U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Needs to Improve Its 

Recording and Reporting 

of Fines and Penalties 

 Report No. 10-P-0077 

 March 9, 2010 
Report Contributors: Paul Curtis 

 Arthur Budelier 

 Cynthia R. Poteat 

 Sabrina Berry

 Sheree James

 Robert Evans

 James Niergarth 

Abbreviations 

BD Billing Document 

CFC Cincinnati Finance Center 

EPA U.S. Environmental Protection Agency 

FY Fiscal Year 

GAO Government Accountability Office 

ICIS Integrated Compliance and Information System 

IFMS Integrated Financial Management System 

OECA Office of Enforcement and Compliance Assurance 

OIG Office of Inspector General 

RMDS Resources Management Directive System 

SFO Servicing Finance Office 
U.S. Environmental Protection Agency 10-P-0077 

March 9, 2010 Office of Inspector General 

At a Glance
 

Catalyst for Improving the Environment 

Why We Did This Review 

We performed this review to 

determine whether the U.S 

Environmental Protection 

Agency (EPA) (1) billed and 

collected fines and penalties in 

a timely manner; (2) took 

appropriate action to collect 

fines and penalties; and 

(3) tracked the assessment, 

billing, and collection of fines 

and penalties to measure the 

impact of the enforcement 

program and promote accurate 

and transparent reporting. 

Background 

EPA’s Office of Enforcement 

and Compliance Assurance 

(OECA) monitors compliance 

with environmental laws and 

takes enforcement action 

when needed. Assessing 

penalties as part of an 

enforcement action provides a 

deterrent to noncompliance. 

The Cincinnati Finance Center 

(CFC) records and tracks the 

billing and collection of fines 

and penalties. 

For further information, 

contact our Office of 

Congressional, Public Affairs 

and Management at 

(202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2010/ 

20100309-10-P-0077.pdf 

EPA Needs to Improve Its Recording and 

Reporting of Fines and Penalties 

What We Found 

EPA did not consistently record fines and penalty billings in a timely manner. 

Regional and program office personnel did not forward copies of source 

documents timely to CFC, which delayed the recording of accounts receivable. 

EPA did not record a receivable as required for two disputed stipulated penalties 

totaling $2,839,500. 

EPA generally took appropriate action to collect fines and penalties. However, it 

did not monitor the collections on a $300,000 receivable as required. 

EPA tracked the assessment, billing, and collection of fines and penalties. EPA 

used the assessments, and not the collections, as one of its measures of the 

enforcement program’s impact. OECA’s data system contained 7 errors totaling 

$139,242 in the penalty assessment amounts out of 156 billings reviewed related 

to 117 assessments. Due to these data errors and nondisclosure of collections, 

EPA did not report penalty information with complete accuracy and transparency. 

In November 2008, EPA upgraded the Regional Hearing Clerk database to notify 

CFC of new receivable source documents. The enhancement improved CFC’s 

ability to record receivables more timely.

 What We Recommend 

We made various recommendations to EPA to address recording fines and penalty 

billings more timely, monitoring delinquent debt, ensuring greater accuracy in 

OECA’s data system, and disclosing fines and penalties collected as well as 

assessments when reporting the results of enforcement actions. We revised a 

recommendation regarding testing internal controls over the forwarding of account 

receivable source documents to CFC and added a recommendation to develop a 

policy for recording stipulated penalties. EPA should provide estimated 

completion dates for recommendations 2-2, 4-2, 4-3, and 5-1. Based on these 

revisions, EPA agreed with all our recommendations. 
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

March 9, 2010 

MEMORANDUM 

SUBJECT:	 EPA Needs to Improve Its Recording and Reporting of Fines and Penalties 

 Report No. 10-P-0077 

FROM: Melissa M. Heist 

Assistant Inspector General for Audits 

TO: Barbara J. Bennett 

 Chief Financial Officer 

Cynthia Giles 

Assistant Administrator for Enforcement and Compliance Assurance 

The Office of Inspector General (OIG) of the U.S. Environmental Protection Agency (EPA) 

conducted this report on the subject audit. This report contains findings that describe problems 

we identified and corrective actions we recommend. This report represents our opinion and does 

not necessarily represent the final EPA position. EPA managers will make final determinations 

on matters in this report in accordance with established audit resolution procedures. 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time – is $340,813. 

Action Required 

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

report within 90 calendar days. You should include a corrective actions plan for agreed-upon 

actions, including milestone dates. We have no objections to the further release of this report to 

the public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact me at (202) 566-0899 

or heist.melissa@epa.gov, or Paul Curtis at (202) 566-2523 or curtis.paul@epa.gov. 
EPA Needs to Improve Its Recording 10-P-0077 

and Reporting of Fines and Penalties 

Table of Contents 

Chapter 

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

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

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

 Noteworthy Achievements.............................................................................. 2 

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

2 Billings and Collections Not Recorded Timely...................................................... 4 

CFC Did Not Consistently Record Fines and Penalty Billings Timely ............ 4 

EPA Did Not Record a Receivable for Two Stipulated Penalties ................... 5 

Conclusion...................................................................................................... 7 

 Recommendations ......................................................................................... 7 

Preliminary Agency Actions............................................................................ 7 

Agency Comments and OIG Evaluation......................................................... 8 

3 Improvements Needed in Monitoring EPA’s Accounts Receivable .................... 9 

EPA Did Not Monitor the Collection Activity on a Receivable ......................... 9 

Conclusion ..................................................................................................... 10 

 Recommendations .......................................................................................... 10 

 Preliminary Agency Actions............................................................................ 10 

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

4 Enforcement Penalty Data Not Completely Accurate........................................... 12 

Errors in Penalty Data in ICIS Identified......................................................... 12

 Conclusion...................................................................................................... 13 

 Recommendations ........................................................................................ 13 

Agency Comments and OIG Evaluation......................................................... 14 

5 EPA Reported Penalty Assessments but Not Collections ................................... 15
 

EPA Disclosed Penalty Assessments but Not Collections for 

 Enforcement Accomplishments .............................................................. 15

 Conclusion...................................................................................................... 16

 Recommendation ........................................................................................... 16 

Agency Comments and OIG Evaluation......................................................... 16 

Status of Recommendations and Potential Monetary Benefits....................................... 18 

-continued-
EPA Needs to Improve Its Recording 10-P-0077 

and Reporting of Fines and Penalties 

Appendices 

A Details on Scope and Methodology..................................................................... 19 

B Agency Response to Draft Report....................................................................... 21 

C Distribution ............................................................................................................ 29 
10-P-0077 

Chapter 1

Introduction 

Purpose 

We performed this review because Congress showed an interest in determining 

the effectiveness of the U.S. Environmental Protection Agency’s (EPA’s) billing 

and collection of fines and penalties. 

The objectives of our review were to determine whether: 

•	 EPA has billed and collected fines and penalties in a timely manner; 

•	 EPA has taken appropriate action to collect fines and penalties; and 

•	 EPA tracks the assessment, billing, and collection of fines and penalties to 

measure the impact of the enforcement program and promote accurate and 

transparent reporting. 

Background 

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

compliance with environmental laws and takes enforcement action when needed. 

OECA assesses civil and criminal penalties as part of an enforcement action to 

provide a deterrent effect to noncompliance. Civil penalties may be 

administrative, judicial, or stipulated. Documents negotiated out of court, such as 

an administrative order on consent, provide the basis for administrative penalties. 

