. The Draft Report acknowledges that “EPA had not conducted a formal cost study to 

determine its actual program costs” and that at the request of the OIG the program office 

“developed a rough estimate” of these costs for FY2010 and FY2011 “quickly without 

performing a thorough cost analysis.” Despite these significant reservations expressed about the 

accuracy of the underlying data, the Draft Report nevertheless relies on this data to extrapolate 

program costs for FY 2012 to FY2014, and concludes with numerical specificity that there is a 

shortfall in unrecovered program costs for the Lead-based Paint Program for the five-year period 

in question. 

OCSPP cautions against attaching a specific dollar number to the “shortfall in unrecovered 

program costs” without conducting a comprehensive cost analysis, because it conveys a false 

sense of precision about the data underlying that conclusion. OCSPP believes it is inadvisable to 

predict five years of program cost and revenue based on preliminary and limited data, and it is 

misleading to project a specific dollar amount of shortfall using preliminary data. A much more 

accurate cost study would need to be conducted after implementing the Lead-based Paint 

Program for a full five-year certification cycle. 

Furthermore, OCSPP finds the Draft Report’s extrapolation of costs from two years of data (FY 

2010 and FY2011) to a five-year time frame particularly problematic because it fails to make any 

adjustments or even to discuss the complexity and cyclical nature of the Lead-based Paint 

Program. As discussed extensively with the OIG, taking this approach to extrapolating costs does 

not account for the efficiencies and cost reductions that OCSPP expects to accrue as the RRP 

program matures through the first five-year certification cycle. As a certification program 

matures, the program becomes more efficient in processing and reviewing applications, thereby 

reducing labor costs. This likely outcome is evident from the reduction of fees collected 

associated with the abatement portion of the Lead-based Paint Program that EPA realized in the 

1999 Fee Rule. Likewise, as has been experienced with the abatement program, as states and 

tribes become authorized to operate a lead program in lieu of the EPA program, program costs 

will commensurately decrease. The Lead-based Paint Program has made certain investments in 

the first two years of the program in IT and other infrastructure that increase efficiency, which 

will in turn decrease labor costs and, hence, overall program cost. 

Due to OCSPP’s significant concern with data underlying the Draft Report’s conclusions, 

OCSPP has conducted an in-depth analysis of fee-related program activities (see Appendix A). 

Briefly, OCSPP compiled a list of Lead Program activities and identified those which are feerelated and those which are not. OCSPP then gathered information from HQ and all ten Regional 

Office Lead Program components in order to provide more refined Lead Program cost estimates. 

13-P-0163 19 
 

 

OCSPP’s refined analysis indicates actual program costs for FY10 and FY11 were $13.1 million 

and $14.2 million, respectively. This is in contrast to the preliminary estimates of $19.2 and 

$20.3 million, respectively, which were cited in the OIG’s Draft Report. In addition, rather than 

simply using FY11 costs for FY12-14 as the OIG did, OSCPP has provided a cost estimate for 

FY12 that is based on actual costs for 9 months of this fiscal year ($10.9 million) and an FY13 

cost estimate that is based on the President’s Budget ($11.2 million). With this actual data 

available, OCSPP only had to project FY14 costs, which was done using FY13 costs ($11.2 

million). Details on OCSPP’s refined cost estimates are provided in Appendix A. 

In summary, OCSPP’s refined cost estimates are based on more realistic data rather than 

simplified assumptions, and include refined data for FY10 and FY11, an FY12 estimate based on 

actual data for 9 months of the fiscal year, FY13 data from the President’s Budget, and projected 

data for FY14. Based on this refined analysis, OCSPP determined that the Lead-based Paint 

Program recovered its program costs in the first two years, and the projected shortfall over five 

years is significantly lower than the rough estimates OIG used to make its findings in the Draft 

Report. 

Finding 2. RRP Firm Participation is Lower Than Projected 

The Draft Report states that “EPA’s economic analysis overestimated the level of firm 

participation in the program and the number of RRP applications.” This language implies that 

EPA somehow erred in estimating the number of firms needing certification. An economic 

analysis is developed to support rulemaking, and is therefore a projection based on the facts 

available at the time. The estimates of Lead-based Paint Program participation were made to 

support the rule-making and underwent the usual Agency, OMB and public review processes 

without any major comment as to the projections of firm participation. The successful 

completion of this process and the lack of comments on these estimates indicates that, at the 

time, they were reasonable, and that there was no error in EPA’s approach or conclusions. 

However, EPA’s projections were made prior to the severe economic downturn experienced in 

the U.S., which likely caused, if not strongly contributed to, the number of firms actually 

participating in the RRP program to be at the lower end of the projected range. Nevertheless, 

EPA’s economic analysis for the Lead-based Paint Program included a sensitivity analysis to 

account for variance in economic conditions. A review of the data indicates that the actual 

participation has fallen within the range estimated within that sensitivity analysis, further 

supporting that the projections were appropriate for their purpose. 