Judicial documents derived from court action, such as a consent decree, provide 

the basis for judicial penalties. A stipulated penalty is a fixed sum of money that 

a defendant agrees to pay for violating the terms of a consent decree. 

Some of the major statutes that grant EPA the authority to assess penalties are the 

Clean Air Act; Clean Water Act; Safe Drinking Water Act; Comprehensive 

Environmental Response, Compensation, and Liability Act; Toxic Substances 

Control Act; Federal Insecticide, Fungicide, and Rodenticide Act; and Resource 

Conservation and Recovery Act. 

OECA tracks civil fines and penalty assessments in its Integrated Compliance and 

Information System (ICIS) database and reports fines and penalty assessments in 

its annual Accomplishments Reports. For the 5 fiscal years ended September 30, 

2008, EPA reported civil fines and penalty assessments of $724 million as 

detailed in Table 1-1. 

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Table 1-1: EPA Civil Penalties Assessed1

 (in thousands) 

2004 2005 2006 2007 2008 Total 

Administrative $28,000 $27,000 $42,000 $30,700 $38,200 $165,900 

Judicial $121,000 $127,000 $82,000 $39,800 $88,400 $458,200 

Stipulated $68,000 $4,000 $10,000 $12,400 $5,500 $99,900 

Total Civil Penalties $217,000 $158,000 $134,000 $82,900 $132,100 $724,000 

Source: OIG analysis of EPA data. 

EPA assessed criminal penalties of $316 million for the 5 fiscal years ended 

September 30, 2008. Criminal penalties are primarily payable to other entities. 

Accordingly, the other entities were responsible for those billings and collections. 

EPA, the Department of Justice, and the Treasury’s Debt Management Services 

all perform a role in the billing and collection of fines and penalties. EPA bills 

and collects administrative settlements and penalties. The Department of Justice 

bills and collects judicial settlements and penalties on behalf of EPA. EPA’s 

Cincinnati Finance Center (CFC) records and tracks the billing and collection for 

debtors’ current payments and issues dunning letters for delinquent accounts as 

needed. For eligible delinquent receivables, the Treasury’s Debt Management 

Services provide collection services for EPA in accordance with the Debt 

Collection Act of 1996. 

For the 5 fiscal years ended September 30, 2008, EPA recorded fines and penalty 

billings of $694 million in the Integrated Financial Management System (IFMS). 

EPA’s civil penalty assessments of $724 million for the same period exceeded its 

billings by $30 million. We could not determine the reasons for the $30 million 

difference. Reconciling ICIS to IFMS was difficult because the databases lacked 

a common link or data field. 

Of the $694 million assessed and billed by EPA, the uncollected receivables – 

including interest, handling charges, and late payment penalties – totaled 

$280 million as of April 14, 2009. Included in the uncollected receivables were 

three large default judgment civil penalties2 totaling $230 million that EPA 

considers to be uncollectible. 

Noteworthy Achievements 

In November 2008, EPA enhanced the Regional Hearing Clerk database with the 

capability to notify CFC of new administrative documents and make electronic 

copies of the documents available in the database. The enhancement improved 

EPA’s ability to record receivables more timely by providing timely notification 

to CFC and eliminating the document mailing time from the regions to CFC. 

1

 The amounts EPA reported for stipulated penalties represent the amounts collected, while the administrative and 

judicial penalties represent the amounts assessed. 

2

 The court may assess a default judgment penalty for the maximum amount provided by law when the defendant
 

fails to appear in court to defend a lawsuit. 

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Scope and Methodology 

We conducted this audit in accordance with generally accepted government 

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

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

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

evidence obtained provides a reasonable basis for our findings and conclusions 

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

October 2009. Appendix A contains a more extensive discussion of our scope 

and methodology. 

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Chapter 2

Billings and Collections Not Recorded Timely 

EPA did not consistently record fines and penalty billings in a timely manner. 

Regional and program office personnel did not forward copies of source 

documents timely to CFC as required by EPA’s Resources Management Directive 

System (RMDS). Also, EPA did not record a receivable for two disputed 

stipulated penalties totaling $2,839,500. The Agency was uncertain about 

recording penalty amounts in dispute and did not follow established guidance for 

recording these accounts receivable. Untimely receipt of accounts receivable 

source documentation delays the recording of accounts receivable and the process 

of collecting delinquent receivables. The unrecorded receivable accounts 

understated the accounts receivable in the financial statements. 

CFC Did Not Consistently Record Fines and Penalty Billings Timely 

CFC received the source documents for 7 of 32 billings in our review more than 

30 work days after the effective date of the legal document that established a debt 

to the Agency. Table 2-1 illustrates the billings, number of work days from the 

effective date to the receipt date, and the reason for the delays. 

Table 2-1: Documents Received Over 30 Work Days from the Effective Date 

Billing 

Document 

Number 

Billed 

Amount 

Number of 

Work Days from 

Effective Date to 

Receipt Date Reason for Delays 

1. 2740860A149 $11,400,000 31 Time off and holiday leave. 

2. 2750803A004 $140,000 40 Regional personnel could not 

give a reason for the delay. 

3. 4CD904312TX $122,000 99 Determining a penalty 

allocation between EPA and 

State required more time. 

4. 2740803A142 $1,250,000 33 Regional personnel waited for 

an allocation of funds between 

regions. 

5. 2730842R247 $3,164,555 70 Misunderstanding over which 

party would send documents. 

6. 6CIVH01097X $37,500 90 Regional personnel could not 

give a reason for the delay. 

7. 2750930B093 $1,259,695 46 Regional personnel could not 

give a reason for the delay. 

Source: OIG analysis of EPA data. 

EPA did not consistently record fines and penalty billings in a timely manner. 

The Office of Regional Counsel and program offices did not forward copies of the 

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source documents to CFC timely. EPA personnel offered the following reasons 

for the delays in forwarding source documents: time off and holiday leave, 

determination of a penalty allocation that required more time, and a 

misunderstanding over which party would send the documents to CFC. For some 

documents, EPA could not provide a reason for the delay. 

RMDS 2550D, Chapter 14, Superfund Accounts Receivable and Billings, requires 

regional counsel and enforcement offices to forward copies of all entered 

Superfund consent decrees and judgments to the finance office within 3 work 

days of receipt from the Department of Justice or the court. RMDS 2540, 

Chapter 9, Receivables and Billings, requires the responsible EPA office to 

forward a copy of the action document to the finance office within 5 days of 

determining that a debt is owed to EPA. Although EPA’s requirements are 3 and 

5 work days, we used a less rigorous standard of 30 work days in our testing. 

Other factors also contributed to EPA’s untimely recording of fines and penalties. 

EPA did not: 

•	 Monitor the timely forwarding of documents to CFC, 

•	 Establish performance measures to track the timely forwarding of source 

documents to CFC and to enforce accountability of Office of Regional 

Counsel and program office personnel, and 

•	 Test the timeliness of forwarding source documents to CFC as a part of 

the Office of Management and Budget Circular A-123 review of internal 

controls. 

The untimely receipt of accounts receivable source documents delays the 

recording of accounts receivable and the process of collecting delinquent 

receivables. Delayed recording of fines and penalties understates the accounts 

receivable in the financial statements. 

EPA Did Not Record a Receivable for Two Stipulated Penalties 

CFC did not record a receivable from a debtor corporation for two disputed 

stipulated penalties totaling $2,839,500. EPA established a valid claim when it 

issued stipulated penalty demand letters based on the company’s violation of 

provisions in a consent decree. Federal accounting standards require a federal 

entity to recognize a receivable when it establishes a claim against another entity. 

EPA’s guidance requires a Servicing Finance Office (SFO) to carry any 

receivable amount that is under appeal or in litigation as an open receivable. The 

Agency was uncertain about recording penalty amounts in dispute and did not 

follow established guidance for recording these accounts receivable. 

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The consent decree provided for stipulated penalties under the Clean Air Act if 

the debtor did not comply with the terms of the agreement. When the debtor did 

not comply, EPA had a valid legal claim to the penalties and issued stipulated 

penalty demand letters. The consent decree requires the debtor to pay the 

penalties within 30 days of receiving EPA’s written demand. If the debtor 

disputed the stipulated penalties, the consent decree stated that stipulated penalties 

shall continue to accrue during the dispute resolution, but need not be paid until 

the dispute was resolved. 

Through inquiry of CFC personnel, we determined that CFC was unsure about 

recording the receivable. The Agency questioned the appropriateness of 

recording the disputed penalties because the judge’s final order might change the 

penalty amount. CFC was looking into the matter and trying to determine what 

should be recorded. 

Although the consent decree did not require payment of the penalties during 

dispute resolution, accounting standards and guidance requires EPA to record a 

receivable when established and carry it as an open receivable during the dispute 

resolution process. If the dispute resolution changed the penalty amount, EPA 

could then adjust the receivable. EPA, the Federal Accounting Standards 

Advisory Board, and the Government Accountability Office (GAO) have 

established guidance for recording accounts receivable when a claim is 

established and for recording transactions timely: 

• RMDS 2540, Chapter 9, Receivables and Billings, states that the SFO 

must ensure that a debt is recorded in IFMS no later than 3 work days after 

receipt of the documents or other information informing them of the debt. 

SFOs must carry any amount that is under appeal or in litigation as open 

until the government changes its position regarding the amount that is due 

and payable, either as a result of a court decision or as a result of an 

administrative settlement directed by a responsible government official. 

•	 The Federal Accounting Standards Advisory Board’s Statement of Federal 

Accounting Standards Number 1, Accounting for Selected Assets and 

Liabilities, states that a receivable should be recognized when a federal 

entity establishes a claim to cash or other assets against other entities, 

either based on legal provisions or goods or services provided. 

•	 GAO’s Standards for Internal Control in the Federal Government, dated 

November 1999, defines the five standards for the minimum level of 

quality acceptable for internal control in government. The standard for 

control activities requires accurate and timely recording of transactions 

and events. 

The unrecorded receivable understated the accounts receivable in the financial 

statements. 

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Conclusion 

EPA did not consistently record fines and penalty billings in a timely manner 

because regional and program office personnel did not forward copies of source 

documents timely to CFC. EPA also did not monitor whether documents were 

forwarded timely to CFC, establish performance measures for timeliness, or test 

the related internal controls. If EPA implemented those control activities, it could 

become more timely in forwarding source documents to CFC, recording accounts 

receivable, and collecting receivables. 

EPA did not initially record a receivable for two disputed stipulated penalties. 

The Agency was uncertain about recording penalty amounts in dispute and did not 

follow established guidance for recording these accounts receivable. Accounting 

standards and guidance required CFC to record the receivable when it was 

established. By recording receivables timely, EPA would properly state the 

accounts receivable in the financial statements. 

Recommendations 

We recommend that the Chief Financial Officer: 

2-1 Work with the Agency program offices to implement performance 

measures to track the timeliness of forwarding accounts receivable source 

documents to CFC and issue performance reports to the Agency program 

offices and regions for accountability. 

2-2 Analyze and document the current process of forwarding accounts 

receivable source documents to CFC and review it for effectiveness. 

Upon completion, develop a plan for testing key internal controls and 

correcting any deficiencies as part of the Office of Management and 

Budget Circular A-123 review of internal controls. 

2-3	 Record the billings in IFMS for the two stipulated penalties. 

2-4 Develop a policy on fines and penalties to clarify when a stipulated 

penalty becomes an account receivable. 

Preliminary Agency Actions 

Subsequent to our audit field work, EPA established a receivable for the two 

stipulated penalties. CFC recorded the first penalty for $1,682,500 because EPA 

received a judge’s verbal ruling and the second penalty for $1,157,000 because 

EPA received a judge’s written opinion and order. EPA’s corrective action has 

satisfied our Recommendation 2-3 to record the billings in IFMS for the two 

stipulated penalties. 

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Agency Comments and OIG Evaluation 

The OIG made changes to the report based on the Agency’s comments where 

appropriate. Appendix B provides the full text of the Agency comments. 

EPA agreed with recommendations 2-1 and 2-3. We revised recommendation 2-2 

to provide for analysis and documentation of the current process of forwarding 

accounts receivable source documentation to CFC before testing the effectiveness 

of the internal controls. We also added recommendation 2-4 to develop a policy 

for recording stipulated penalties. Based on these revisions, EPA agreed with all 

four recommendations. 

EPA believes it generally recorded fines and penalties in a timely manner, and 

OIG’s findings were only exceptions. We believe our statement that EPA did not 

consistently record fines and penalty billings in a timely manner is fair and our 

review results support it. We reported that CFC received the source documents 

for 7 of 32 billings in our review more than 30 work days after the effective date 

of the legal document that established a debt to the Agency. The rate of untimely 

receipt of documents is significant. In fact, if we had used EPA’s requirements of 

3 or 5 days, the error rate would have been 18 of 32 received late. 

OECA does not believe that the initial demand letter for payment of stipulated 

penalties is always a basis for creating an account receivable. Accordingly, EPA 

plans to develop a policy for recording accounts receivable for stipulated 

penalties. We do not object to EPA developing a policy if it complies with the 

standards of the Federal Accounting Standards Advisory Board. Therefore, we 

added a recommendation for EPA to develop a policy. Federal Accounting 

Standards Advisory Board number 1, Accounting for Selected Assets and 

Liabilities, states that a receivable should be recognized when a federal entity 

establishes a claim to cash or other assets against other entities, either based on 

legal provisions, such as a payment due date (e.g., taxes not received by the date 

they are due), or goods or services provided. If the exact amount is unknown, a 

reasonable estimate should be made. We believe that an initial demand letter for 

stipulated penalties based on a legal document, such as a consent decree, is a basis 

for creating an account receivable. RMDS 2540, Chapter 9, requires EPA to carry 

any amount that is under appeal or in litigation as open until the government 

changes its position regarding the amount that is due and payable, either as a 

result of a court decision or as a result of an administrative settlement directed by 

a responsible government official. We believe the RMDS 2540 standard should 

apply to a stipulated penalty. 

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Chapter 3

Improvements Needed in Monitoring EPA’s 

Accounts Receivable 

EPA generally took appropriate action to collect fines and penalties. However, 

EPA did not monitor the collections on a Region 10 Superfund receivable as 

required by EPA’s guidance. CFC did not request the regional staff to resolve the 

outstanding delinquent debt, which at the time of our review was $298,851, and 

regional staff did not assign the responsibility for collecting the outstanding debt. 