Finding 3. EPA Has Not Conducted a Biennial Cost Review 

OCFO concurs in this finding. 

Finding 4. Fees Structure Does Not Take Into Account All Indirect Costs Needed for Full 

Cost Recovery 

The Draft Report states that “When EPA prepared an economic analysis to estimate the program 

costs and develop a fee structure, it did not include all applicable indirect costs.” As OCSPP 

explained in discussions with the OIG, the economic analysis for the 2009 Fees Rule is an 

13-P-0163 20 
 

 

 

estimate of future costs for use by decision-makers (along with other information including 

program participation rate forecasts and effects of fees on small businesses) in considering 

regulatory options. OCSPP believes a much more accurate estimate could be conducted after 

implementing the RRP aspect of the lead program for a five-year certification cycle and after 

having performed biennial reviews following guidance provided by the OCFO. 

Finding 5. Internal Controls Over Fee Assessments and Collection Were Generally Effective 

OCFO concurs in this finding. 

Discussion of Recommendations: 

Recommendation 1. Update the March 20, 2009, fees rule to reflect the amount of fees 

necessary for the program to recover the costs of implementing and enforcing the program. 

Concur. OCSPP will proceed with updating the 2009 Fees Rule following completion of at least 

one 5-year cycle of the RRP accreditation and certification program, if warranted, based on 

findings from at least two consecutive biennial reviews that the Lead Program costs continue to 

exceed the amount fees collected. 

 OCSPP is unable to provide an estimated completion date at this time. 

Recommendation 2. Modify its lead-based paint program cost analysis procedures to apply 

indirect cost rates to all applicable direct costs in order to obtain the full costs of the program. 

(The CFO will develop the indirect cost rates.) 

Concur. Upon clarification of applicable indirect cost rates by OCFO, OCSPP will modify cost 

analysis procedures as appropriate. 

 OCSPP is unable to provide an estimated completion date at this time. 

Recommendation 3. Conduct biennial cost reviews of the lead-based paint fee collection and 

full cost of operating the program to determine whether EPA is recovering costs. 

Concur. In accordance with Office of Management and Budget Circular A-25, User Charges and 

the Chief Financial Officer’s Act of 1990, the Office of the Chief Financial Officer will conduct 

a review of the Lead-Based paint fee collections and the full cost of operating the program to 

determine whether EPA is recovering its costs. This will be performed in accordance with the 

next biennial cost review scheduled for FY 2013. 

 Estimated completion date: November 15, 2013 

Recommendation 4. Determine the appropriate Agency indirect cost rates to be used for EPA’s 

user fee programs. 

13-P-0163 21 
 

 

 

Concur. OCFO will develop the appropriate indirect cost rate for the EPA user fee programs 

including the lead-based paint program. 

 Estimated completion date: December 31, 2012 

Conclusion: 

Thank you for the opportunity to comment on this Draft Report. If you have questions, please 

feel free to contact me, or to have your staff contact Janet Weiner at (202) 564-2309. 

Attachment A 

13-P-0163 22 
 

 

 

 

 

 

 

 

 

APPENDIX A 

OCSPP Lead-based Paint Program Cost Estimates 

OCSPP Costs 2010 2011 

2-Year 

Total 2012 2013 2014 

5-Year 

Total 

PC&B $4,137,200 $3,833,600 $7,970,800 $3,368,000 $3,619,200 $3,619,200 $18,577,200 

Travel $65,500 $34,800 $100,300 $29,000 $30,700 $30,700 $190,700 

CG&E – Regional Offices $0 $0 $0 $0 $0 $0 $0 

CG&E – STAG grants & 

contracts $4,647,700 $5,864,900 $10,512,600 $3,400,000 $3,331,000 $3,331,000 $20,574,600 

Sub-total $8,850,400 $9,733,300 $18,583,700 $6,797,000 $6,980,900 $6,980,900 $39,342,500 

OCSPP Indirect Cost Rate 8.6% 10.2% 10.2% 10.2% 10.2% 

OCSP Indirect Costs $763,790 $996,690 $1,760,479 $696,013 $714,844 $714,844 $3,886,181 

WCF $257,100 $321,900 $579,000 $185,400 $260,300 $260,300 $1,285,000 

OCSPP Full Costs – Total 

direct & indirect costs $9,871,290 $11,051,890 $20,923,179 $7,678,413 $7,956,044 $7,956,044 $44,513,681 

OECA Costs 

OECA costs $3,000,000 $3,000,000 $6,000,000 $3,000,000 $3,000,000 $3,000,000 $15,000,000 

OECA Indirect Cost Rate 6.4% 7.6% 7.6% 7.6% 7.6% 

OECA Indirect Costs $191,700 $228,300 $420,000 $228,300 $228,300 $228,300 $1,104,900 