Due to the lack of monitoring, EPA was not collecting payments on the debt. 

EPA Did Not Monitor the Collection Activity on a Receivable 

We reviewed EPA’s collection efforts on 30 delinquent penalties totaling 

$19,215,096, or 56 percent of the testing universe totaling $34,353,418. EPA 

performed its collection efforts satisfactorily on 29 of the 30 samples reviewed. 

However, EPA did not monitor the collections on a Region 10 Superfund 

receivable for a criminal restitution penalty, billing document (BD) 

#2700630B058. The local county government court required the debtor to serve a 

jail sentence and make $300,000 restitution to EPA, payable monthly based on a 

percent of his income during and after his jail term. At the time of our review, the 

account balance was $298,851. CFC identified the receivable as delinquent and 

requested an EPA attorney to provide an estimate of collectibility. However, no 

one at EPA monitored the debtor’s release from jail and subsequent employment 

or investigated the reason why periodic collections were not received. 

RMDS 2550D, Chapter 14, Superfund Accounts Receivable and Billings, states 

that the SFO provides general accounting and financial management services in 

the regions and field offices and for Headquarters. The SFO’s responsibilities 

include: 

•	 Monitoring the status of accounts receivable until paid or liquidated; 

•	 Advising the legal and program offices when a receivable becomes 

delinquent; and 

•	 Requesting that the assigned regional Legal Enforcement Office/Office of 

Regional Counsel staff initiate the appropriate enforcement action to 

resolve the outstanding debt. 

CFC did not request the regional staff to resolve the outstanding delinquent debt 

and regional staff did not assign the responsibility for collecting the outstanding 

debt. EPA employees from the regional counsel, regional program office, 

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Criminal Investigation Division, and CFC who were familiar with the case stated 

that they were not responsible for tracking the collections on the receivable. 

Region 10 relied on the U.S. Attorney’s Office in the region to monitor the 

receivable and relied on the probation officer to monitor the debtor’s activities. 

However, the Department of Justice did not get involved with the case because 

the local county court assessed the receivable. Region 10 could improve its 

collection experience by assigning responsibility for monitoring the receivable 

and for resolving the debt. 

The local county government’s office stated that the debtor was making payments 

from his paycheck to the county, which in turn paid EPA. The county office 

could not forward the November 12, 2008, and April 28, 2009, payments of $24 

each to EPA because the post office returned the November payment due to an 

incorrect mailing address. EPA was not aware of the debtor’s current ability to 

pay or the local county government’s undelivered payments to EPA. Due to the 

lack of monitoring, EPA was not collecting payments on the debt. 

Conclusion 

Based on our testing, we found one unusual instance in Region 10 involving a 

local court order that required payments from a criminal defendant. EPA did not 

monitor collections on this receivable as required by EPA’s guidance. Our testing 

otherwise indicated that EPA generally took appropriate action to collect fines 

and penalties. Region 10 could improve its collection experience by assigning 

responsibility for monitoring the Superfund receivable and resolving the debt. 

OECA is responsible for Superfund enforcement efforts. 

Recommendations 

We recommend that the Chief Financial Officer: 

3-1 Notify the regional assignee that the debt for BD #2700630B058 is 

delinquent and request they work to resolve it. 

We recommend that the Assistant Administrator for Enforcement and Compliance 

Assurance: 

3-2	 Ensure that Region 10 assigns the responsibility for monitoring the 

outstanding debt for BD #2700630B058 and provides the name of the 

assignee to CFC. 

Preliminary Agency Actions 

Subsequent to our audit field work, CFC notified Region 10 that the debt for BD 

#2700630B058 is delinquent and requested they work to resolve it. Region 10 

assigned the responsibility for monitoring the outstanding debt and provided the 

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name of the assignee to CFC. EPA’s corrective actions have satisfied 

recommendations 3-1 and 3-2. 

Agency Comments and OIG Evaluation 

EPA agreed with our recommendations. The OIG made changes to the report 

based on the Agency’s comments where appropriate. Appendix B provides the 

full text of the Agency’s comments. 

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Chapter 4

Enforcement Penalty Data Not Completely Accurate 

We found seven errors totaling $139,242 in OECA’s ICIS database during our 

review of Fiscal Year (FY) 2008 civil penalty assessments of $100,000 or higher. 

OECA’s reporting and certification process did not detect the errors. OECA 

requires regions and OECA offices to certify that the data entered in the national 

database are complete and correct. OECA did not reconcile the penalty 

assessment amounts to billings recorded in IFMS, a control activity that would 

have helped EPA detect the errors, because it was not involved with penalty 

billings. As a result, OECA reported some inaccurate penalty data. 

Errors in Penalty Data in ICIS Identified 

We found seven incorrect penalty amounts that overstated the annual penalty 

assessment by $139,242. We reviewed 156 FY 2008 civil penalty billings of 

$100,000 or higher related to 117 assessments. EPA personnel in the regions and 

OECA offices enter penalty assessment data into ICIS. OECA’s Enforcement and 

Compliance FY 2008 Reporting Plan requires regions and OECA offices to 

certify that the data entered in the national database are complete and correct 

Table 4-1 provides the details of the penalty misstatements in ICIS. 

Table 4-1: Penalty Misstatements in ICIS 

Enforcement 

Action Identifier 

Final 

Order 

Date 

Federal 

Penalty 

Assessed 

(in ICIS) 

Billing 

Document 

Number 

Billed 

Amount 

(in IFMS) 

Overstated 

(Understated) 

in ICIS 

01-2007-5000 06/30/08 $125,311 2710842R106 $31,724 $93,587 

03-2008-0103 09/18/08 $122,982 2730875Z356 $50,000 $72,982 

04-2006-9037 04/09/08 $6,700,000 2740843W296 $6,719,598 $(19,598) 

05-2003-0255 01/29/08 $750,000 2750803A199 $760,000 $(10,000) 

08-2003-0244 05/14/08 $211,593 2780843W130 $181,124 $30,469 

08-2006-0080 03/26/08 $150,000 2780803A101 $176,000 $(26,000) 

09-2008-7002 08/21/08 $2,640,000 2790847X313 $2,642,198 $(2,198) 

Totals $10,699,886 $10,560,644 $139,242 

Source: OIG analysis of EPA data. 

OECA’s reporting and certification process did not detect all the penalty errors in 

the ICIS database. Reconciling the assessment amounts in ICIS to the billings 

recorded in IFMS is a control activity that would have helped EPA to detect the 

errors. OECA did not perform the reconciliation because it was not involved with 

penalty billings. CFC records and tracks all EPA penalty billings and collections. 

Since EPA tracked penalty assessments and billings through separate program 

offices, the ICIS and IFMS databases did not have a common data field, or 

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common link, that would facilitate a reconciliation of penalties recorded in the 

databases. We attempted to reconcile the penalty amounts in ICIS and IFMS and 

found the reconciliation to be difficult without a common link. We were not able 

to reconcile the $30-million difference between OECA’s penalty assessments and 

CFC’s billings for the 5 fiscal years ended September 30, 2008. 

Reconciliations are a control activity to verify the completeness and accuracy of 

data. GAO’s Standards for Internal Control in the Federal Government, dated 

November 1999, states that control activities, including reconciliations, are an 

integral part of an entity’s planning, implementing, reviewing, and accountability 

for stewardship of government resources and achieving effective results. 

As a result of the errors in ICIS, OECA reported some inaccurate data in its 

annual Accomplishments Report. Without performing a reconciliation, 

management assumes a greater risk that financial data may not be complete and 

accurate. 

Conclusion 

OECA’s ICIS database contained errors in the FY 2008 penalty assessment 

amounts that OECA’s reporting and certification process did not detect. EPA 

could implement a control activity to detect penalty data errors by reconciling the 

penalty amounts in ICIS and IFMS. The reconciliation would reduce the risk of 

errors and promote more accurate reporting. 

Recommendations 

We recommend that the Assistant Administrator for Enforcement and Compliance 

Assurance: 

4-1 Correct the fines and penalty errors identified in this report in ICIS. 

We recommend that the Chief Financial Officer and the Assistant Administrator 

for Enforcement and Compliance Assurance work together to: 

4-2 Develop a common link between ICIS and IFMS to facilitate the 

reconciliation of the penalty-assessed amounts in ICIS to the penaltybilled amounts in IFMS. 

4-3 Perform an annual reconciliation of the penalty-assessed amounts in ICIS 

to the penalty-billed amounts in IFMS. 

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Agency Comments and OIG Evaluation 

EPA agreed with our recommendations. The OIG made changes to the report 

based on the Agency’s comments where appropriate. Appendix B provides the 

full text of the Agency’s comments. 

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Chapter 5

EPA Reported Penalty Assessments 

but Not Collections 

EPA tracked the assessment, billing, and collection of fines and penalties but used 

the assessments, and not the collections, as one of the measures of the 

enforcement program’s impact. OECA publicly reported in its annual 

Accomplishments Report the penalty assessments but not the collections. OECA 

believes that assessments are the key measure for reporting to the public. 

However, OECA’s report without collection data did not promote transparency 

and open government. A January 2009 Presidential memorandum called for a 

commitment to open government and transparency, which promotes 

accountability and provides information for citizens about what their government 

is doing. Since EPA did not collect a significant amount of penalty assessments, 

EPA’s reporting of penalty information was not completely accurate and 

transparent and may have overstated the impact of the enforcement program. 

EPA Disclosed Penalty Assessments but Not Collections for 

Enforcement Accomplishments 

OECA publicly reported in the annual Accomplishment Report the amount of 

fines and penalties assessed but not the amount of collections. For the 5 fiscal 

years ended September 30, 2008, OECA reported civil fines and penalties 

assessed of $724 million. As of April 14, 2009, EPA had not collected 

$279,644,975 of the penalties, a significant portion of the assessed amount. The 

uncollected penalties include three large default judgment penalties from civil 

judicial cases totaling $229,706,860. The Agency believes these three penalties 

are unlikely ever to be collected, and the removal of these penalties would result 

in a significant reduction in the overall level of penalties that EPA reports. 

The President's Memorandum on Transparency and Open Government, dated 

January 21, 2009, states that the Administration is committed to creating an 

unprecedented level of openness in government. According to the memo, 

“Government should be transparent. Transparency promotes accountability and 

provides information for citizens about what their government is doing.” By 

disclosing penalty collections along with assessments, EPA would help support 

the Administration’s commitment to openness and transparency in government. 

GAO recommended that EPA report its penalty collections. The GAO report, 

Environmental Enforcement: EPA Needs to Improve the Accuracy and 

Transparency of Measures Used to Report on Program Effectiveness, dated 

September 18, 2008, stated that EPA is overstating the impact of the enforcement 

programs by reporting penalties assessed against violators rather than actual 

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penalties that the U.S. Treasury received. This situation may overstate the impact 

of the enforcement programs by reflecting penalties that have not or will not be 

collected. GAO recommended that when reporting the amount and nature of 

penalties stemming from enforcement actions, the EPA Administrator should 

disclose federal penalties collected as well as assessed. OECA responded to GAO 

that it did not report penalty collections because it believes that reporting penalties 

assessed is the key measure for reporting to the public. 

Since EPA did not collect a significant amount of assessments, OECA may have 

overstated the impact of the enforcement program by reporting penalty 

assessments but not the collections. OECA’s reporting may undermine the 

transparency and accuracy of EPA's reported outcomes, cause EPA to overstate 

its enforcement achievements, and create the potential for Congress and the public 

to misunderstand the Agency’s enforcement outcomes. 

Conclusion 

EPA used penalty assessments as one of the measures of the enforcement 

program’s impact. OECA publicly reported the penalty assessments but not the 

collections. Since EPA did not collect a significant amount of the penalty 

assessments, OECA’s reports might have overstated the impact of the 

enforcement program. EPA could support the Administration’s commitment to 

openness and transparency in government by reporting penalty collections as well 

as the assessments. 

Recommendation 

We recommend that the Assistant Administrator for Enforcement and Compliance 

Assurance: 

5-1 Disclose fines and penalties collected as well as assessed when reporting 

the amount and nature of fines and penalties based on enforcement 

actions. Since EPA does not collect all penalties in the year assessed, 

reporting total assessments and collections for a combined group of years 

may be a reasonable approach to disclosure. 

Agency Comments and OIG Evaluation 

EPA agreed with our recommendation. The OIG made changes to the report 

based on the Agency’s comments where appropriate. Appendix B provides the 

full text of the Agency’s comments. 

EPA emphasized that if it provided public information on its penalty collections, 

the report would need to consider the important timing differences between 

penalty assessments, billings, and collections. We agree there are timing 

differences between the assessment and collection of penalties. However, timing 

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differences accounted for only a small portion of the uncollected penalties in our 

review. For the 5 fiscal years ended September 30, 2008, EPA recorded penalties 

totaling $694 million, with $280 million of that amount uncollected as of 

April 14, 2009. Of the $280 million, $264 million was delinquent and only 

$16 million was not yet due. We believe that when EPA provides public 

information on its penalty collections, EPA should develop the report considering 

the reasons for delinquencies as well as timing differences. The OIG 

recommendation provides EPA considerable discretion in determining how it will 

report penalty collections. 

OECA stated that the billing and collection of penalties are not an enforcement 

function. We disagree because billings and collections both represent 

accomplishments and serve as a deterrent to noncompliance with environmental 

statutes. EPA could increase its transparency by reporting penalty collections to 

the public as well as assessments. 

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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 

2-1 7 Work with the Agency program offices to 

implement performance measures to track the 

timeliness of forwarding accounts receivable 

source documents to CFC and issue performance 

reports to Agency program offices and regions for 

accountability. 

O Chief Financial Officer December 

2010 

2-2 7 Analyze and document the current process of 

forwarding accounts receivable source documents 

to CFC and review it for effectiveness. Upon 

completion, develop a plan for testing key internal 

controls and correcting any deficiencies as part of 

the Office of Management and Budget Circular 

A-123 review of internal controls. 

O Chief Financial Officer 

2-3 7 Record the billings in IFMS for the two stipulated 

penalties. 

C Chief Financial Officer 08/18/09 $2,840 $2,840 

2-4 7 Develop a policy on fines and penalties to clarify 

when a stipulated penalty becomes an account 

receivable. 

O Chief Financial Officer 12/31/10 

3-1 10 Notify the regional assignee that the debt for BD 

#2700630B058 is delinquent and request they work 

to resolve it. 