OECA Full Costs – Total 

direct & indirect costs $3,191,700 $3,228,300 $6,420,000 $3,228,300 $3,228,300 $3,228,300 $16,104,900 

Total Costs 

OCSPP & OECA Full Costs $13,062,990 $14,280,190 $27,343,179 $10,906,713 $11,184,344 $11,184,344 $60,618,581 

Fees collected $22,010,546 $8,675,000 $30,685,546 $4,059,894 $4,665,182 $4,850,168 $44,260,790 

Excess (shortage) of fees $8,947,556 ($5,605,190) $3,342,367 ($6,846,819) ($6,519,162) ($6,334,176) ($16,357,791) 

13-P-0163 23 
 

 

 

Lead Risk Reduction Program Resources, FY 2010 - FY 2014: Summary of Changes from 

Preliminary (March 12, 2012) Estimates 

OCSPP’s preliminary estimate of costs used a simplifying assumption that all Regional FTE, 

PC&B, Travel, CG&E and WCF were fee related resources. With the additional time 

taken to refine our assessment, OCSPP has worked with all 10 EPA Regional Offices to 

provide realistic data-based cost estimates for each of these cost categories. 

Methodology: 

Step 1: OCSPP-HQ queried each of the Regional Lead Program managers asking them to 

provide best estimates of the proportion of their Lead Program FTE dedicated to feerelated and non-fee related activities for Fiscal Years 2010-2012. Program activities 

that should be attributed to fee-related and non-fee-related categories were provided 

to the Regions as guidance for conducting the assessment to ensure that each Region 

was able to distinguish among fee-related and non-fee-related activities in a 

consistent manner. (See below “Lead-based Paint Abatement and RRP Program 

Costs”) 

Step 2: The proportion of each Region’s FTE that was designated as fee-related was 

applied across the remaining Regional cost categories (i.e., PC&B, Travel, and 

WCF), to estimate the amount of each of these cost categories that is used for feerelated activities. 

The exercise conducted with the Regional Lead Programs also verified that no Regional 

EPM CG&E resources are used for fee-related activities. 

OCSPP’s preliminary cost estimates provided to OIG were only for FY10 and FY11, as these 

were the only data available for the preliminary analysis. OCSPP’s refined cost estimates 

include FY12 resources derived from the Agency’s FY12 operating plan and FY13 

resources derived from the President’s FY13 Budget. FY14 resources are estimated from 

the FY13 figures. This refined information provides a much more realistic estimate of the 

fee-related costs of the Lead Program for FY10-FY14. 

OCSPP’s preliminary fee revenues provided to OIG were only for FY10 and FY11, as these 

were the only data readily available for the preliminary analysis. OCSPP’s refined fee 

revenue estimates include actual FY12 fee revenue through August 2012 and 

extrapolated from this FY12 trend through September, 2012. The FY13 and FY14 

revenue figures are estimated based on the FY12 figures. This refined information 

provides a much more realistic estimate of the fee revenue for the Lead Program for 

FY10-FY14. 

13-P-0163 24 
 

 

 

Lead-based Paint Abatement and RRP Program Fee- and Non-Fee-Related Activities 

As specified in the Toxic Substances Control Act (TSCA), EPA must establish and 

implement a fee schedule to recover to the U.S. Treasury the Agency's costs of 

administering and enforcing the standards and requirements applicable to lead-based 

paint training programs and contractors. 

Relevant statutory language from TSCA section 402(a)(3): 

Accreditation and certification fees. The Administrator (or the State in the case of an 

authorized State program) shall impose a fee on – (A) persons operating training 

programs accredited under this title; and (B) lead-based paint activities contractors 

certified in accordance with paragraph (1). The fees shall be established at such level as 

is necessary to cover the costs of administering and enforcing the standards and 

regulations under this section which are applicable to such programs and contractors. 

The fee shall not be imposed on any State, local government, or nonprofit training 

program. The Administrator (or the State in the case of an authorized State program) 

may waive the fee for lead-based paint activities contractors under subparagraph (A) for 

the purpose of training their own employees. 

Examples of fee-related activities: 

o	 Review/approval of abatement or RRP training provider applications 

o	 Review/approval of abatement individual applications 

o	 Review/approval of abatement firm applications 

o	 FLPP redesign activities 

o	 Application status inquiries 

Examples of non-fee-related activities: 

o	 Oversight of State and Tribal grants to implement abatement and/or RRP programs 

o	 Outreach to State, Tribes and Territories to discuss possible authorization for 

abatement and/or RRP programs 

o	 Outreach to the public 

o	 Outreach to the regulated community 

o	 Regulation development 

o	 Interpretive guidance activities 

13-P-0163 25 
 

 

Appendix D 

Distribution 

Office of the Administrator 

Assistant Administrator for Chemical Safety and Pollution Prevention 

Chief Financial Officer 

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 

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 Chemical Safety and Pollution Prevention 

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

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

Officer 

13-P-0163 26