C Chief Financial Officer 05/04/09 $299 $299 

3-2 10 Ensure that Region 10 assigns the responsibility for 

monitoring the outstanding debt for BD 

#2700630B058 and provides the name of the 

assignee to CFC. 

C Assistant Administrator for 

Enforcement and 

Compliance Assurance 

07/30/09 

4-1 13 Correct the fines and penalty errors identified in 

this report in ICIS. 

C Assistant Administrator for 

Enforcement and 

Compliance Assurance 

01/06/10 

4-2 13 Develop a common link between ICIS and IFMS to 

facilitate the reconciliation of the penalty-assessed 

amounts in ICIS to the penalty-billed amounts in 

IFMS. 

O Chief Financial Officer and 

Assistant Administrator for 

Enforcement and 

Compliance Assurance 

4-3 13 Perform an annual reconciliation of the penaltyassessed amounts in ICIS to the penalty-billed 

amounts in IFMS. 

O Chief Financial Officer and 

Assistant Administrator for 

Enforcement and 

Compliance Assurance 

5-1 16 Disclose fines and penalties collected as well as 

assessed when reporting the amount and nature of 

fines and penalties based on enforcement actions. 

Since EPA does not collect all penalties in the year 

assessed, reporting total assessments and 

collections for a combined group of years may be a 

reasonable approach to disclosure. 

O Assistant Administrator for 

Enforcement and 

Compliance Assurance 

O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is undecided with resolution efforts in progress 

18 

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Appendix A 

Details on Scope and Methodology 

We conducted this audit in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. We conducted our audit from January through 

October 2009. We reviewed EPA’s processes for billing and collection of fines and penalties. 

To gain an understanding of the processes, we interviewed personnel in CFC and OECA. We 

reviewed OECA’s Accomplishments Reports and obtained data reports of fines and penalty 

assessments, billings, and collections for FYs 2004 through 2008. 

We conducted field work for billing and collections in CFC where the accounts receivable and 

collection processing occurs. For billings, we tested a sample of fines and penalties to determine 

whether EPA recorded them timely. We used the monetary unit method of statistical sampling to 

select 32 billings totaling $63,198,005 out of 2,453 billings totaling $133,087,641 from FY 2008 

and the first quarter of FY 2009. For collections, we tested a sample of uncollected fines and 

penalties to determine whether EPA took appropriate action to collect them. We used 

judgmental sampling to select a diversified sample of penalty accounts with different status 

codes, aging, and amounts. We selected 30 fines and penalties totaling $19,215,096 out of 385 

totaling $264,060,278 from the 5 fiscal years ended September 30, 2008. We separately 

reviewed three large default judgment civil penalties totaling $229,706,860 that EPA considered 

uncollectible. 

We assessed EPA’s internal controls related to the tracking and reporting of assessments and the 

billing and collection of fines and penalties. We gained an understanding of the internal controls 

through interviews of finance office and OECA personnel, examination of supporting 

documentation for selected billing and collection transactions, and comparison of assessment 

data in ICIS to billing data in IFMS. We did not review the internal controls over IFMS from 

which we obtained data reports, but relied on the review conducted during the audit of EPA’s 

FY 2008 financial statements. 

We reviewed the following prior EPA OIG and GAO reports that had findings and 

recommendations related to billing and collections and to accurate and transparent reporting of 

OECA’s program effectiveness. 

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Table A-1: Prior Reports Reviewed 

Report Title Report No. Date 

Environmental Enforcement: EPA Needs to Improve the 

Accuracy and Transparency of Measures Used to Report 

on Program Effectiveness 

GAO-08-1111R September 18, 2008 

Audit of EPA’s Fiscal Year 2007 and 2006 (Restated) 

Consolidated Financial Statements 

08-1-0032 November 15, 2007 

Region 5’s Billing and Collection of Accounts Receivable E1AMB6-05-0079-7100139 March 26, 1997 

Source: OIG analysis. 

Both OIG reports disclosed internal control weaknesses in establishing receivables timely 

because the regional offices did not timely forward accounts receivable source documents to the 

finance office. Our current review found that these internal control weaknesses still exist. 

According to the GAO report, EPA overstated the impact of the enforcement program by 

reporting penalties assessed against violators rather than actual penalties that the Treasury 

received. EPA disagreed with GAO’s recommendation to report penalties collected as well as 

assessments. EPA stated that reporting penalties assessed is the key measure for reporting to the 

public. While EPA agreed that penalties collected is a useful internal management measure, 

EPA did not believe that penalties collected should be publicly reported when EPA announces 

individual case settlements or in its Annual Results. 

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Appendix B 

Agency Response to Draft Report 

December 23, 2009 

MEMORANDUM 

SUBJECT: Response to the Office of Inspector General Draft Audit Report: EPA Needs to 

Improve Its Recording and Reporting of Fines and Penalties. 

FROM: Barbara J. Bennett 

 Chief Financial Officer 

TO: Bill A. Roderick 

 Acting Inspector General 

Thank you for providing us with the opportunity to comment on and respond to the 

findings and recommendations made in the “Draft Audit Report: EPA Needs to Improve Its 

Recording and Reporting of Fines and Penalties.” On behalf of the Agency, attached is our 

response to the specific audit findings and recommendations made in the report. 

If you have any questions concerning the audit response, please contact Stefan Silzer, 

Acting Director, Office of Financial Management, at 564-5389 or Jeanne Conklin, Staff Director, 

Financial Policy and Planning Staff, at 564-5342. 

Attachments 

cc: Paul Curtis 

Arthur Budelier 

Cynthia Giles 

 Mathy Stanislaus 

 Maryann Froehlich 

 Joshua Baylson 

 Stefan Silzer 

 Raffael Stein 

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OCFO’s Response to OIG Draft Report 

“EPA Needs to Improve its Recording and Reporting of Fines and Penalties” 

Assignment No. 2009 – 0803 

This document is comprised of the following sections: 

1. Table of Response to OIG’s nine recommendations 

2. General comments regarding the recommendations 

3. OCFO/OECA Specific Joint Comments by page number 

4. OECA Specific Comments by page number 

1. Table of Response to OIG’s nine recommendations 

Rec. 

No. 

Subject Action 

Official (s) 

Recommendation Planned 

Completion 

Date 

2-1 Work with the Agency program 

offices to implement 

performance measures to track 

the timeliness of forwarding 

accounts receivable source 

documents to CFC and issue 

performance reports to Agency 

program offices and regions for 

accountability. 

OCFO/OFM OCFO agrees with this recommendation. 

OCFO Office of Financial Management 

will establish an Agency-wide workgroup 

to develop and implement performance 

measures and performance reports. 

Dec. 2010 

2-2 Test the timeliness of forwarding 

accounts receivable source 

documents to CFC as part of the 

Office of Management and 

Budget Circular A-123 review of 

internal controls. 

OCFO/OFS In accordance with A-123 guidance, tests of 

operating effectiveness will not be 

developed for ineffectively designed 

controls. Rather, we recommend this 

recommendation be changed to: "Analyze 

and document the current process and 

review it for effectiveness. Upon 

completion thereof, management will 

develop a plan for testing key internal 

controls and correcting any deficiencies." 

In support of OCFO, OECA and the EPA 

regions will take steps to assure that penalty 

assessments are timely forwarded to OCFO. 

Ongoing 

2-3 Record the billings in IFMS for 

the two stipulated penalties. 

OCFO/OFS EPA established a receivable for the two 

stipulated penalties Completed 

3-1 Notify the regional assignee that 

the debt for BD# 2700630B058 

is delinquent and request they 

resolve it. 

OCFO/OFS/CFC CFC has contacted the regional office 

through 'Collection Estimate' emails, which 

indicate a debt is outstanding and request 

information regarding the debt. Since this 

is a restitution case, there is no additional 

work they can do to 'resolve' the debt. 

However, CFC will work with Region 10 to 

maintain a current status of this debtor 

through the Court system. 

Ongoing 

3-2 Ensure that the Region 10 Office 

of Regional Counsel assigns the 

responsibility for monitoring the 

outstanding debts for BD# 

2700630B058 and provides the 

name of the assignee to CFC. 

Re-assign to 

OECA 

Region 10 has assigned the responsibility 

for monitoring the outstanding debt and 

provided the name of the assignee to CFC. 

Completed 

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4-1 Correct the fines and penalty 

errors identified in this report in 

ICIS. 

OECA OECA will correct the errors. March 31, 2010 

4-2 Develop a common link between 

ICIS and IFMS to facilitate the 

reconciliation of the penaltyassessed amounts in ICIS to the 

penalty-billed amounts in IFMS. 

OECA/OCFO 

(CFC) 

OECA and OCFO will jointly explore 

potential methods and their costs for 

reconciling penalty data. We anticipate 

selecting an appropriate method for 

reconciliation by March 31, 2010, with the 

intention of performing a first reconciliation 

in FY 2010. 

Ongoing 

4-3 Perform an annual reconciliation 

of the penalty- assessed amounts 

in ICIS to the penalty-billed 

amounts in IFMS. 

OECA/OCFO 

(CFC) 

See response to 4-2 above. Ongoing 

5-1 Disclose fines and penalties 

collected as well as assessed 

when reporting the amount and 

nature of fines and penalties 

based on enforcement actions. 

Since EPA does not collect all 

penalties in the year assessed, 

reporting total assessments and 

collections for a combined group 

of years may be a reasonable 

approach to disclosure. 

OECA OECA and OCFO will jointly undertake a 

feasibility assessment to examine 

approaches to public disclosure of penalties 

collected data. This feasibility assessment 

will be completed by the end of the first 

quarter of FY 2011. OECA and OCFO 

believe their first priority is to address IG 

recommendations 4-2 and 4-3 in an effort to 

gain better understanding of the 

recommendations once implemented. 

Ongoing 

2. General comments regarding the recommendations 

A) OECA and OCFO appreciate the work performed on this audit and will use this opportunity 

to further improve procedures. It is our belief with a few exceptions as reported in this audit that 

EPA records all penalty assessments, as well as billings and collections in a timely and accurate 

manner. In our opinion this report treats these exceptions as if they are the rule not exceptions to 

the rule. 

Overall, the report demonstrates the level of success that OECA has had in the accuracy of its 

recording and reporting of penalty data. Although the IG makes very little mention of this, it is a 

fact established by the IG's findings that the errors found were a small percentage of the numbers 

of reports and the total dollar values involved. For example, on page 10 of the draft report, the 

IG states EPA's penalty assessments announced for FY 2008 "overstated" the actual amount by 

$139,242. The errors found represent only 0.1% of the total penalties assessed. OECA considers 

this a success, and would like the IG to consider recognizing it as such. 

OECA will continue to strive to identify and amend all data errors. OECA agrees that there must 

be reconciliation between their penalty assessment numbers and our billing and collection 

numbers. 

Below we suggest a number of edits to the report that reflect the overall quality of the work that 

OCFO and OECA are performing today. Both OCFO and OECA continue to remain open to 

implement the recommendations of the IG in order to make further improvements. 

B) There are important timing differences the IG should recognize that require differential 

treatment of penalty assessments and penalty billing and collections. Not all penalty assessments 

are due immediately. The time period can range from one to two months, and in some cases, may 

extend for years. Accordingly, this time must be factored in for billings and collections 

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purposes. This means that when EPA determines a civil penalty during a fiscal year, that does 

not mean that all of that amount is legally due and should have been billed and collected in that 

same fiscal year. Thus, to the extent the Agency decides to provide public information on its 

penalty collections, this report will need to be developed considering these factors. 

3. OCFO/OECA Specific Joint Comments by page number 

A) OECA disagrees with the statement on page 12 of the draft report, "Since EPA did not collect 

a significant amount of penalty assessments, OECA did not promote accurate and transparent 

reporting and may have overstated the impact of the enforcement program." The billing and 

collection of penalties are not an enforcement function. Therefore, if some penalties are not 

collected or deemed not collectable this does not represent an overstatement of the 

accomplishments of EPA's enforcement program. While recognizing that billing and collection 

information is important, penalty assessments are an equally important measure of the deterrent 

value of EPA enforcement actions. Penalty assessments serve to notify the regulated community 

and the public concerning the important consequences for noncompliance. 

Contrary to the IG's statement, OECA has accurately and transparently reported penalties 

assessed. Given the circumstances of the uncollectible penalties identified, (i.e., assessed via 

default judgment), it should be noted that uncollectible penalties in no way represent a 

shortcoming of any EPA program. OECA’s role is to obtain penalty assessments. 

Nevertheless, OECA and OCFO recognize there is an opportunity to provide the public with 

information on penalty collections and thus are committed to exploring the feasibility of doing 

so. OECA and the regions recognize that it is necessary to convey assessment information to 

OCFO in a timely manner so that OCFO can carry out its function. 

B) The IG indicates on page 10 that it reviewed 156 FY 2008 civil penalty assessments of 

$100,000 or higher. OECA's list of the $100,000 or higher FY 2008 civil penalty assessments 

shows only 117 such assessments. Attachment 1 is OECA's list. Since OECA has not seen the 

IG's list of 156 assessments, we do not know why there is a difference in our counts. We believe 

the IG is counting a penalty assessment in a single case that was internally split among the 

regions, as a separate penalty assessment for each region that received a split of the penalty. In 

contrast, OECA only counts one penalty assessment for such cases and ignores the internal 

allocations of the penalty amounts among the regional offices that participated in the case. 

OECA increases its count to 167 if all the regions pieces of these cases are counted. The IG and 

OECA should confirm this is correct before the final report is published. 

C) OECA does not believe that the initial demand letter concerning payment of stipulated 

penalties is necessarily or always a basis for creating an accounts receivable. The initial demand 

letter often is just the beginning of the process for obtaining the facts and analysis that lead to a 

specific penalty amount that would support creating an accounts receivable. The stipulated 

penalty amount that is finally agreed upon is based on additional information received from the 

defendant about the purported violations that underlie the initial demand, including factual issues 

and mitigating circumstances. 

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OECA and OCFO believe that a policy must be issued that would assist the EPA regions in 

making the determination whether stipulated penalty requests constitute a penalty assessment, 

thus requiring an accounts receivable to be opened. To remedy this situation, OCFO’s Office of 

Financial Management will be establishing a workgroup in January 2010 with the objective of 

writing a policy on fines and penalties. 

OECA and OCFO, with assistance from the Office of General Counsel, and in conformance with 

the FASAB standards, will draft this policy. One portion of this policy will be to clarify when a 

stipulated penalty becomes an account receivable, thus prompting OECA to notify OCFO. This 

policy will be completed and issued by the end of CY 2010. The IG is welcome to add this 

commitment to the Report as an additional recommendation. 

4. OECA-specific comments by page number 

A) In the summary section of the report, titled, “At A Glance: What We Found”: 

1. The language used by the IG in this summary paragraph is overly harsh. EPA 

generally does a very good job tracking penalty assessments, billings, and collections 

despite some obstacles. OECA does not believe that the IG’s findings support the use of 

the harsh language in this section or elsewhere in the report. 

2. The IG makes the statement, “EPA tracked the assessment, billing, and collection of 

fines and penalties. However, it used only the assessments, and not the collections, to 

measure the impact of the enforcement program.” OECA wants to assure that the IG 

understands that EPA uses measures in addition to penalty assessments to measure the 

impact of our enforcement program (e.g., pollutant reduction, value of injunctive relief, 

health benefits). The way this sentence is drafted implies that EPA only uses penalty 

assessments as a measure. 

3. To acknowledge the general success of EPA in tracking penalty assessments, EPA 

proposes that the IG change the first and third paragraphs to read, 

EPA generally recorded fines and penalty billings in a timely manner, though we 

found a few exceptions. Regional and program office personnel generally 

forwarded copies of source documents timely to CFC, though again there were a 

few exceptions which delayed the recording of accounts receivable. EPA did not 

record a receivable as required for two disputed stipulated penalties totaling 

$2,839,500. 

EPA tracked the assessment, billing, and collection of fines and penalties. EPA 

used the assessments, and not the collections, to measure the impact of the 

enforcement program. OECA’s data system for tracking EPA enforcement 

actions contained seven errors totaling $139,242 in the penalty assessment 

amounts out of 156 assessments reviewed. These seven errors constituted 0.13 

percentage of the total amount from these 117 assessments. Due to these data 

errors, information released by EPA on its enforcement actions was not 

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completely accurate. Assuring more accurate reporting would increase the 

transparency of EPA’s penalty data. 

B) Regarding the data table at the top of page 2 of the report and the text related to this table, the 

stipulated penalty amounts that EPA measures are stipulated penalty paid amounts, not assessed 

amounts. EPA adds judicial and administrative penalties together for an annual civil penalty 

assessed total but we do not add in stipulated penalties. We report stipulated penalties 

separately. The administrative and judicial penalties that we count are the penalty amounts 

assessed by the court or administrative law judge. The stipulated penalty amounts are penalty 

amounts that have been paid. We don't add them together to avoid combining unlike figures. 

C) Again, to recognize EPA’s generally strong performance, OECA suggests that the first 

paragraph on page 4 be changed to read, 

EPA generally recorded fines and penalty billings in a timely manner, though there were 

some exceptions. Regional and program office personnel generally forwarded copies of 

source documents timely to CFC as required by EPA’s Resources Management Directive 

System, though again there were exceptions. Also, EPA did not record a receivable for 

two disputed stipulated penalties totaling $2,839,500. The Agency was uncertain about 

whether to record penalty amounts in dispute and did not follow established guidance for 

recording these accounts receivable. Untimely receipt of accounts receivable source 

documentation delays the recording of accounts receivable and the process of collecting 

delinquent receivables. The unrecorded receivable understated the accounts receivable 

in the financial statements. 

For the same reasons, OECA also proposes that the paragraph that begins at the bottom of page 4 

be revised to read, 

Though EPA generally recorded fines and penalty billings in a timely manner there were 

seven exceptions identified. Where these exceptions occurred, the Office of Regional 

Counsel and program offices had not forwarded copies of the source documents to CFC 

timely. EPA personnel offered the following reasons for the delays in forwarding the 

source documents in these instances: time off and holiday leave, determination of a 

penalty allocation that required more time, and a misunderstanding over which party 

would send the documents to CFC. For three of the seven documents, EPA could not 

provide a reason for the delay. 

OECA also proposes that the associated section titles be changed to match the more positive tone 

of this revised paragraph. 

D) Again, to recognize the generally strong job that EPA does in recording penalty billings, we 

request that the first sentence of the conclusion on Page 7 be changed to read, 

EPA generally recorded fines and penalty billings in a timely manner though there were 

exceptions that occurred because regional and program office personnel had not timely 

forwarded copies of source documents timely to CFC. 

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E) Concerning the Chapter 3 conclusion on page 9 of the report, to clearly note the very unusual 

circumstance surrounding the problem uncovered, we propose that it be changed to read, 

Based on our testing, we concluded that EPA generally took appropriate action to collect 

fines and penalties. We did find one instance, in a very unusual case involving a local 

court order that required a criminal defendant to make payments to EPA, that EPA did 

not monitor the collections on a Region 10 receivable as required by EPA’s guidance. 

Region 10 could improve its collection experience by assigning responsibility for 

monitoring the Superfund receivable and resolving the debt. The Office of Enforcement 

and Compliance Assurance is responsible for Superfund enforcement efforts. 

Also, EPA criminal enforcement matters, Superfund and otherwise, are an OECA responsibility, 

not a responsibility of the Office of Solid Waste and Emergency Response. This necessitates a 

change to the language of recommendation 3-2 as well. 

F) On page 10, EPA proposes that the subtitle be changed to, “EPA Maintained Highly Accurate 

Penalty Data in ICIS, though Several Errors were Identified.” This again is to reflect EPA’s 

generally strong performance. For the same reason, we suggest the language of the paragraph 

that follows this subtitle be changed to read, 

EPA personnel in the regions and OECA offices enter penalty assessment data into ICIS. 

OECA’s Enforcement and Compliance FY 2008 Reporting Plan requires regions and 

OECA offices to certify that the data entered in the national database is complete and 

correct. However, OECA’s FY 2008 ICIS penalty assessments data was not completely 

accurate. We reviewed 156 FY 2008 civil penalty assessments of $100,000 or higher and 

found seven incorrect penalty amounts that overstated the annual penalty assessment 

total by $139,242 which was only 0.13 percent of the penalty amounts we reviewed. 

Table 4-1 provides the details of the seven penalty misstatements in ICIS. 

F) Concerning the last sentence of the paragraph that carries over to the top of page 13, “OECA 

believes it should not publicly report collections when EPA announces individual case 

settlements or publishes its Accomplishment Reports,” we wish to assure that it is understood 

that it would not be possible to announce collections at the time we announce settlements in that 

penalties are not due to be paid at the time that EPA issues its individual case press releases, at 

the point of lodging of the judicial consent decree or approval of the administrative consent 

agreement. The penalties are due some time later, usually 30 or 60 days later. 

H) To acknowledge the impact of the time lag between assessment and payment of penalties, 

OECA proposed revisions of recommendation 5-1 to read as follows: 

Disclose total fines and penalties collected as well as assessed when publicly reporting the 

amount of fines and penalties. Since there are legitimate time lags between when a penalty is 

assessed, when it becomes legally due and the billing and collection process, EPA may need 

to develop a separate way to report penalty collections from its existing annual penalty 

assessment reports. 

27 
10-P-0077 

I) OECA has additional minor, editorial comments on the report that they would like to share 

with OIG at OIG’s convenience. 

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10-P-0077 

Appendix C 

Distribution 

Office of the Administrator 

Chief Financial Officer 

Assistant Administrator for Enforcement and Compliance Assurance 

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

Agency Follow-up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

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

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

Acting Inspector General 

29